The global economic system looks set to change

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We know the covid-19 pandemic has been a game-changer. But, what if some things are already changing and we are missing the signs? For example, the tectonic plates of the global economic order of the past 50 years have already shifted, and the pandemic has only accelerated these changes. President-elect of the United States of America, Joe Biden will have to heed some of these signs as he brings America back to a moral and sane place and builds the legacy he intends to leave. In his acceptance speech, he promised to “heal”; economic policy could be a starting point.

Biden may want to look south towards Chile for some early signs. The recent referendum in this South American nation saw 78% vote to change its constitution, which has been in effect for more than 40 years. This referendum is important for two reasons. The first is cathartic: this constitution recalls the dark days of the republic when a democratically elected president was toppled by a US-backed dictator. Augusto Pinochet’s brutal reign wiped out thousands of political dissidents, apart from the tens of thousands who were imprisoned, tortured and maimed. He drafted a constitution devoid of any stakeholder input and was passed by a mock vote in 1980. Chileans wanted this canker removed from their public life and they were only able to change bits and pieces; they finally have the option to completely overhaul it now.

It was not easy, however. Chileans had to fight for it, which included protracted street protests. But here’s the problem: Serious protests actually started about a year ago over the metro fare hike, but this problem, like the proverbial spark in a powder keg, has spurred the population against a crowd of people. other combustible concerns. These include worsening income inequalities, poor health and education infrastructure, and persistently low wages and pensions, among others. The people regarded the constitution, which also set out Chile’s economic policy, as the ancestor of these loopholes. Here is the second reason for the importance of this referendum: a revision of the constitution is also an opportunity to overhaul economic policy.

The overhaul of Chilean economic policy could then present the first sign of any attempt to reform the dominant and dominant global economic system. Eyebrows might be raised at the geography of the turmoil, as Chile was perhaps the best performing country in Latin America when viewed through the conventional prism of gross domestic product (GDP). Yet what ignited the spark in this Andean republic was the fact that its economic philosophy closely followed the model of the Chicago school popularized by the late Nobel laureate and economist Milton Friedman, who put the ’emphasis on monetarism, free markets and a greater role for the private sector. This recipe was seen as favoring only the elite and impoverishing the masses. What made matters even worse was the fact that many Chilean economists – later dubbed Chicago Boys – were trained by Friedman at the University of Chicago, all of whom held critical positions in administration. Friedman faced continual criticism for visiting Chile and advising dictator Pinochet. Well-known German-American sociologist and economic historian (and Friedman’s student) Andre Gunder Frank criticized his former professor’s economic policies in an open letter to India’s Economic and Political Weekly.

The Chilean economy initially performed well, with an increase in GDP per capita and an increase in foreign capital inflows. At the same time, inequalities have also widened, implying that the fruits of the economic program have not been distributed evenly. Chilean industry is naturally not enthusiastic about the referendum. According to an October 25 New York Times article, “Last year, the United Nations Economic Commission for Latin America estimated that nearly a quarter of total income went to 1% of the Chilean population. To cover the high cost of living, Chileans are heavily in debt. The Central Bank found last year that on average nearly three-quarters of household income was used to pay off debts. “

If the referendum brings hope, the road is long. Attempts are being made to ensure that politics do not veer too far to the left. A warning shot has already been fired: Fitch Ratings recently downgraded Chile’s ratings and added a rather open statement on what could trigger future downgrades: “A significant deterioration in Chile’s economic institutional strengths, for example through measures which weaken its macroeconomic policy framework. “It may be premature to predict the kind of Chilean economy that will eventually emerge. It is also very likely that many key elements remain, with the policy aimed only at correcting the situation: preventing the concentration of wealth in a few hands in the name of laissez faire, or ensuring a greater role for government in the provision of services. social essentials.

However, it is undeniable that two nations are on the cusp of a major change: Chile with a new constitutional opportunity and the United States with a new leadership. These developments may well be the catalysts needed to change the course of the global economy which gained momentum with the elections of Margaret Thatcher and Ronald Reagan in the UK and US respectively.

As economic developments after the 2008 financial crisis showed, these policies are well past their expiration date.

Rajrishi Singhal is a political consultant, journalist and author. His Twitter handle is @rajrishisinghal.

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