In Search of a New Economic Model

May 10, 2012

At a discussion on “the future of capitalism” at the Guardian Open Weekend on 24 March, a case was made by one of the panelists – Will Hutton – for what he called “good capitalism”. This is one that encourages private entrepreneurship but subordinates the market to the broader needs of society. It is focussed on more equality of opportunity, and enables and facilitates small businesses. It also recognises and addresses the constraints posed by the environment, and reduces ecological waste and damage. It was pointed out by another panelist (myself, as it happens) that what he was describing could as easily be called socialism.

The problem is, of course, that when the world “socialism” is used, too many people immediately think of the centralised planning, authoritarian tendencies and bureaucratic control of the former Soviet state, and reject the notion immediately. Unfortunately, we have over-used and distorted too many words, especially the “isms”. Therefore it is harder and harder to describe in shorthand the alternative that must be promoted, without getting stuck with all the baggage of the past. Yet thinking about and formulating the alternative is not only essential but increasingly inevitable. The current model of profit-led deregulated capitalism has failed on so many fronts and created so much dysfunctional inequality that it obviously must be transcended.

So, for want of a better word (maybe someone will think of one soon?) let me call this alternative socialism. It is based on the idea that society and economy should be so constructed as to give everyone equal opportunities; that each person should be granted freedom, dignity, a political voice and the minimum material conditions for a decent life; that plurality should be respected without encroaching on fundamental human rights.

It is immediately evident that this requires a move beyond tired ideas of all kinds, not just those prevalent in the mainstream. Thus, the traditional socialist paradigm, with its emphasis on centralised government control over an undifferentiated mass of workers, cannot still be the desirable ideal. Rather, the new vision of socialism must incorporate more explicit emphasis on the rights and concerns of women, ethnic minorities, indigenous and local communities and other marginalised groups, as well as recognition of ecological constraints and the social necessity to respect nature.

The distributive element of this is clearly important. The Occupy Movement has made the huge contribution of putting the issue of inequality at centre stage. Yet the system cannot be changed only by restraining the one percent, or seeking to reduce their obscenely inordinate share of assets and incomes, although this is obviously essential. In addition to this, we need to think of new and genuinely progressive ways of organising the economy that recognize the varied needs of all citizens.

This requires, to start with, moving beyond GDP as the basic index of well-being, and developing new means of measuring genuine progress, well-being and quality of life. Quantitative GDP growth targets, that still dominate the thinking of policy makers and the media, are not simply distracting from more important goals, but can even be counterproductive. For example, a chaotic, polluting and unpleasant system of privatised urban transport involving many private vehicles and over-congested roads actually generates more GDP than a safe, efficient and affordable system of public transport that reduces vehicular congestion and provides a pleasant living and working environment. So it is not enough to talk about “cleaner, greener technologies” to produce goods that are based on current (increasingly discredited) patterns of consumption. Instead, we must think creatively about consumption itself, work out which goods and services are more necessary and desirable for our societies, and think of how best to create the material incentives that will encourage such activity.

The good news is that this is not just an idealistic hope for an impossible utopia. In fact people across the world are thinking along these lines and developing alternative paradigms for constructing very different relationships between society and economy. For example, in Ecuador and Bolivia, new constitutions emphasise the rights of all citizens to work with dignity and decent conditions, to have access to food, water and health care. Simultaneously, the state is required to respect the rights of nature, and so environmental conservation, biodiversity, the prevention of environmental damage and recovery of degraded natural spaces are declared matters of public interest. The economic structures built around these broad aims do not involve the complete negation of the market; rather, the necessity is seen for encouraging and developing market activities, but within regulations and fiscal and other economic policies that create incentives for generating more decent work opportunities, as well as more time for leisure and what is seen as “relational time” to engage in fulfilling social relations. In Ecuador, the five-year economic plan of the government is explicitly focussed on “El buen vivir” or “good living”, though the literal translation of the original Quechua term is perhaps more apt: “life to the fullest”.

This is just one example – but in many countries more and more people are not just thinking about but also attempting to put into place new institutions, rules and practices that do not just challenge the existing power structures but also suggest creative new ways of dealing with the economy. We need to know much more about these experiments, and to have more confidence in ourselves and in our capacity not just to imagine but to implement alternatives. For that, we have to shed the fears, insecurities and pessimism that are so actively instigated by the mainstream media. Of course the path will not be easy, and opposition will be fierce. But if we do not open our minds to a more positive approach that seeks to transcend the current system, we will continue to be helpless pawns in an increasingly cynical game in which financial elites and large capital are destructive of both human and natural life.

The slogan of the World Social Forum, which for a brief time had become one form of articulation of global people’s resistance to the current oppressive system, is “another world is possible”. The writing on the wall is now clear: another world is not just possible but inevitable, as this system cannot survive in its current form. Shaping it in more desirable directions, towards socialism in its original sense, is therefore the task.


By Jayati Ghosh, Professor of Economics at the Jawaharlal Nehru University in New Delhi.