Long Depression and the Third Way

During the space of 20 years, both bureaucratic socialism, as practiced by erstwhile Soviet Union, and unregulated capitalism of the western countries, have ended up in an unedifying heap. Recent rescue efforts to save capitalism by using neo-liberal tool kits seem unlikely to save a system bloodied and racked by the unbridled greed of the rich few. This catastrophe has not left any geography untouched. Multilateral institutions like the World Bank and International Monetary Fund (IMF) claim that the pain of the economic slowdown will be long and deep. More than 40 million people are likely to be impacted by the economic cataclysm that is gently unfolding in front of our eyes, whereby individuals and even some governments are finding themselves to be totally helpless. Sometimes it seems like an inexorable slide into a deep abyss from where millions would find difficult to come out.

According to some economic historians, the 2008 meltdown would not be similar to the Great Depression of 1929-30, but to the ‘long depression' of 1873 that lasted four years. The 1873 depression was also due to the collapse of the financial pyramid that rested on a pinhead. These were panic years when businesses closed down with "primeval upheaval". Hundreds of thousands were rendered unemployed and street rioting and protests became a norm. This long period of depression pauperised societies in Africa and shifted the economic locus to the US from Europe. This also saw the rise of cash rich robber barons in the US who took over small businesses at "fire sale prices". Rise of colonialism in Africa was also a result of this depression.

Countries, invariably, pay a heavy price by forgetting these important lessons of history. And there is evidence that many choose to be amnesic of these policies that may spell disaster in the long term but are extremely profitable for a small sliver of the population. Casino capitalism that was at display in the last few years was a manifestation of this hubris.

Ironically, the multilateral institutions that were created to prevent the repetition of the Great Depression and manage foreign currency fluctuations by pegging the local currency first to gold and later to the dollar, like the IMF and World Bank, seemed to have been hijacked by the neo-liberals to execute their agenda. Their bitter conditionalities for giving loans to foreign exchange strapped countries have had a disastrous impact on these societies. US treasury reports have indicated categorically how the World Bank has been forwarding US policies to promote free market and counter Leftwing and social welfare ideologies. Now that the US financial system has collapsed would it not be prudent for the world community to impose strict and punishing conditionalities on a profligate Washington?

It is incumbent, therefore, on US president elect Barack Obama, to take a hard look at the iniquitous world order and cooperate with other leaders to build the architecture of a new financial system. An extremely bright and progressive leader, Obama would not only have a responsibility towards his own country but also towards the rest of the world which is suffering because of the mindless policies of the American economic establishment. He could take a leaf from India's first prime minister, Pandit Jawaharlal Nehru, who had the intelligence and wisdom to marry the social sector responsibilities of a government to look after the poor, with the innate aspirations of individual and collective freedom. His refusal to succumb to the temptation of creating a totalitarian society - like the regimes in the Eastern Bloc or China - and resort to a mixed economy with well-defined roles for the ‘public' and private sector, proves his ability to redefine the future. Now, even capitalist societies like the US are taking the path that India has been trotting all these years, despite the current obsession for neo-liberal privatisation and globalisation. Governments are picking up stakes in banks and responding to demands for greater financial market regulation.

There are many more Nehruvian prescriptions that give content to the ‘Madhyamarg' or the ‘Third Way' that needs to be followed by all governments including our own. This fifth anniversary issue of Hardnews is dedicated to bringing the focus once again on a visionary, idealist and nation-builder who seemed convinced that the world is neither black nor white but has huge shades of grey.