According to a well respected British think-tank. Action is needed..
Policymakers have failed to address problems at the root of the recent economic crisis and unless urgent action is taken, there is a real danger that it may not be the last crisis of its type, warns a new report published by the Institute for Public Policy Research.
ippr warns that although the worst of the banking crisis appears to be behind us, there are already signs that lessons have not been learnt. So far, real reform in the way that economies and financial markets work has been very limited, as evidenced by the rapid return of the City’s bonus culture.
ippr’s new report How to make capitalism better is the result of an extensive review of the capitalist model, featuring a series of debates and seminars, with leading experts from the world of economics, finance, politics and the media. Its aim is to identify the scope for a better form of capitalism, one that is more stable and sustainable and that delivers better outcomes for all, not just a small elite.
The report argues that policymakers must seize this opportunity to create the blueprint for “Tomorrow’s Capitalism”, by adopting the following reforms.
- Greater international coordination of economic policies in the major economies – an outcome that will be more likely if countries like China and India are given a larger role in bodies such as the IMF.
- Economic growth in the UK based more on exports and investment and less on debt-fuelled consumption – which will require the government to be active in addressing market failures in innovation, training, infrastructure and finance.
- A financial system that operates for the benefit of the whole economy, not just in its own narrow, short-term interests – which will require increased regulation, preferably based on internationally agreed principles.
- Recognition that there may be better measures of progress in an economy like the UK than the growth in national income, or GDP, and that reducing inequalities can make for a happier society.
Tony Dolphin, Senior Economist said:
“Alarm bells should be ringing with the early signs of a ‘back to business’ attitude in the City (as illustrated by the return of big bonuses) and little evidence that policymakers are taking measures to ensure the next economic recovery is better balanced than the last one. Unless policymakers take action to create the blueprint for a more stable and sustainable model of capitalism, and one that delivers better outcomes for all not just a small elite, there is a real danger of another economic crisis in the future.
“The success of Tomorrow’s Capitalism will depend on how successful policymakers are in meeting a series of challenges. These require greater coordination: between international governments; the Government and private sector; the financial sector and the rest of the economy; and between all parts of society to secure more equitable outcomes and improved well-being for all, not just the lucky few.’
These changes will not be easy to achieve but it is important that progress is made on a number of fronts sooner rather than later. The United States must accept a lesser role in international economic affairs to accommodate the increased importance of countries like China and India; the UK public’s love affair with consumerism, particularly debt-driven spending, must be tackled; and the culture of the City will have to change so that the financial sector better serves the rest of the economy.
Notes to editors
The Institute for Public Policy Research, in conjunction with the Friends Provident Foundation, organised a series of debates and seminars earlier this year, featuring leading experts from the world of economics, finance, politics and the media, with the aim of identifying some of the changes needed to the neo-liberal model to create a better form of capitalism – one that is more stable and sustainable and that delivers better outcomes for all, not just a small elite. Read more about Tomorrow’s Capitalism.
Kelly O’Sullivan, media officer, 020 7470 6125 / 07753 719 289 / firstname.lastname@example.org
Tony Dolphin, senior economist, 020 7470 6184 / 07981 112916 / email@example.com