Governments must ‘change the way the economy works’ after Covid-19 pandemic, says OECD-commissioned report

15-Sep-2020 9:00 AM EDT, by University of Sheffield

  • Leading economists call on governments to go ‘beyond growth’ and radically reorient economic policy 
  • Economic policy should prioritise environmental sustainability, economic resilience, reducing inequality and improving wellbeing
  • Report warns current patterns of economic growth are causing ‘significant harms’ 

Newswise — Governments must change the way the economy works in the wake of the Covid-19 pandemic, according to a report commissioned by the Organisation for Economic Co-operation and Development (OECD).

The report, by an Advisory Group of leading economists, warns that the dominant patterns of economic growth in OECD countries have generated ‘significant harms’ over recent decades – including rising inequality and catastrophic environmental degradation.  

It calls for a paradigm shift in the way developed countries approach economic policy – so that instead of focusing on gross domestic product (GDP), they prioritise environmental sustainability, improving wellbeing, reducing inequality and strengthening economic resilience.

The report calls for these goals to be built into the structures of the economy from the outset, rather than hoped for as a by-product, or added after the event. It argues that this will require a new role for the state, with governments becoming more entrepreneurial, seeking to shape markets and steer the process of economic change, not simply correcting market failures. This “new kind of social contract” would transform the relationship between the state, business, civil society and citizens. 

Beyond Growth: Towards a New Economic Approach was commissioned by the OECD’s Secretary-General Angel Gurria, as part of the OECD’s New Approaches to Economic Challenges Initiative. It was written by Michael Jacobs, Professor of Political Economy at the University of Sheffield, on behalf of an international Advisory Group including Bank of England Chief Economist Andy Haldane, University College London Professor Mariana Mazzucato and biographer of Keynes Lord Robert Skidelsky.

The experts argue that, until the 1980s, economic growth led to rising household incomes, employment and living standards, and falling poverty and inequality. However, recent patterns of growth have caused serious social and environmental harms. 

The report calls on governments to prioritise cutting greenhouse gas emissions and protecting ecosystems, improving people’s quality of life, reducing income and wealth inequality, and boosting the economy’s ability to withstand financial, environmental and other shocks. It argues that politicians must make clear to the media and the public that they want their success to be measured against these goals, rather than by economic growth alone.

Professor Michael Jacobs, Professorial Fellow at the University of Sheffield’s Sheffield Political Economy Research Institute, said: “The Covid-19 crisis needs to lead to a major reset in economic policy. Before the crisis Western economies were already experiencing financial instability, environmental breakdown and rising inequality, so a return to the status quo would be disastrous. 

“Just as in the 1940s and 1980s major economic crises led to paradigm shifts in economic thinking and policy, so today we need to rethink how we define and measure economic success. As governments spend unprecedented sums to rebuild their economies after the pandemic, they must look beyond growth alone to prioritise the needs of people and planet.” 

 

The University of Sheffield

With almost 29,000 of the brightest students from over 140 countries, learning alongside over 1,200 of the best academics from across the globe, the University of Sheffield is one of the world’s leading universities.

A member of the UK’s prestigious Russell Group of leading research-led institutions, Sheffield offers world-class teaching and research excellence across a wide range of disciplines.

Unified by the power of discovery and understanding, staff and students at the university are committed to finding new ways to transform the world we live in.

Sheffield is the only university to feature in The Sunday Times 100 Best Not-For-Profit Organisations to Work For 2018 and for the last eight years has been ranked in the top five UK universities for Student Satisfaction by Times Higher Education.

Sheffield has six Nobel Prize winners among former staff and students and its alumni go on to hold positions of great responsibility and influence all over the world, making significant contributions in their chosen fields.

Global research partners and clients include Boeing, Rolls-Royce, Unilever, AstraZeneca, GlaxoSmithKline, Siemens and Airbus, as well as many UK and overseas government agencies and charitable foundations.




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