THE market is all shook up, to borrow a phrase from the sensation of the late 1950s and 1960s Elvis Presley. And Covid-19 is doing more than the famed pelvis movement.
The coronavirus that was born in the centrally-planned economy of China is challenging the laissez-faire theories of the free-marketeers the world over.
Move over Friedrich von Hayek for Ha-Joon Chang of Cambridge University is here. Hayek’s Austrian economics had its day, though most of it was bad.
Time now for a South Korean strain. Ha-Joon’s economics is still a variety of capitalism, but it has more heart in it. Some call it compassionate capitalism, though an oxymoron it is. Covid-19 has got this neoeconomics going.
Look East or West, there is a lot of compassion in the market. Not from capitalists swooning under the spell of shareholder value, but from the government.
Strangely, the market that often tries to keep the government out is pleading for its help. This is happening in the so-called “free-est” economies of the world.
The United States Congress has just approved US$2 trillion to aid the ailing market there. This is the largest ever aid — 10 per cent of its gross domestic product — the US has handed out, even eclipsing the package during the financial crisis a dozen years ago.
Britain and European governments are answering the call of the drowning market, too, with their own versions of help. Malaysia, too, is offering RM250 billion to keep the market going. Thanks to Covid-19, central banks of the world are making frequent trips to the mint.
Covid-19 is changing many things. And economics is one of them. Although we are creatures of old habits — even of some very bad ones — we must use this time to give our economics a big rethink.
For far too long we have been under the hypnosis of Hayek’s The Road to Serfdom, a treatise on how to keep the hand of the government out of the market.
It is such thinking that has made the one per cent of the world decide how the 99 per cent should live their lives. Those who are glued to the TV screens — 45 per cent of the world who are under some form of lockdown or movement control order are so glued — are constantly being exposed to images of marginalised living.
Never have so many people around the world seen so much of abject poverty at the same time. To be fair, in some such places, the governments have let this happen. But in most other places, especially in the free world, the market has. The market needs a makeover.
If compassionate capitalism is that makeover — Covid-19 tells us it is — the free-marketeers’ mindset of profit-at-all-cost must undergo a sea change. It is not that compassionate economics has no place for profits. It has.
But in just proportion, unlike in Hayek’s winner-takes-it-all laissez-faire economics. In compassionate capitalism, people come before profit.
Always. And most importantly, in such a model, the government stands ready, with a not very invisible hand, to slap the wrist of the capitalist should he somehow make the proportion unjust. If the Hayeks of the world need a reason for the slap on the wrist of the errant capitalist, an old wisdom provides it: “We did not inherit the Earth from our ancestors, but borrowed it instead from our children.”