Written in two parts, this book is a critique of neo-liberalism in which MacEwan, in the second part, goes on to propose
realistic alternatives to the economic system with a “
democratic economic
development stategy”.
In Part I MacEwan argues that the capitalist system is run by powerful elites, for powerful elite interests and not the miracle for the benefit of all that it is held up to be by its proponents. The book explores in detail the central tenets of neo-liberalism: free trade, minimum regulation, foreign direct investment, and income inequality, explaining the neo-liberal economic justifications for these positions. He argues that in theory and practice such ideas make neither economic nor democratic sense. For example, historical evidence shows that protectionism was used by the US, UK, Japan and Western Europe and markets only gradually opened up to become “free” once strong domestic industries were in place. More recently, South Korea has done the same, with economic success, yet the Washington Consensus still pushes for poor countries with fledgling industries to open up to the market before they can survive.
MacEwan similarly brings up all the evidence to show that the neo-liberal justification of income inequality is misplaced as short-term pain is not the only way, and not even a sure way, of bringing longer-term economic growth. In fact, income equality can bring economic growth, for example as equality generally means more educational infrastructure, which means a more technologically capable and more productive workforce, leading to growth.
The myths about markets are thoroughly debunked in a wide ranging and in depth critique of neo-liberal doctrine, exposing its many inadequacies both in theory and practice.
MacEwan also discusses what exactly markets are, how they are constructed and how they operate. He argues that that markets do not simply exist independently, but are constructed, and constantly reconstructed by governments, firms, social movements and individuals. It is thus impossible to ‘leave things to the market’, as though it is a neutral arbitrator, as that simply means leaving things to history. Therefore the question about markets is not should they be regulated, but how to regulate them.
The second part of the book lays out policies, arguing for a democratic economic development strategy which would allow people to exercise political control over their economic affairs, involve people in solving their own economic problems and serve the material needs of the great majority. MacEwan describes how the policies can be implemented within the current socio-economic framework, asserting that this kind of policy is far preferable both short-term and long term. He also says that democratic economic development is “a process of change that is democratic in its nature and moves society towards an expansion of democracy,” explaining that political participation is key to the process of the strategy. Other goals of the strategy include not only economic growthand rising productivity but also widespread provision of basic needs and relative income equality, environmental sustainability and the preservation (and creation) of community.
MacEwan describes how such a strategy is possible through macroeconomic policy including non-regressive expansion of taxes, reallocation of government spending and reduction of corruption and waste, international capital controls. It would also involve an expansion of social programmes, which would involve extensive community participation in planning development and operation.
Emphasis on expansion of social programmes, especially education, health and environmental
Firms would be encouraged through incentives to expand training and skill development in the workforce, while the value of local production would be recognised in terms of its effect on the environment, employment and community cohesion, using a combination of taxes, subsidies and regulations as necessary.
Neo-liberalism and Democracy is an excellently well-rounded book in that the critique is followed by realistic proposals for a better system. Despite being written a decade ago, it is an appropriate read today as the implosion of the economic system in the current crisis illustrated that neo-liberalism was not at all as successful as it was supposed to be. Today we are looking into more regulation of the market and international finance, something argued for by MacEwan in this book. Perhaps we should be having a serious look at the proposals in the second part of his book as we attempt to create a much more egalitarian and sustainable economic system, and hopefully we might even be able to construct one which focuses not just on economic growth but also on social, political, environmental and physical infrastructure for a better world. Economic growth is not the only measure of a society’s success and development.