The source of the current global economic crisis lies deeply in U.S.-style neoliberal capitalism, or contemporary laissez faire. It could not have been triggered in countries with a social market economy, but only in the conditions of the neoliberal Anglo-American model. The intense shock the world experienced could take place only as a result of the coincidence of numerous political, social and economic circumstances (as well as technological ones, since it would not have been possible without the Internet). The overlapping of these conditions in a specific way, which accumulated the crisis-related phenomena and processes, was possible only under a special combination of values, institutions and policies—typical of U.S.-style neoliberalism.
First and foremost, neoliberalism definitely overestimates the power, purpose and usefulness of individualism. It unnecessarily supports greed—by elevating this vice to the level of an economy propelling virtue. It neglects the social cohesion aspects of the economy and does not perceive of human beings as the center of the economic activities. In their place, there is money. As far as values are concerned, neoliberalism leads to translation of almost everything into money worth, since according to this doctrine it is possible and worthwhile to trade in everything, which may bring profit, including expectations. And, of course, irrational expectation, too.
From the institutional side, neoliberalism converted the government with its regulatory powers into a kind of a public enemy number one. By using (quite brilliantly, one has to admit) media to manipulate public opinion and, unfortunately, by using the opinion-forming capacity of some groups of social sciences experts, particularly economists, it imposes the idea of a small (read: weak) government and diminishes its interventions in the spontaneous market processes. However, lasting success is possible only due to an intelligent synergy of the power of the invisible hand of the market and the visible mind of the government. This applies particularly, though not exclusively, in the countries of the emerging markets. Institutional intervention is the necessary corollary of contemporary capitalism. That principle, however, is not accepted by neoliberalism owing to its values and, above all, due to its focus on serving the special interests groups.
As far as neoliberal policy is concerned, it confuses its purposes with its measures. The purpose of economic policy is sustainable long-term development. It should be sustainable not only economically, but also socially and ecologically. Low inflation, positive interest rates, balanced budget, fast privatization, currency exchange rate either fixed or flouting, taxes (low, of course)—these are only instruments and tools of politics. It is not possible to subordinate any economic strategy or policy to indices, which only illustrate phenomena and processes from those areas. To improve the financial standing of narrow groups of elites at the expense of the majority of society, neoliberalism uses in politics and policies such expressive liberal ideas (which by the way have to be followed) as liberty and democracy, private ownership and entrepreneurship, competition and economic freedom. However, supporting such ideas as pro bono publico on the one hand, and their usage for the benefit of the minority at the expense of the majority on the other hand, are totally different.
On top of that, the current disturbances of the world economy are not merely symptoms of the financial and economic crisis only. The difficulties started with a serious financial crisis, which rapidly advanced to production. Output dynamics crumpled and in many countries went into the stage of collapse. Now, the crisis spreads to the social sphere of life, from where it slowly starts to have an impact on the political sphere, as well. As if that were insufficient, the crisis of the fifth sphere, that is the crisis of culture— values, principles and ideology—starts to overlap.
It is not, however, a general crisis of capitalism, since this political system has special adaptation capacities. It has been proven on many occasions in the past — and will so be the case in the foreseeable future. Nevertheless, the current crisis is a fundamental breakdown of the neoliberal model. By the time the crisis had become evident, this model managed to function fairly well, at times even remarkably well, by manipulating public opinion and politics in practice. It was clearly noticeable wherever neoliberal tendencies dominated — from the United States in the times of Reaganomics and in the United Kingdom during the primacy of Thatcherism, via Latin American countries which allowed the imposition of the Washington Consensus in the 1990s, to Russia during the Yeltsin’s term of office or Poland during the “shock without therapy” period at the beginning of the post-communist transformation.
Now it is important to prevent the neoliberal doctrine, which attempts to lead the global political and economic show after minor cosmetic changes and insignificant adjustments, from imposing the main trajectory of the world economy again. There is only one rational way to move forward, that is to go to the post-GDP economics since we are already in the post-GDP economy. The new paradigm for development economics must exercise interdisciplinary and heterodox approach, I believe along the line of New Pragmatism I’m outlying in my recent book.