Those who have been restricted to their homes in the last few weeks must be suffering from an overload of pandemic information. Understandably, the medical headlines dominate the media’s agenda. But soon, the focus will be on the economic effects on individuals and businesses.
Hopefully, the debate will rise above the amount of support those affected will be asking the government to provide. We need to discuss whether the prevailing political philosophies and economic theories are still fit to promote the well-being of society.
For the last four decades, neoliberalism was the prevalent political philosophy in the Western economies, moving towards free-market capitalism and away from government spending, regulation, and public ownership.
The last substantial shock that the Western world faced was World War II. The devastation of Europe gave rise to a new breed of politicians who had what it takes to rebuild shattered economies and put back hope in ordinary people’s lives.
In Britain Clement Attlee put in place a recovery plan built on establishing free health for all, public housing and state ownership of industry. The welfare state was born. In Germany, Konrad Adenauer led the effort to revive the country from the destruction of war and the plague of Nazism to help a divided Germany become the engine of European economic growth.
In times of crisis people do not want to depend on the heroics of generous individuals
The welfare state was by no means perfect. Successive generation of politicians used it to score political points. They failed to curb abuses of the system decisively until it became too expensive to support. A wave of privatisation of poorly-managed state industries, reduced expenditure in public health and education and the notion that the nanny state was an obstacle to economic growth sparked the enthusiasm for a new political philosophy built on neoliberal economic theories.
The state’s withdrawal from the economy was gradual but irreversible. Even so, some countries managed to keep some of the pillars of the welfare state intact. Government health spending per person in 2016 amounted to over €8,000 in the US while the corresponding amount spent in Germany was €4,500. Few can doubt that the better managed and regulated public health system in Germany outperforms the US system, which relies much more on private healthcare.
Neoliberalism has brought about some significant benefits. Economic wealth has increased as the lean and mean business management philosophy improved enterprise efficiency. Many moved up the social ladder by upgrading from the working to the middle class. Taxation was reduced as the state rid itself of obligations to invest heavily in public health and education.
However, in the last 40 years, many were left behind. The gap between the haves and the have-nots increased. Many survive from one pay cheque to another. The gig economy is depriving millions of workers in Europe from thinking about setting up a family as economic insecurity is a risk that they feel will haunt them forever. The big state has been put in quarantine for the past 40 years. Many are told that they need to fend for themselves. Many political leaders in Europe looked at the US socio-economic model as an excellent blueprint for creating the European dream.
Europe needs to do better than this. With an ageing population, a growing trust gap between politicians and ordinary people, lack of adequate investment in physical, social and economic infrastructure, the challenges are formidable, and the leadership is lacking. It is not just substantial public medical health crises that expose the weaknesses in the current European socio-economic model. Europe is increasingly becoming a laggard in economic performance because it has given up on promoting social policies that promote the well-being of the community.
The present global public health crisis could be the catalyst for new socio-economic thinking that will lead to a fairer society. What is certain is that the current neo-liberal philosophy is failing many people and giving rise to populist politicians who in reality are strong on rhetoric by bankrupt in ideas. There are undoubtedly lessons to be learnt from the US system. But social cohesion is undoubtedly not a US strength.
In times of crisis, and there will be many more crises, people do not want to depend on the heroics of generous individuals. They need to have trust in the ability of the state to protect them from economic and social shocks.