BRUSSELS/MEXICO CITY – Since the global economic downturn began in 2008, debate has centered on the macroeconomic strategies and instruments used to address the crisis and foster recovery. But correcting imbalances and addressing short-term slowdowns or recessions, while important, should not be allowed to overshadow the need to establish long-term conditions for solid and sustainable economic growth.
So far, macroeconomic policy has borne both the blame for economic malaise and the hope that it can be overcome. But we should be devoting as much attention to the microeconomic problems – such as poor incentives, market failures, and regulatory shortcomings – that led us into the crisis in the first place.
Indeed, just as microeconomic problems in the financial sector triggered a credit crunch and fueled a global recession, so microeconomic factors hold the key to recovery. Many economies need to fix the financial sector and restore credit, while many more need to raise productivity in order to boost growth and create jobs.
Some industries suffer from counterproductive and ill-conceived regulation; others are ailing as a result of monopolistic behavior by dominant firms, or because they face a lack of effective competition and transparency in utilities and financial services. Fixing these problems would help us to return to a path of growth and prosperity for all.