It’s time to review the merits of ‘neoliberalism’ as the world economy is fast threatening to slip into recession in the wake of the dual impact of the pandemic and the Russia-Ukraine war. The fear of another economic crisis has highlighted the need for states to have some control over capital and market. Many economists argue that the present slump in the world economy is the result of opening up trade more than the permissible level, which in turn has only created further inequality between nations and its people. Several economists implore those in authority to spend more on welfare measures to avert the crisis, while another group of financial experts are still stressing on easing state control on markets to increase profitability. One group strongly believes that the trickling effect of a flourishing economy immensely helps the marginalised people, while the other group advocates for increasing public expenditure to benefit the poor, without restricting profits only to big cities. As a matter of fact, many feel that the very idea of profitability obstructs the welfare of the people. Only recently, Union Finance Minister Nirmala Sitharaman criticised Indian businesses for lack of investments in the country. The Union Finance Minister is right in criticising the private investors as figures show that Indian capital is now being invested more abroad than within the country. It means that there is no dearth of capital in the country, but businessmen and women are not interested in investing in India as they believe returns will be limited.
Former President Pranab Mukherjee had warned about such a situation quite some time ago, when he categorically differed from the then Prime Minister Manmohan Singh’s ‘trickling effect’ theory. In his very first speech as the President of the country, the late Mukherjee opined that India shouldn’t rely upon ‘trickling effect’ to uplift the downtrodden. Instead, the country should focus on increasing the purchasing power of rural India to bring it to par with the rest of the country. He was right as in India private investments are restricted only to big cities. For example, many private banks have entered the Indian market and snatched business from nationalised banks. But it is rare to find a branch of such banks in remote areas of the country as it is unprofitable. Thus, the ignorance of the welfare aspect is the biggest mistake of ‘neoliberalism.’ There is nothing wrong in making profits, but it is ideal if a part of the amount is reinvested in the same place from where it has been generated. As the world is yet to recover from the jolt it has suffered from the pandemic and high fuel prices, private investors are of the opinion that the present situation is not conducive to making investments, whereas it requires large-scale investment to prevent recession which may destroy the world’s economy. So today, the question is should countries once again embrace ‘regulation raj’ discarding ‘neoliberalism’ to save the economy from peril?
