Updated: Oct 31, 2022
Image credits: FT
Economics, for most of us at least, was always that side subject among the social sciences we studied at school. It was something to do with money, not the personal finance kind of thing but the money problems of the broader regions-a town, a state, or even a nation itself. Today, we seem to be grappling with our basic economic assumptions yet again. This is yet another cycle we seem to repeat over and over again, but more on that later. After the rosy years of globalisation, we’re at a stage where several economic issues intermingled with politics are at the forefront.
Consider the empathetic voices raised in favour of the Universal Basic Income (UBI), or the hostilities and prejudices that the immigrants face nowadays, threats to national security and wages of the natives being some of the prominent ones. And where do we find the solution? Politics. People divided on the left-right spectrum have developed contrasting views on all of these essential questions, and politics has become the battleground.
No doubt, Politics is part of the solution, the process of conflict resolution and mediation. However, in today's surcharged environment, advocating voices that focus on nuances and effectively those which do not go along with the general public opinion of either camp are neglected and often rejected quite harshly. Therefore, in today’s piece, we aim to focus upon the trajectory of the field of Economics over the years, unearth its massive socio-political implications and comprehend where we might be headed.
ECONOMICS- THE REGULATOR OF SOCIETY
Once Vladimir Lenin, the supreme Soviet leader, remarked: Politics is the most concentrated form of Economics. And it rightly is. Not to say that politics is just about economics, but a significant chunk? Yes. Ask yourself, what is Politics? Well, broadly, Politics is the way we choose to organise our society. The rules and the regulations. Economics-the economic principles we choose to believe in forms a basis for that.
This stems from the fact that we have limited resources as a civilisation. Therefore politics is about regulating these resources to all the different sections of the society, in a legitimate manner, as per the rules and regulations as per the law of the land.
The rise in the relevance of economics observed a positive correlation with the rise in sophistication of the human civilisation as a collective. The smaller the needs, the local it was. However, as we arrived on the shores of the journey of industrialisation, it emerged as a distinct field of its own. Adam Smith’s publication of 'The Wealth of Nations' Is taken as the foundational start of Modern Economics. Which represents the birth of the free-market economy.
The gradual break up of Feudalism was followed by the rise of two political-economic schools of thought: Liberalism and Socialism. These were attempts to shape the evolving nature of society. Both of these stood on their respective political pillars: the attention and focus on the individuality of liberalism and the preference of society/community over individuals of Socialism. However, both of them were also strongly focused upon key economic virtues. Industrialisation was the contending battleground: Liberalism sought to leave the market on its own, thus indirectly empowering and favouring the industrialists, while socialism actively sought the farmers and workers of the time. What gradually emerged from this shaped our present in the most profound ways. Let us see how.
Fast forward to the 20th century. A century overridden by a conflict between the socio-economical and political ways of life. The world of Capitalism and Communism led by the USA and USSR, respectively. While one empowered the conceptions of private ownership of the society’s resources, the other sought to solidify absolute state control over the same. This was stacked over by multiple layers of political competition involving arms race, propelling up proxies near each other and a lot more. As the Cold War progressed, and while Soviet system could match the United States in terms of its weapons arsenal. It faltered to match it on the economic front. And it was the same that ultimately led to its demise.
Images credits: Britannica
The market can stay irrational longer than you can stay solvent - Keynes
Ask yourself this question. What sort of economic system is your country based upon? Most of them have adopted a system modelled on America’s system of capitalisation but with a state with strong powers. It’s like a breed between the two dominant systems-markets are in charge of driving the economy while the state legitimately regulates them and adopts welfare policies for the masses. This is the sort of framework of our current macroeconomics. Not that exceptions do not exist - look at China, the second-largest economy of the world who attributes its framework to “socialism but with Chinese characteristics”.
Despite having brought human civilisation this far, the modern modified capitalist system is not perfect. It is blamed for the monopolies it produces, resulting in the massive influence it brings to the table. However, one of its sharpest criticism is the inequalities that it creates, in the sense where certain individuals continuously observe massive rises in their fortunes, the masses are deprived of minimal growth, even failing to beat the inflation. That is a legitimate concern, no doubt about that. However, the way it is portrayed, the way the two categories of people are put against each other presents a faulty narrative.
Empathetic voices are continuously raised in the American society for UBI for the masses left by the market, by the people usually belonging to the left or centre. A proposition that such a move might lead us to a slippery slope towards bankrupting the country is bound to be met with hostilities everywhere, Twitter and Facebook being the prime examples. It’s not that we shouldn’t be empathetic. The markets have their own downsides. However, how justified is basing your support for economic policies on one’s personal values alone.
Do we pay attention to what the economists have to say? In fact, who are the economists we should trust? In these times, it seems like everyone has a grasp of what the economy needs and how it should function. Once the high priests of academia-now the economists seem to be losing the general faith of the public for often, their views seem to be in opposition to the general narrative of the public.
After the prolific years of globalisation, we are revisiting, yet again, our macroeconomic policies. After decades of following Keynesianism-where it was believed states could control the employment levels in the economy by injecting it with demand-essentially money, we took a step back and considered its larger implications. This is a cycle we always come back to because no theory or policies are a magical solution to our problems.
Increasing the taxes on the rich-what is termed as their ‘fair share’, Universal Basic Income, whether to go for strict immigration policies or lenient ones remain some of the compelling questions of our age, and we should care about who we listen to regarding these matters, for if Politicians remain the only significant source, more often than not, they are naturally tilted towards viewpoints with the maximum number of people on the side, which might not always be the best option.
BY PRATYAKSH KUMAR
CO-FOUNDER THE GEOSTRATA