Can the present generation avert an economic armageddon by questioning the economic paradigms they were taught?
Economic policy making has failed us. The global economic recession is a glaring example of the failure of economic fundamentals that were once deemed infallible. We were told that the systems formed marked the end of a new era where a recession like the great depression of the 1930s would be a thing of the past. It was therefore ironic when the markets collapsed in 2008 and the debt bubble formed through imprudent policy making finally burst. The people wanted answers. They stood divided. Uneasy, guilty tortured, holding on to what they were taught when they went to schools, and what they saw, which defied everything that they were taught. They stood divided, trying to reason but their delusion of pre-knowledge hindered them. They started anew, and decided this was unacceptable.
Only last month students at one of the most prestigious university, Harvard, staged a walk out of their economics course. Their reason for the protest was simple. They said that their course on economics propagated a conservative mindset in the guise of what was said to be economic science. The theory, they argued, was consistently perpetuating social injustice and breeding socio-economic disparities.
This marked merely a beginning of a string of protests against modern economics as it is being taught in some of the leading institutions of the world. The global economic crisis has reinforced the mistrust of people in theoretical economics. And they have a point. Economic paradigms are formed with the knowledge of the known and not the unknown. It is common knowledge that the real market revolves around a string of intangible factors that are not taken into account. Let’s take for instance the example of the black market economy, let’s talk about legalised versions of corruption, let’s talk about financial embezzlement, and let’s talk about vested interests. A simplification of economic policies without in effect suggesting policy decisions that eliminate these intangibles from functioning is fallacious to say the least. It is a façade, one that is bound to crumble.
Capitalism is a tale of individuals seeking self interest. Why then are we taught in our economic classrooms that the free market will effectively eliminate public goods that will be underprovided due to the lack of self interest and profit maximization? There is the problem of free riders. But what is to determine who should deserve a particular commodity, while others will be excluded. Our text books tell us that the government will have to provide these facilities for the common man. Have they done so? That is highly questionable given the extent of protests that have been witnessed in more than 900 cities. The fact that people in developed nations have been forced out on the streets, points to the growing divide in socio-economic disparities. Why have policy makers insisted upon a free market mechanism in the presence of knowledge that without government intervention such a system is bound to fail.
The fact that those people responsible for the global economic crisis went to some of the leading institutions of the world, points towards the blatant failure of these institutions. The students have realised this and a movement has begun where the clamour for a just human centric economic system has gained currency. Can the present generation avert an economic armageddon by questioning the economic paradigms they were taught, remains to be the million dollar question.
The writer is Chief Manager SME bank, and a leading banker with over 30 years of experience