NEWS HIGHLIGHTS
Theme : Social Justice , Economy
Paper : GS - 2, GS - 3
Economic science has dominated public policy since the 20th century. Debates have raged between “Keynesian” economists and “Friedman” economists: between “welfarists” who see the need for a government hand in the economy and “monetarists” who want governments out of the way to let private entrepreneurs loose and let an “invisible hand” produce good outcomes for all. Both sides agree that growth in GDP — the size of the economy measured in money terms — is essential.
TABLE OF CONTENT
- Context
- The Concerns Regarding Current State
- Out-of-Box Economics
- The Challenges for Implementing Change
- Institutions losing the Trust
- Road Ahead
Context : Economic science has dominated public policy since the 20th century. Debates have raged between “Keynesian” economists and “Friedman” economists: between “welfarists” who see the need for a government hand in the economy and “monetarists” who want governments out of the way to let private entrepreneurs loose and let an “invisible hand” produce good outcomes for all. Both sides agree that growth in GDP — the size of the economy measured in money terms — is essential.
The Concerns Regarding Current State :
- The Club of Rome in 1972 showed that pursuit of GDP growth was destroying the earth’s capacity to renew itself and provide resources for unbridled economic growth.
- The “Thatcher-Reagan-Chicago” model of neo-liberal economics prevailed and citizens who earn their livelihoods by work, not investments of money, were often side-lined in national economic policies.
- The 2008 global financial crisis revealed the fragility of insufficiently regulated markets.
- While the various governments bailed out the “too large to fail” institutions, millions of common citizens, who lost homes and livelihoods, were barely compensated.
- Moreover, some solutions to stabilize the global financial system, such as the austerity package imposed on Greece, harmed common citizens even further.
Out-of-Box Economics :
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An outline of 5 systemic solutions for simultaneously improving People, Planet, and Profit is provided in Earth for All: A Survival Guide for Humanity. The guide is produced collaboratively by economists, ecologists, and social scientists. They do not model the economy as a closed system as macro-economists do. Following the Club of Rome, their ‘whole system’ model includes feedback loops between the economy, the natural environment, and social systems.
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The five tracks for their solutions are:
- ending poverty
- addressing gross inequality
- empowering women
- making food systems healthy for people and ecosystems
- transitioning to clean energy.
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The report projects outcomes this century if the present pattern of solutions continues. It compares them with an alternative approach that will accelerate systemic change. The present path is called “Too Little Too Late”; the other, “Big Leap”.
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Business as usual for present gains, with lots of talk of “do-gooding” but insufficient systemic change, is making the world miserable for the next generation. The model reveals it will lead to environmental and societal collapse later this century.
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“Too Little Too Late” preserves the present inequitable distribution of wealth and power. (The model forecasts that by 2050, on its present trajectory, India will be the most unequal society in the world.)
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“Big Leap”, on the other hand, can prevent catastrophe. It does not require new technology breakthroughs. In fact, both, “Too Little Too Late” and “Big Leap”, are based on the use of the same largely known technologies. The difference in the two scenarios is in equitable access to technologies, and in the ways the technologies are incorporated by local actors into solutions fitting their own contexts.
The Challenges for Implementing Change :
- Social tensions are already too high within many countries.
- Their governments are unable to find fair solutions through conventional “democratic” processes, with elected assemblies, competing political parties, even public referendums.
- Disillusionment with democratic institutions is increasing, even in democratic U.S. and Europe.
- Authoritarian governments are coming to power in many countries, often supported by citizens, as alternatives.
Institutions losing the Trust :
- India will host the G20 in a greatly disordered world. Global governance has broken down. Social tensions are already too high within many countries. Their governments are unable to find fair solutions through conventional “democratic” processes, with elected assemblies, competing political parties, even public referendums.
- Disillusionment with democratic institutions is increasing, even in democratic U.S. and Europe. Authoritarian governments are coming to power in many countries, often supported by citizens, as alternatives.
Road Ahead :
- Policymaking must become more inclusive and less dominated by the powerful and the wealthy on the top. On the economic front, recoupling monetary policy with fiscal policy is necessary but insufficient. GDP must also be recoupled with nature and society.
- A paradigm shift is required in the process of problem solving at global and national levels.
FAQs :
1. What was observed by The Club of Rome in 1972?
Answer:The Club of Rome in 1972 showed that pursuit of GDP growth was destroying the earth’s capacity to renew itself and provide resources for unbridled economic growth.
2. What is “Too Little Too Late’’ Model’s Prediction?
Answer :The model forecasts that by 2050, on its present trajectory, India will be the most unequal society in the world.