Eight principles for the world economy

Voting for Pexit and the election of Donald trump reflected the dissatisfaction of citizens of developing countries about globalization. They blame her frozen in one place income, rising unemployment and increasing uncertainty.

Citizens of developing countries expressing similar feelings for much longer. Although globalization has brought many benefits to the developing world, many were not to the liking of the underlying neo-liberal Economics, the unfettered liberalization and privatization, macroeconomic policy, which puts in first place the fight against inflation and not employment and growth. Thus, the time has come to revise common economic wisdom.

The Swedish Agency for international cooperation in the field of development proposed to reflect on this 13 economists from around the world (including the authors of this article). In particular, we came to the conclusion that the preservation of the balance of the national budget and control over inflation along with the decision to provide the market with the ability to do everything else can’t be the guarantor of sustained economic growth. In this perspective, we identified eight main principles that should guide policy development.

Economic growth is a means, not an end

First, economic growth must be seen as a tool, not as a goal. It is important primarily because it gives the necessary for human well-being resources: employment, sustainable consumption, housing, health, education and security.

Second, economic policies should focus on inclusive development. Instead of waiting for that wave of development will bring benefits to all, management needs to ensure the inclusion of all groups in this process. He should start an active fight against unemployment and insufficient access to health and education, which have so difficult to the poor.

Third, ecology can not be considered optional. At the national level growth with environmental damage cannot be considered as sustainable. It is important that the fight against climate change and adaptation policy is not considered secondary destinations.

Fourth, there must be found a balance between market, state and community. Markets need regulation for the efficient allocation of resources: otherwise, they cause serious damage, what was the financial crisis of 2008 and the rise of inequality. The state is necessary for the effectiveness of this regulation. Civil society institutions required for the efficient and fair operation of the state.

More effective redistribution

Fifth, balance the budget has been idealized. You need to consider the fiscal balance and external balance as a constraint in the medium term so that fiscal stimulus has given forces surrendered momentum to the economy and laid the foundations for long-term growth. The main thing is to ensure that public debt and inflation pressure were under control in favorable years.

Sixth, recent technological advances have changed the landscape of the workforce and increased the share of capital in income, which eventually led to the growth of inequality. The problem of “the working of forces against capital” is often described as a problem of “labour force vs labour”, under which developing countries take jobs away from developed that promotes protectionism. At the same time, rather, it is necessary to achieve a better redistribution and income equality, particularly by strengthening the negotiating position of workers.

Seventh, the social norms and values affect economic performance. The economy works better when there is trust. Social norms can help to fight corruption and establish fair practices. Civil society and the government should be guided by these values.

The old economic idea

Eighth, the international community also has an important role. Global forces and national policies of one affect the other policy options (monetary policy, immigration restrictions, trade policy). To cope with external consequences of such a policy can only international institutions. To ensure their efficient and equitable working developing countries should get more votes.

Created so much trouble the old approaches to economic thought should disappear. Past experience and the progress of economic thinking give us the entire reservoir of information about what works and what doesn’t. This knowledge should be at the centre of a new approach to development, which the world needs.