Western economies can’t return to ‘business as usual’ after the pandemic, by Michael Jacobs

 Today’s challenges demand radical action. The old orthodoxy of free markets and hands-off government won’t cut it

The Rentier economy and neoliberalism have failed to bring prosperity to our societies. 

Some of their ideas revive the economics of John Maynard Keynes, who saw that government spending is needed to stimulate demand for goods and services during a recession. More recently, most economists have recognised that in an era of ultra-low interest rates, fiscal policy – spending and taxation – should play a major role in how the economy is managed. Many also now acknowledge that there are no absolute constraints on public debt. As long as low interest rates keep the cost of borrowing affordable, and borrowing is used to fund investment (which raises future national income and therefore brings in more taxes), the ratio of debt to GDP will ultimately fall. By contrast, trying to reduce debt through austerity policies is self-defeating and harmful, as the last decade has proved.

Economic thinking is shifting in response to the climate and nature crises. It is no longer sufficient to use a few market-based environmental taxes and product regulations. To achieve net-zero emissions, the whole economy needs to be geared towards these goals. At the same time an active industrial strategy is needed to support greener technologies and consumption patterns, with job creation programmes for workers and communities adversely affected by the green transition.

The Guardian

Western economies can’t return to ‘business as usual’ after the pandemic, by Michael Jacobs