Equitable Capitalism or Bust
Two decades of economic crises have exposed the flaws of a system that has grown increasingly incompatible with sustainable development and equality of opportunity. To reform capitalism requires rethinking social welfare and how public policy can tackle inequality in all its forms.
PARIS – Global crises have grown in frequency and intensity over the past 20 years, with worrying implications for future economic development. The World Bank warns that the effort to reduce poverty has suffered its “worst setback” in a quarter-century, owing to the COVID-19 pandemic. Inequalities are deepening within and between countries, and across many key sectors, from education to health.
Given the scale of these problems, public policy cannot focus narrowly on income and wealth. The situation demands a holistic approach with longtime horizons. Otherwise, subsequent governments will always be tempted to pursue short-term improvements with immediate political payoffs (such as an increase in households’ purchasing power), rather than investing in future welfare. We will need to quantify the necessary trade-offs so that politicians can explain to voters why they should support having a bit less now for the sake of gaining more later.
We also need to be mindful of how we measure inequalities. Is it fair to demand that developing countries reduce their greenhouse-gas emissions at the same rate as advanced economies, even though the latter have contributed far more historically?