The Covid-19 pandemic requires societies to make critical choices about the kind of economies countries wish to rebuild, and change the way current levers of the economic structure works, a new report released on Tuesday has said.
Commissioned by the Organisation for Economic Cooperation and Development (OECD) and written by Sheffield University professor Michael Jacobs, it said the pandemic has raised serious challenges, coming on top of the financial crisis, climate change and inequalities of the last decade.
Governments must change the way the economy works in the wake of the pandemic, said the report based on inputs by an international advisory group, calling on countries to go ‘beyond growth’ and radically reorient economic policy.
The report warned 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 called 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.
These goals should 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 said.
The report argued 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, said the report, titled ‘Beyond Growth: Towards a New Economic Approach’.
Jacobs 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,” he added.
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