By Helmut Reisen, Scientific Advisor to the Perspectives on Global Development 2019
This blog is part of an ongoing series evaluating various facets
of Development in Transition. The 2019 “Perspectives on Global Development” on “Rethinking Development Strategies” will add to this discussion
Economics has adopted an introspective mindset since the global financial crisis erupted ten years ago. The ´markets-work-wonders´ formula of the 1980s embraced such characteristics as state withdrawal from public services, curtailment of social benefits, deregulated and borderless finance, privatised pensions, and weakened workers’ bargaining rights. At times imprecisely dubbed ´neoliberalism´1 it had a bland aftertaste. Growth in advanced countries was slow, crisis prone and unjust, failing the bottom third. Today, absolute poverty by global standards hits more than 12 million people in the European Union and the United States alone.2
The free market paradigm had been oversold as the only way to achieve prosperity, resulting in liberal delusion. The ´End of History´3 — Western civilisation as the natural order of the modern world — didn´t materialise. Instead, we witness state-led prosperity in Asia, but backlash against globalisation and rising populism in market democracies4. Middle-income class concerns in advanced countries have identified bottlenecks, particularly with respect to research and development, upgrading, and skills development. Industrial and place-based regional policies are back on the table.