Economic thinking underwent two seismic shifts that followed major global crises in the last 100 years. Some political scientists are now rightly asking whether the present global crisis will lead to a paradigm shift in economic theories, strategies and policies.

In the 1940s, following the Wall Street crash of 1929 and the Great Depression, Keynesian economics replaced the previous orthodoxy of laissez faire. Political economists then agreed that economic strategies should focus on full employment and the welfare state.

Forty years later, the global economy faced another major crisis when oil prices quadrupled in 1973 and doubled again in 1979. The response of Ronald Reagan in the US and Margaret Thatcher in the UK was to blame excessive government intervention in the eco­no­my as the cause of the global economic crisis, especially in western democracies.

The doctrine of neoliberalism was endorsed by right-wing governments and centre-left ones that could not develop an alternative economic theory. Neoliberalism is the doctrine that maintains that economic growth and human freedom are best served by the expansion of deregulated markets and private enterprise and a reduction in the activities and size of the state.

The global financial crisis of 2008 signalled the beginning of the end of neoliberal supre­macy in economic thinking. The big bang approach to libera­lising financial markets led to a massive expansion of the financial sector and the predominance of key financial performance indicators in driving company strategies.

Neoliberal policymakers waxed lyrical about how market competition would benefit consumers. The reality was much less favourable. In the last few decades, critical sectors like digi­tal platforms and public services outsourcing have enabled the development of mighty multinational companies opera­ting as quasi-monopolies.

Globalisation growth is another direct effect of ingrained neoliberalism in economic thinking in the last 40 years. Unfettered globalisation has been blamed for growth in income and wealth inequality and pervasive environmental degradation. In many countries, it led to the destruction of traditional industries and the communities that relied on them. It also accelerated the growth of populist parties on the far right and left, increasing political instability in some western democracies.

In the last three years, we saw governments intervening aggressively in the economy to ward off the spectre of massive unemployment and economic collapse due to the pandemic. Businesses not only did not object to this state intervention but are still urging governments to do more to help them recover from what they wrongly perceived as the pre-COVID golden era.

Globalisation growth is another direct effect of ingrained neoliberalism in economic thinking in the last 40 years.

Populist politicians like Donald Trump created a nostalgic narrative of the good old days when governments believed they could control economic growth dynamics and create prosperity. This fallacious politi­cal reasoning signalled the beginning of the end of unfettered globalisation. The pandemic and the Ukraine War will probably speed up global trade restrictions for decades.

There is still no label that one can stick to evolving post-neoliberal economic thinking. But the elements of this seismic shift in the core goals of this new mindset are pretty straightforward.

Economic analysts and policy­makers are often classified with two avian terms: hawks and doves. I would add

a third term: ostriches. Economic hawks want to stick to old and trusted monetary poli­cy tools to deal with the current threat of stagflation. The doves in the economy want the more accommodative monetary policies to be kept in place for much longer to avoid a deep recession. Economic ostriches fail to see how the world has changed in the last 10 years and passively wait for the alternating phases of boom and bust to take their course as part of the typical cyclical phases.

The more enlightened economists acknowledge the need for environmentally sustainable economic planning that promotes living within the earth’s planetary boundaries in a just and fair way for all people and future generations.

An equally crucial objective is to improve individual and social well-being rather than prio­ritising economic growth at all costs. This objective can only be reached when economic planning is structured to reduce income, wealth and power inequalities and eliminate systematic gender and race discrimination.

Former UK Chancellor and Prime Minister Gordon Brown was wrong when he declared that he had abolished the econo­my’s boom and bust cycle. Still, it remains a valid premise for new economic thinking.

Neoliberal failures can only be corrected when the new economic thinking embeds structural resilience to shocks, whether from finance, geopolitical turmoil, environment or pandemics, in the foundations of its theories.