UPSC Current Affairs for 29ᵗʰ October 2026

2. How Neoliberalism Turned the World Against Its Young

Youth unrest across France, Albania, Spain, India, Bangladesh and Sri Lanka reflects growing frustration with unemployment, declining wages, rising education costs and economic insecurity. The central argument is that neoliberal capitalism has weakened public welfare and labour’s bargaining power, while prioritising profitability over employment generation, leaving young people with fewer opportunities and diminishing prospects for economic mobility.

Youth Unemployment: A Crisis of Labour Demand

1. Persistent youth unemployment: The G7 comparisons show that unemployment among young people aged 15–24 is substantially higher than overall unemployment. This indicates difficulties in absorbing young entrants into the labour market, even in advanced economies.
2. Orthodox explanation: Neoclassical approaches attribute unemployment partly to high wages, labour-market rigidities, trade-union power and insufficient wage flexibility. Reducing labour costs is expected to encourage employers to recruit more workers.
3. Heterodox explanation: Employment depends on the level of effective demand in the economy. Wages are not merely a production cost; they also finance household consumption. Wage reductions can therefore weaken demand, production, investment and employment.
4. Wage–employment relationship: Individual firms may benefit from lower wages, but economy-wide wage suppression can reduce consumer purchasing power. Falling sales then discourage investment and labour demand, creating a cycle of unemployment and weak economic activity.
5. Distributional inequality: The charts indicate a declining share of total income accruing to the poorest half of the population in several G7 economies. Weakening labour incomes alongside the concentration of economic gains reinforces insecurity.
6. Education and employment mismatch: Rising education costs, shown across G7 countries, increase the financial burden on young people without guaranteeing secure or remunerative employment. The resulting gap between educational investment and employment opportunities undermines intergenerational mobility.
7. Structural concern: The problem is not simply an excess supply of labour, but inadequate demand for workers. Treating unemployment exclusively as a skills deficit overlooks the role of economic growth, investment and income distribution in generating jobs.

From the Golden Age of Capitalism to Neoliberalism

1. Golden Age of Capitalism (1945–1973): The post-war period was associated with relatively high growth, expanding employment, rising working-class incomes and stronger welfare provisions. The charts compare growth across successive periods in G7 economies, highlighting the slowdown after the post-war decades.
2. Keynesian economics and the New Deal: The broader tradition of State intervention, associated with the New Deal and Keynesian demand management, emphasised public expenditure and economic intervention to support employment and demand. Fiscal expansion could compensate for insufficient private investment and consumption.
3. Crisis of the post-war model: Economic stagnation and stagflation during the 1970s weakened the post-war consensus and created space for monetarist and neoliberal ideas.
4. Rise of neoliberalism: Associated with the policy shifts under Ronald Reagan in the United States and Margaret Thatcher in the United Kingdom, neoliberalism emphasised deregulation, labour-market flexibility, reduced welfare-state intervention and the weakening of organised labour. These changes shifted bargaining power towards capital.
5. Michal Kalecki’s critique: In Political Aspects of Full Employment, economist Michal Kalecki argued that sustained full employment could undermine employers’ disciplinary power over workers. Full employment was therefore not merely an economic question; it also had political and class implications.
6. Changing balance between capital and labour: The shift away from the post-war settlement weakened workers’ collective bargaining power and constrained wage growth. The resulting distribution of income increasingly favoured capital relative to labour, contributing to economic insecurity.
7. Crisis of underconsumption: When wages decline across the economy, households reduce consumption. Businesses then face weaker sales, lower incentives to invest and reduced demand for labour. Thus, a strategy that reduces labour costs for individual firms can undermine aggregate demand and growth when adopted across the economy.

 Consequences for Young People and the Economic Policy Challenge

1. Precarious employment and social insecurity: High youth unemployment, falling real wages and rising education costs make it harder for young people to achieve financial independence, stable employment and upward social mobility.
2. Wage suppression and consumption: Weak wage growth constrains household purchasing power, while the concentration of income among higher-income groups can weaken mass consumption. This reinforces the underconsumption problem and limits employment-generating investment.
3. Automation and artificial intelligence: The growing use of AI may intensify labour displacement if firms prioritise workforce reduction and profit margins without generating sufficient new employment opportunities. Technological productivity gains do not automatically translate into broadly shared prosperity.
4. Political consequences: Persistent unemployment, reduced public welfare and perceived intergenerational injustice can erode trust in established political institutions and fuel youth-led protests.
5. Limits of individual reskilling: Education and skill development remain important, but they cannot independently resolve unemployment when the economy fails to generate sufficient jobs. The challenge is both the employability of workers and the availability of productive employment.
6. Way forward: A more inclusive economic model requires productive investment, employment generation, affordable education, adequate social protection and policies supporting effective demand. Economic policy must balance profitability and productivity with decent work, equitable income distribution and inclusive growth.