'Neoliberalism has failed yet another test and must finally be replaced by a new economic vision based on new values.'
, I asked,"Does each country simply accept [security] risks as part of the price we face for a more efficient global economy? Does Europe simply say that if Russia is the cheapest provider of gas, then we should buy from Russia regardless of the implications for its security…?" Unfortunately, Europe's answer was to ignore obvious dangers in the pursuit of short-run profits.
Underlying the current lack of resilience is the fundamental failure of neoliberalism and the policy framework it underpins. Markets on their own are short-sighted, and the financialization of the economy has made them even more so. They do not fully account for key risks—especially those that seem distant—even when the consequences can be enormous.
Precisely because markets do not account fully for such risks, there will be too little investment in resilience, and the costs to society end up being even higher. The commonly proposed solution is to"price" risk, by forcing firms to bear more of the consequences of their actions. The same logic also dictates that we price negative externalities like greenhouse-gas emissions.
But pricing risk is far more difficult than pricing carbon. And while other options—industrial policies and regulations—can move an economy in the right direction, the neoliberal"rules of the game" have made interventions to enhance resilience more difficult. Neoliberalism is predicated on a fanciful vision of rational firms seeking to maximize theirprofits in a context of perfectly efficient markets.
Clearly, there has been too much focus on the security of IP, and too little on the security of our economy. We need to start rethinking globalization and its rules. We have paid a high price for the current orthodoxy. Hope now lies in heeding the lessons of this century's big shocks.
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