Global policy post-Covid-19

There were already discussions gaining momentum since the Global Financial Crisis 2007/08 in many policy corners of economy and politics globally - but still remained far from reaching any meaningful threshold in terms of consequences on three main areas mainly, on the role of state as against market fundamentalism, the quality of growth given exorbitant rise in income inequality and reliance on fossil-fuel industry, and the performance of multilateralism and globalization in terms of its negative fallouts, a lack of level playing field for trading countries, and labour market issues. The Covid-19 is a consequence of improper policy direction of mainly these three policy areas, which did not allow a) taking appropriate policy response in reaction to quite vivid signs on the horizon of public health sector for almost two decades with regard to coronaviruses, including and most importantly better handling of market fundamentalism through stronger state intervention, especially in terms of effectively dealing with climate-change-causing factors, and in taking measures to stop it before happening, and b) being better prepared in terms of vaccines and reaching required health sector capacity in case it did happen. Above all, a policy rethink on all these is of utmost urgency across the globe because the current direction will not allow the much-needed national and global effort against reversing the fast approaching existential threat in the shape of climate-change crisis. The current pandemic crisis, among other reasons, is also a consequence of lack of effort towards dealing with the climate crisis. While there are three important areas, the underlying philosophy shaping them for the last four decades has been Neoliberalism. Way back in 1999, world renowned intellectual and political dissident, Noam Chomsky criticised Neoliberalism in his book Profit over people: Neoliberalism and global order in which he pointed out: "The neoliberal Washington consensus is an array of market oriented principles designed by...the international financial institutions...and implemented...in various ways for the more vulnerable societies, often as stringent structural adjustment programmes... The 'principal architects' of the neoliberal 'Washington consensus' are the masters of the private economy, mainly huge corporations that control much of the international economy and have the means to dominate policy formation as well as the structuring of thought and opinion." The time is indeed overripe to take the bull of Neoliberalism by the horns, and move towards a 'Green New Deal'. This would require enhancing the role of state in terms of reining-in market fundamentalism that has allowed the collusion of politico-economic elites to prosper astronomically in terms of their income and wealth, while creating acute inequalities for the middle- and lower income classes. This choice of elites to favour 'profit-over-people' at the cost of supporting an economy that did not allow appropriately enough, economic and political agents to enjoy the fruits of democracy in terms of opportunity, choice, and accountability, and to approach policies that effectively saved the future of life in any saner sense of form by dealing appropriately with climate-change crisis. The rot had already reached the bones of the social fabric before the pandemic hit, which when it did, amply highlighted that self-serving, short-sighted policy choices of the elites, both nationally and in the international sense, had already immensely damaged the branch on which the elites sat. Greed of the few, did what it is meant to do, which is to jeopardize the future of all, and if global economy and politics do not favour higher moral values in shaping policy, then God-forbid, humanity may not even get a second chance to restore life in some meaningful way. In this, Covid-19 should serve as a corner, where a turn is taken for the right. That right set of policies include, above all, undoing with Neoliberalism through approaching the role of State from the standpoint of greater responsibility in terms of managing markets, and in breaking the coalition of politico-economic elites. If 'systematic' policy does not check Neoliberalism today then 'chaos' may over-do change in the not-so-distant future, perhaps similar to the unintended consequences of extreme political and economic ideologies taking centre-stage at the back of mobocracy, like what happened during the French Revolution. Similar to the times of the Global Depression of the 1930s and post-World War II, when the likes of Franklin Delano Roosevelt, who came up with famous 'New Deal', and John Maynard Keynes helped formulate a new global economic architecture in the shape of the Bretton Woods, there is a need to undo the policies of Neoliberalism that significantly undid the above laudable efforts. The way forward is to move towards a 'Green New Deal' which the world renowned intellectual Naomi Klein describes in her recent book On fire: the (burning) case for a Green New Deal by arguing, "The idea is a simple one: in the process of transforming the infrastructure of our societies... humanity has a once-in-a-century chance to fix an economic model that is failing the majority of people on multiple fronts... from wage stagnation to gaping inequalities to crumbling services to the breakdown of any semblance of social cohesion... a Green New Deal could instill a sense of collective higher purpose... [and] takes its inspiration from Franklin Delano Roosevelt's original New Deal, which responded to the misery and breakdown of the Great Depression with a flurry of policies and public investments." It is therefore about time the global and national leadership stood up and got counted by articulating a new 'New Deal' and similar responses of the past. As Michael G. Jacobides in his article Good leaders can overcome institutional inertia in a crisis published in Harvard Business Review recently, has argued: "Although Covid-19 is clearly a catastrophe, it offers what every social scientist craves: a 'natural experiment' that allows us to compare different responses to similar shocks... We can also glean profound lessons about the role of leaders. The differences can't be attributed to party politics... [but] sprang from ability, strategy, and leadership skills... Good leaders need to be direct and bold (yet not inhumane), especially in a crisis. They must be decisive and unite rather than divide... The truth is that in normal, predictable times, leadership is not that critical; the quality of institutions and other structures is far more important... . But in a crisis, even the strongest organizational habits, structures, and resources may be inadequate to meet challenges that are formidable and sometimes completely new. In those circumstances, strong leadership is crucial. Rough seas demand a skilled captain." In the realm of economics, Adam Smith's The Theory of Moral Sentiments, according to Eamonn Butler, "identifies the basic rules of prudence and justice that are needed for society to survive, and explains the additional, beneficent, actions that enable it to flourish." It needs to be invoked by leaders to take more than a leaf out of it. In this time of severe crisis, leadership will have to lead by example, and in doing so will have to pull up public institutions nationally, and come together to meet this challenge globally. The pandemic does not call for authoritarianism, but more inclusive policymaking nationally, and it does not require deglobalization, but greater and better globalization that a) provides level playing field for all in terms of trade, supply chains and handling labour markets, b) allows a much-needed global response to the pandemic and, equally importantly, fast-unfolding climate crisis, and c) transforms multilateral institutions to deliver more meaningfully. Above all, at both levels there is a need to move away from Neoliberalism and towards a 'New Green Deal'. Short of this, countries run a high risk of sliding in an inward-looking spiral of ultra-nationalism and populism, for institutions like the WTO and IMF to wither away while offshore safe havens for rich people's money to thrive.
Having said that, initial signs indicate that global policy response has remained woefully short of expectations in both the developed and developing countries, including Pakistan. There is more an effort to save the pre-pandemic world than to reform it to deal effectively with Covid-19, the looming global debt crisis, and the climate-change crisis. Renowned Harvard University professor, Dani Rodrik, in his recent article Making the best of a post-pandemic world points out: "Developing countries will now have to rely on new growth models. The pandemic may be the wake-up call needed to re-calibrate growth prospects and stimulate the broader rethink that is needed. Insofar as the world economy was already on a fragile, unsustainable path, COVID-19 clarifies the challenges we face and the decisions we must make. In each of these areas, policymakers have choices. Better and worse outcomes are possible. The fate of the world economy hinges not on what the virus does, but on how we choose to respond." (The writer holds PhD in Economics from the University of Barcelona; he previously worked at International Monetary Fund) He tweets@omerjaved7