Liberal economics creates illiberal societies

A new form of ‘Gandhian’ democratic socialism powered by cooperative economic enterprises is required

January 14, 2022 12:02 am | Updated January 15, 2022 07:41 am IST

Scale icon isolated on background. Modern balance flat pictogram, business, marketing, internet concept. Trendy Simple vector symbol for web site design or button to mobile app. Logo illustration.

Scale icon isolated on background. Modern balance flat pictogram, business, marketing, internet concept. Trendy Simple vector symbol for web site design or button to mobile app. Logo illustration.

A surging tide of nationalism and authoritarianism has imperilled democracy globally, and within presumptively democratic nations — the United States, India, the United Kingdom, and the European Union — too.

Economies are not doing well. The benefits of growth are being sucked up to the 1% on the top; ‘trickle down’ to those below has diminished. With every global crisis — the financial crisis of 2007-08 and the ongoing COVID-19 crisis — the rich get richer while millions at the bottom fall off the ladder. Inequalities of wealth have increased around the world and India is becoming one of the world’s most unequal countries.


Political, economic symptoms

Like the COVID-19 virus, whose origins scientists are struggling to understand, another disease has been crippling the well-being of nations for 30 years. Political symptoms of the disease are the weakening of democracy and secularism. Its economic symptoms are inequities within economies and an unsustainability of economic growth. The socio-political and economic pathologies are inter-related. Economic despair is feeding the rise of authoritarianism, nationalism, and identity politics. Liberals who continue to advocate for more liberal economics must understand how their ideas have caused the rise of anti-liberal societies and governments which they lament. They can no longer have their cake and eat it too.

Opening national borders to free trade became an ideology in economics in the last 30 years. Taxes of incomes and wealth at the top were also reduced. The ideological justification was that the animal spirits of ‘wealth creators’ must not be dampened. Otherwise, the pie will not grow and there will not be enough to share. With higher taxes until the 1970s, the U.S. and many countries in Europe had built up their public health and education infrastructure and strengthened social security systems. The rich are now being taxed much less than they were. The pie has grown larger but the richest few have been eating, and hoarding, most of it themselves.

On ‘privatisation’

Governments are hamstrung without resources to provide public goods. ‘Privatisation’ of everything became another ideological imperative in economics by the turn of the century. Selling off public enterprises raises resources for funds-starved governments. Another justification is efficiency in delivery of services, setting aside ethical questions of equity. When ‘public’ is converted to ‘private’, rich people can buy what they need. In fact, they can buy more with their higher incomes even if the services become more expensive — better health care as well as better education for their children at the world’s best schools. The children of wealthier people with better education have greater access to opportunities in the future also. The gaps between the haves and the have-nots become larger.


Return of history

With not enough in the present, and receding hopes of better conditions in the future, people lose faith in their governments. History shows that whenever hopelessness spreads in societies, they are fertile grounds for messianic saviours who whip up pride in citizens’ identities to distract them from their woes. History has not ended, even though Francis Fukuyama said it had when the Soviet Union collapsed. With it, he suggested, the idea of totalitarian governments as saviours of the people had been debunked; and the idea of public ownership of property, which the communists had taken to an extreme by abolishing all private property, had failed.

History has returned. Authoritarian governments are now being democratically elected by people seeking a way out of the morass. The U.S., the leader of the Cold War against the Soviets, built the “Washington Consensus” around a starkly “unsocialist”, capitalist ideology which swept across erstwhile socialist countries of Europe and India too. Socialism seems to be back in U.S. politics now with Bernie Sanders, Elizabeth Warren, and young Democrats.

Liberal economists, promoting free markets, free trade, and privatisation, are worried by nationalism and authoritarian governments. They rail against “populist” policies of governments that subsidise the poor and adopt industrial strategies for self-reliance and jobs for their citizens. Liberals must re-examine their ideas of economics, to understand their own culpability in creating authoritarian and identitarian politics.

The property problem

Thomas Piketty’s Capital and Ideology traces the ideology of “property” rights and its encounters with evolving ideas of “human” rights over the last three centuries. In proprietarian societies, it is just that he who owns more must have a greater say in the governance of the enterprise. In truly democratic societies, human rights must prevail, and every person, billionaire or pauper, must have an equal right to determine the rules of the game.

Democratic and capitalist principles were becoming reconciled with “socialist” ideas in Europe and the U.S. after the World Wars, and in developing countries such as India after the collapse of colonialism. The socialist era ended with the collapse of communism and the resurgence of neoliberal economics around the world afterwards.

While communism had lifted living standards, and the health and education of masses of poorer people faster than capitalism could, communism’s solution to the “property” question — that there should be no private property — was a failure. It deprived people of personal liberties. Capitalism’s solution to the property problem — replacing all publicly owned enterprises with privately owned ones (and reducing taxes on wealth and high incomes) has not worked either. It has denied many of their basic human needs of health, education and social security, and equal opportunities for their children.

The private property solution has also harmed the natural environment. The belief that private owners will husband natural resources sustainably for all has proven false. When natural resources, and knowledge converted into “intellectual property”, become the property of business corporations, they will use them for the purpose for which a business corporation is created — which is to increase the wealth of its owners. The ecological commons are harmed, and social equity suffers.


Communism and proprietarian capitalism carried too far have both failed. Climate change and political rumblings around the world are both warnings that capitalism needs reform. Economic policies must be based on new ideas. Thought leaders and policymakers in India must lead the world out of the rut of ideas in which it seems to be trapped. Principles of human rights must not be overpowered by property rights. A new form of “Gandhian” democratic socialism, powered by cooperative economic enterprises, is required in the 21st century, to create wealth at the bottom, not only at the top, and save humanity and the planet.

Arun Maira, Former Member, Planning Commission, is the author of A Billion Fireflies: Critical Conversations to Shape a New Post-pandemic World

Top News Today

Sign in to unlock member-only benefits!
  • Access 10 free stories every month
  • Save stories to read later
  • Access to comment on every story
  • Sign-up/manage your newsletter subscriptions with a single click
  • Get notified by email for early access to discounts & offers on our products
Sign in


Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.

We have migrated to a new commenting platform. If you are already a registered user of The Hindu and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.