The Royal Swedish Academy of Sciences, following a proposal by the Economic Sciences Prize Committee, awarded the Nobel Prize in Economics to Daron Acemoglu, Simon Johnson and James A Robinson for their so-called “groundbreaking” operate on the part of corporations in shaping economic growth.
Their analysis reveals how industrial institutions contribute to regional failure while inclusive institutions contribute to economic growth. Elinor Ostrom and Oliver E. Williamson were honored for their groundbreaking efforts to financial management, especially those that concern how companies manage shared solutions and resolve conflicts, with this choice recalling the 2009 Nobel Prize.
By appointing a political scientist and an analyst to study these topics within corporations, the Nobel Committee in 2009 acknowledged the value of institutions and management. Also, the 2024 award reflects a move away from free-market finance, emphasizing rather how institutional systems and governance structures affect economic outcomes.
Why, especially in the wake of numerous economic and financial crises, has the Nobel Committee regularly favored non-economic ideas over standard economic models? Look no further than the constraints the Nobel collection commission good faced given the changing geopolitical environment.
The decision to award Ostrom and Williamson in 2009 was primarily motivated by the effects of the global financial crisis of 2008, when Western free-market beliefs were subject to intense scrutiny.
The long-held conviction that areas allocate resources effectively, resulting in products and services at the lowest rates, maximum profits for producers, and no tool wastage, was demonstrated to be fundamentally flawed.
Alan Greenspan, a steadfast supporter of liberal economic theory and the US Federal Reserve’s longest-serving chair, reportedly admitted during a parliamentary hearing that he had mistakenly assumed that resources would be distributed effectively.
According to Greenspan,” a crucial pillar of business rivals and completely markets did collapse.” ” I still do not completely comprehend why it happened”.
Given that choosing a free-market economist would have been socially indefensible in the context of the time’s economic collapse, Ostrom and Williamson’s collection was more of a need than a decision.
In 2024, the selection committee experienced a similar position. In recent years, the West has gradually abandoned the principles of free-market economy and completely industry in the face of China’s state-led and subsidy-fed economic giant.
Traditional economic theory contends that grants harm free areas because they cause a disconnect between prices and production costs, distorting marketplaces, leading to wasteful outcomes, and directing resources to less productive activities. Additionally, trade protectionism is viewed as a business displacement that results in errors and misallocations.
But, US President Joe Biden’s financial plans have evidently departed from free-market rules. His trade policies have led to the most extraordinary protectionism in British history, while his professional policies have been characterized by big government intervention, including strong subsidies, tax breaks, and low credit.
The Research and Development, Competition and Innovation Act, the CHIPS &, Science Act, and the Inflation Reduction Act ( IRA ), are important pieces of legislation that offer American businesses significant tax breaks and subsidies. The Biden administration has also instituted a” Buy America” policy for government procurement, a serious violation of World Trade Organization ( WTO ) agreements.
These lending terms and advantageous terms for US businesses highlight Biden’s support for mercantilist trade practices. This includes preserving Trump-era taxes on foreign goods, local material needs, and disciplinary measures against alleged foreign dumping in US marketplaces.
Ironically, the United States has imposed tariffs of up to 100 % on Chinese-made electric vehicles ( EVs ), far exceeding the tariffs under the Smoot– Hawley Tariff Act of the 1930s, which imposed a maximum tariff of about 62 %.
In an April 27, 2023 statement at the Brookings Institution, US National Security Advisor Jake Sullivan outlined the Biden administration’s monetary policy, attributing many of the region’s challenges—such as a hollowed-out manufacturing base, economic inequality, China’s fall and the weather crisis—to prior economic policies.
Sullivan criticized “hyperglobalization”, deregulation and blind faith in trickle-down economics and market efficiency. He argued that the goal of liberalizing trade was to achieve nothing more than its broad-results.
The US Treasury, International Monetary Fund, and World Bank led the effort to promote free markets and trade liberalization in the 1990s, which was a significant departure from the” Washington Consensus.”
Sullivan made it clear that Bidenomics does not rely on the free-market theory that the West once proclaimed as superior to other economic systems. There was a presumption at the heart of all of this regulation: that markets always allocate capital productively and efficiently, no matter what our competitors did, no matter how much our shared challenges grew, and no matter how many guardrails we erected,” Sullivan said.
” Now, no one—certainly not me—is discounting the power of markets. But in the name of oversimplified market efficiency, entire supply chains of strategic goods —along with the industries and jobs that made them—moved overseas. And the postulate that a significant amount of trade liberalization would support American exports of goods was made but not kept was also true.
Regardless of the outcome of the 2024 presidential election in November, Sullivan’s remarks suggest that the United States is turning away from the market economy and adopting a more protectionist stance.
Through the seizure of Russian assets, which challenges the status of private ownership, the West has also undermined the sanctity of private property. These sanctions, including the freezing of assets and the expropriating of those held by Western banks by the Russian Central Bank, directly violate private property rights.
By politicizing economic assets and further undermining the principles of market-based economies, this unprecedented move sets a dangerous precedent. The US-led West has eroded the trust that global capital depends on because it blurs the lines between political retribution and economic governance.
This undermines the laissez-faire economic ideology and destabilizes the global economic order.
One of the biggest paradoxes of the first decade of the 21st century is that the United States, once the biggest supporter of free-market economics and free trade, is now implementing protectionist measures at a rate unobservable since the 1930s.
In essence, the US is putting national security before economic efficiency, and it rejects the notion that” the government is best when governs least.” Meanwhile, China’s Communist Party-led government has become the world’s leading advocate for free trade.
The Nobel Selection Committee de facto supported the West’s shift away from liberalization and globalization by awarding the Nobel Prize to institutions-focused economists. In this context, institutional economics justifies more government intervention in the economy to detriment free markets that were once supported by the US and the West.