By Mah Hui Lim and Michael Heng
This is the second of a two-part series.
THE Chinese word for crisis consists of two characters – “wei ji”. Wei means danger and ji means opportunity. Every crisis is pregnant with danger and risks but also with opportunities – for some to make money, for others to learn valuable lessons, and for society to reorient or restructure its priorities, institutions and even the system.
Major crises are moments when classes in society contest for power to restructure the economy, politics and society. The failure of President Herbert Hoover to deal with the devastations of the Great Depression led to the election of President Franklin Roosevelt (1933-38) who introduced major structural reforms in the economic, financial and political spheres.
His policies of 3Rs were relief, recovery and reforms. He implemented large-scale public works to mop unemployment, introduced a social security safety net which still exists today, tamed and regulated finance by separating investment banking from commercial banking, and set up regulatory watchdogs for the stock market. They led to the eventual recovery of the economy and most significantly to a well-regulated financial system that did not experience major financial crises for over 40 years. The government took on a bigger role in the economy.
The negative aspects of the crisis have been widely covered in the mass media, and would not be repeated.
If there is any silver lining to this dark cloud, it is found in some of the unintended positive consequences of this crisis – carbon emission choking the world is down significantly, traffic congestion has lightened up, crime rates have declined, mountains of garbage generated have declined, communities have come together to help the afflicted, nature is reclaiming its space.
As one US celebrity who was infected said in his interview, it is nature’s way of hitting back at what humanity has done to it. We were supposed to be the guardian and trustee of this earth but we abused it. Deforestation and the destruction of natural habitat has reduced the space between humans and wildlife, opening more chances for new forms of pathogens and contamination. Epidemiologists have warned for decades the potential and dangers of new epidemics but they went unheeded. This is the most serious but, unfortunately, it may not be the last.
This multiple crises – health, economic, financial and environmental – is a wake-up call for humankind to rethink its hyper-consumerist economy that prides growth above all else, and one that benefits a tiny segment at the expense of the majority. It prompts us to think more seriously about restructuring society to one that is more socially and economically equitable, more respectful of nature and our environment, and restore a balance between non-materialism and materialism.
Since the 2008 global financial crisis, there has been a nascent effort to move away from the obsession with GDP growth as the measurement of a society’s welfare and wellbeing. The small nation of Bhutan spearheaded the alternative concept of Gross National Happiness. But these movements were muted and sidelined. This crisis offers us the opportunity to bring it to the fore. Prime Minister Jacinda Ardern of New Zealand recently said she would prioritise her people’s wellbeing over growth.
Karl Polanyi 70 years ago published “The Great Transformation”. His great contribution was that markets had existed for thousands of years before the rise of industrial capitalism in the 18th century. Markets, where goods and services are exchanged to meet social needs, were subordinated to social, political and cultural norms. But this arrangement was overturned when the market was deified to become the only organising principle in society. Markets in society became the market society. He presciently predicted that policies inspired by market liberalism, if unchecked, would result in the destruction of human society, the natural environment, and even productive forces.
Classical market liberalism convulsed in the 1930s with the abandonment of the Gold Standard. But 50 years later, it was resurrected in the form of neoliberalism which has formed the basis of government policies in many countries since the late 1970s.
This crisis lays bare the myth of the invincibility of the market. The market has broken down in a big way and the state is asked to step in to solve this crisis – from bailout of companies, to paying wages of workers, to cutting interest rates, to soft loans to small businesses guaranteed by the state. Once this is over, we should not be going back to business as usual.
Markets will continue to exist and play a part in the economy. But it must be subordinated to society, to be regulated by the state to serve a greater good. For the market to function well as a public good, it must not only be free but also fair. Both attributes are equally important, like the two wings of birds. The new economy must prioritise people’s as well as nature’s wellbeing over profit making for a few. – April 11, 2020
Mah Hui Lim is an economist and has been a banker in the private sector and the ADB. Michael Heng is a former professor in Management Science.
First part: Dangers and lessons of the present multiple crises
