How do we design our new economic system?


The answer is “one value at a time”. In other words, if we take the time to ask the most important question in economics today: “How do we design a new economic system that will actually work?” It is increasingly recognized that GDP is too narrow a measure of economic success. However, you can’t just add a few new social metrics and continue with the flawed core economy system and expect major changes because we tweaked the edges a bit. It will only delay the inevitable.

Last week I argued that the cornerstones of our neoliberal economy – financialization, consumerism, small government and globalization – are all crumbling and argued for a new approach to economics fit for the modern world . Economic systems exist in a state of flux, and significant historical and technological changes such as the Agricultural Revolution and the Industrial Revolution, and the invention of money around 600 BC all revolutionized commerce – as did the end of feudalism. and the emergence of commercialism. And perhaps one day the age of the Internet will be seen as the emergence of a new economic paradigm.

In 1944 we had a directed transition of the economic system, when the Bretton Woods conference abandoned the gold standard, opened international markets with free trade agreements (namely the Commonwealth in the United States) and founded the International Bank for Reconstruction and Development (now the World Bank) and the International Monetary Fund (IMF). I would also say that the deregulation of financial markets in 1986 (the Big Bang) that started the movement towards financialization as an economic dogma was a deliberate change heralding the end of true or balanced capitalism.

Bretton Woods included 730 delegates from 44 nations aiming to revive the global economy after World War II and generate prosperity through global trade. But it was overtaken by neoliberalism, an initiative dreamed up by bankers and right-wing think tanks to create a system that fostered the cult of money creation, a system that assumed GDP growth was a cure for all economic and social ills. From that point on, it seemed to me that the global economy simply rode natural waves of boom and bust until Gordon Brown redoubled his efforts on financial deregulation, helping to create the conditions of the credit crisis, from which we have not fully recovered.

So if we can’t change what we have, and what we have isn’t working, we need another Bretton Woods-style intervention. So what are the new values ​​on which to base our new economy?

Let’s start by accepting that creating money as a panacea and trickling down wealth is false value. We therefore need a new focus of the economy, but to create a trading system that leads to the betterment of society, it must be based on values ​​and measures that offer protections against the evils of neoliberal capitalism. in his heart.

Then we will have a system that does not need false politics of left and right/them-and-us/class system.

Having values ​​that protect doesn’t mean you can’t start a business and get rich, or that big business can’t exist, but it does mean that big business can’t be allowed to legally avoid tax and drown small businesses in late payments and unfair competition.

So what can we measure against our values? Although I want to measure progress against a new set of values, I would still measure GDP or some improved measure of growth and productivity. The well-being of the nation, including measures of healthy life and life expectancy, is also vital and is already measured in the UK.

Safety: How safe do our employees feel? Is it safe to walk the streets in the dark? Are they afraid of crime, terrorism, poverty?

Poverty and well-being: do people have enough to live on? Will retirees? How much are people borrowing and how vulnerable is the population to the rising cost of debt?

Internationalization: how connected is our economy? What is the trade balance with other nations and what trade terms do we have? How easily can we bring in the skills our economy needs from abroad?

Managing natural resources: not just how much do we have, but how do we manage what we have – comparing the UK’s oil and gas performance to that of Norway is dire reading.

Environmental sustainability: what do we recycle? Can we minimize the environmental impact of our economy? Where are we in the production of renewable energy?

Renewal: How much are we spending on R&D that will drive lean manufacturing, creating more and better paying jobs?

What is the wealth of young people compared to past generations? How healthy are they and do they have positive options for careers and further education? If we don’t take care of our young people, the economy will eventually run out of fuel.

We can decide on different values ​​and measures, but if we start with a blank sheet of paper (only offered with independence), we can start putting together policies and measures that match our new values. By monitoring progress across a wider range of performance measures, we can create an economy that leaves no one behind and where the benefits of real growth and prosperity are shared more equitably. Where significant personal wealth can only come from adding value, innovation and job creation – not through the manipulation of money.

We should also ask ourselves what institutions we need in such an economy. Should the banks retain their monopoly on money creation or should the government provide national investment and savings services? Would we need a basic income in such a society and would we need such a large charity sector if our economic system addresses the causes of problems rather than the symptoms driven by bad values?

A new economy will lead to new politics and an end to the left-to-right boxes that politicians put us in to manipulate and control us. You can’t have a society between them and us when the system is designed to work for all of us.


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