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The Financial Express

A review of socio-economic systems warranted  

Nilratan Halder   | Published: April 30, 2020 22:36:06


A review of socio-economic systems warranted   

Never ever could anything rein in the mad rush of economic activities the world over as the submicroscopic coronavirus has done now. Governments everywhere, particularly in countries hit hard by the virus, have announced huge stimulus packages for various industries, businesses and productive sectors in order to keep economy afloat. Here is an unusual situation when millions of people everywhere have no money to buy foods because of the complete lockdown. The majority of such people do not have enough savings as their income is barely enough to eke out a living.

So grave is the situation now that the pandemic, predictsthe World Food Programme, 'will cause famine of biblical proportions'. As many as 30 million people could die of starvation on account of coronavirus impact on economy. So governments not only in the developing countries but also in developed countries, as workers are going to lose jobs, have the double agenda of feeding the poor and vulnerable and at the same time keep the engine of economy moving.

Now the question is, why has economies come to such a pass? Much as John Menard Keynes and Milton Freedman may have their difference in economic paradigms, they were staunch defenders of capitalism. Whether a government should intervene in free-market economy by creating jobs for every citizen and even going for big spending to sustain consumerism and on the other hand, demand and supply on their own correct the discrepancy if given some more time were the bone of contention. 

No one will contest the fact that the world has many times more resources than is necessary to not only feed the planet's population but also take better care of them in terms of education and health. It is undeniable that continued incremental income, bullish share market and explosion of information technology presented a highly positive and desirable face of free-market economy. In the late 80's and 90's, the West, particularly the United States of America, was riding one such extraordinary wave. Countries like the UK under Margaret Thatcher went for wholesale privatisation. Such policies opened the floodgates of resource accumulation of unprecedented proportions by the rich at the cost of the working class. It was also the time when the socialist countries including the Soviet Union disintegrated. No wonder that supporters of free-market economy were obnoxiously jubilant.

In 1997, however, the crisis in the East Asian venture market halted the jubilation but the proponents of market economy justified the implosion by terming it a 'creative explosion'. Then comes the 2008 economic downturn in the US economy following the artificial attempt to inject blood into the economic momentum. Loans were sanctioned left and right without considering the repayment capability of debtors. The economic bubble busted, creating financial crises even in European countries -one after another. The world is yet to recover from that recession. 

And now comes the double whammy of lockdown and job losses. Corona pandemic has brought to the fore the truth that ultimately it is the government that has to come to the rescue of industries and businesses even if they are in the private sector. In a way it exposes the malaise of capitalism that no doubt has created wealth but only to be piled up by the rich and the privileged. Why not these accumulators of wealth part with a portion of the billions of their capitals and lighten the burdens of governments?

Instead they are clamouring for stimulus package so that their huge capitals do not erode. In Bangladesh, Prime Minister Sheikh Hasina made an important announcement in that the owners of establishment terminating jobs would not be eligible for stimulus package. Let this happen.

Is not it irrational that a government should generously dole out from its coffer money to prop big industries and businesses in time of crisis? It has to because of the lobbying power of such privileged sections. Well, countries like Sweden have at least ensured social security of their citizens by imposing fat taxes on the rich. But elsewhere, economic disparities have only widened and coronavirus has pointedly raised its accusing fingers at this galling flaw of capitalism.

The corporate world is busy making disproportionate profit and in times of economic recession looks for what is euphemistically called incentives or stimulus. But the government has to ensure the most basic right to foods for every citizen. Economies have progressed but the gulf between income and living has also widened for most people. In countries like Bangladesh, the informal sector of economy guarantees no job security, nor enough income for low level employees for modest living. If they can somehow manage food and shelter, healthcare and education of their children suffer tremendously.

Even in developed countries like Britain, although its healthcare system is efficient its allocation for the sector is proportionately lower than Germany and France in terms of GDP. Significantly, its weakness in diagnostic facilities has caused it to suffer during this pandemic. Germany could better prepare for facing the attack because it has the most restriction-free and consumer-oriented healthcare system in Europe. Patients can seek any type of healthcare they want and almost 80 per cent of the system is government-funded and the rest is private-funded.

So, here is an opportunity for governments the world over to review not only their economic systems and policies but also healthcare and social security systems in order to address the deep-rooted malaise.

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