In Gros Islet, St. Lucia, Walcott waited his turn for a trim. With his back turned to Walcott the barber looked into the tarnished oval mirror and said, “So the world is waiting for Obama.” Today, the world is waiting for Mia Mottley as she adroitly contests a debilitating emerging market debt crisis at the 53rd Session of African Ministers of Finance in Addis Ababa. COVID-19 has replaced days of development with days of devastation.
The overarching aim of the economy remains wealth, not wellbeing. Profit without purpose. We delight in being robbed in the daylight of our capacity for fairness, freedom, fraternity, and preparing for failure. The present confluence of the financial meltdown, the climate crisis, and a viral pandemic stems from unfettered free market fundamentalism, unprincipled culture and degraded institutions lacking integrity. The fall of values accompanied the rise of a market society. Grounded in subjective preferences, we surrendered our free will and lost our humanity.
In the 1990s, Gorbachev asked the G7 for advice on economic reform. It came from political and economic soulmates Reagan and Thatcher. They inspired a revolution in thinking and policy in both economics and foreign affairs. Their answer to any market failure was to build more markets and /or deregulate. The collapse of communism in Eastern Europe and the former Soviet Union is a result of their direct policy positions. Many hope for a world that will revert to pre-Reagan and pre-Thatcher policies. But those who recall what it was before Reagan and Thatcher know that we can never go back.
Deregulation made London into a global financial centre and a Brexit-Britain is unlikely to jeopardize an important component of its economy by reverting to pre-Thatcher policies. Thatcher’s monetarist approach supported high interest rates and she succeeded in sharply reducing inflation. She supported Britain’s entry into the European Union in order to benefit from free trade, but forcefully opposed the single currency.
Reagan had four key economic goals: reduce inflation, reduce high personal tax rates, reduce the size of government, and reduce regulation of the private sector. Inflation came down from more than 10 percent in 1981 to less than 4 percent in 1983, following the monetary policies of Paul Volcker. The Thatcher-Regan method balanced market dynamism with innovative forms of regulation that took on board the needs of the system across regions and over time.
Over the last few decades, the freer movement of ideas, capital and goods has lifted more than 1bn people out of poverty, made the sum of human knowledge available to 4bn more and raised global life expectancy. And yet the broader response to what has been the crisis of globalization has been miserably inadequate. In recent years, the effects of economic openness and technological change have fuelled disaffection and political resentment evident in the decision by UK voters to leave the EU in June 2016 and the November 2016 ascension of Trump.
Across these brown leaves of islands that cling to the blue rim of the Caribbean basin, globalization and breakthrough technologies meant mouth gaping inequality, insecure employment and low wages. Now instead of the contemplations of Karl Marx in his Communist Manifesto, we have viral tweets and sweltering blogs that voice similar outrage as we substitute textile mills for digital platforms and steam engines for machine learning. The present sensitivities echo those of prior ages. But new forces around everything from COVID to the Extinction Rebellion are intensifying our anxieties.
The climate transition will require enormous structural changes. If the changes are to mirror events during previous periods of technological upheavals, we are in for a protracted period of difficult adjustment and spiralling inequality before any increases in the jobs market and in real wages. COVID-19 is accelerating the mutiny and deepening inequality. Baron Rees of Ludlow, crumpled the colonization of Mars ambitions of billionaire Elon Musk at the World Government Summit in Dubai. He stated that such a feat is no easier than setting up a colony on the tip of Mt. Everest. Back on earth it seems more plausible to set about making the Earth return to Earth. A new global economy must be founded on new dispersed networks of trade, capital and ideas, that harness the creativity of billions of people, who will share fully in its rewards.
We need a new open architecture for non-financial risks from everything from COVID to climate change. Planning for failure is the new strategy. Digital resilience means ring fencing schools with servers and redundancy and building cyber defences around power grids and water resources. Budgets can no longer be about debt sustainability and markets but about life and livelihoods. Long periods of wage stagnation for swathes of people remains morally indefensible. Everyone’s real earning and prospects must grow over their lifetimes.
With every sun salutation, children everywhere awake to the “bauchar” that passes off as schooling. Regulations, tax policy and public investment must incentivise technology to support the retooling of workers in factories and offices and the building of a new ecology of schooling. The choice is to be “Digital by Design” not “Digital by Default”.