UN calls for a global 'New Deal' to replace neo-liberalism
The world must ditch austerity and economic neo-liberalism and undertake a global "New Deal" to rebalance the global economy and achieve prosperity for all, the U.N. trade and development agency UNCTAD said in a report on Thursday.
The world economy, stunted by years of austerity and growing inequality, needs a global "New Deal", inspired by policies that helped Europe rebound after World War II, the UN said Thursday.
"The world economy remains unbalanced in ways that are not only exclusionary, but also destabilising and dangerous for the political, social and environmental health of the planet," said the UN development agency, UNCTAD.
"What is urgently needed now is a global new deal," the agency said in its flagship Trade and Development Report.
The original New Deal, launched in the United States in the 1930s in response to the Great Depression, was replicated at an international level with the Marshall Plan, which is widely credited with helping Western Europe make a spectacular recovery after World War II.
"Seven decades later, an equally ambitious effort is needed to tackle the inequities of hyperglobalisation in order to build inclusive and sustainable economies," UNCTAD said.
As with the previous plans, the report argued that the world, at both national and international levels, should be focusing on job creation, the expansion of taxes to enable redistribution of wealth and regulation aimed at taming finance.
THE WORLD NEEDS A 21ST CENTURY MAKEOVER
UNCTAD chief Mukhisa Kituyi said the global economy was picking up but still not lifting off.
"A combination of too much debt and too little demand at the global level has hampered sustained expansion of the world economy," he said in a statement.
Much of the blame was aimed at "neo-liberalism", a term used to refer to governments cutting back on their own role and leaving the private sector to lead economic and social development within a free-market capitalist system.
After decades of such policies, the system was perceived to be unduly biased in favour of a handful of large corporations, financial institutions and wealthy individuals, the report said.
The world now needed a "21st century makeover", it said.
"The whole neo-liberal mantra that 'there is no alternative' has begun to fall apart," Richard Kozul-Wright, UNCTAD's globalisation director, told a news conference.
"There are plenty of alternatives out there and they are urgently needed given the kind of economic and social imbalances that we are currently facing."
He said central bank chiefs such as Mark Carney in Britain and Janet Yelland in the United States seemed to think they had solved the crisis and blamed any continuing risks on China.
But the global system was still serving narrow interests, and the change that was needed went beyond simply "tinkering with education or credit for poor people or ... putting the word 'inclusive' in front of every possible economic process you can imagine and believing you've solved the problem".
"We need a global 'New Deal'," he said, referring to the policies that revived the depressed U.S. economy in the 1930s.
The aim should be to end fiscal austerity, imposed in 13 out of 14 leading advanced economies between 2011 and 2015, and prioritise reflation, full employment and decent jobs, rather than tackling inflation and cutting government debt.
"It needs a serious regulation of corporate abuse in both the financial and the corporate sector and it requires serious redistributionary measures – both fiscal and more innovative measures," he said.
Kozul-Wright said there were signs of a backlash against austerity in the Anglo-Saxon world, in countries such as New Zealand and Britain, and the United States could also potentially follow suit.
But mainland Europe seemed to be extremely resistant to such a change of direction, he said.
- END AUSTERITY -
"Ending austerity and harnessing finance to serve society once again, rather than the other way around, are the most urgent challenges," the report said.
It pointed out that nearly a decade after the global financial crisis, "a strong recovery has remained elusive".
UNCTAD forecasts that the global economy will grow 2.6 percent this year, only slightly higher than the 2.2 percent registered in 2016, and far below the 3.2 percent average seen in the years leading up to the financial crisis.
Growth in developed countries is expected to tick in at 1.9 percent this year, up from 1.7 percent in 2016.
The sluggish growth in richer nations, along with renewed volatility in global capital flows, has also limited growth in developing countries, the report said, forecasting growth there of 4.2 percent this year up from 3.6 percent in 2016.
And the widespread tendency to turn to austerity as a default policy had made the situation significantly worse, hampering investments and entrenching inequalities, it warned.
Instead of continuous belt-tightening, the UNCTAD economists called for the broad use of fiscal policy to work towards full employment and finance public investments in physical and social infrastructures.
Investments should also be made in major public works programmes, including ones aimed at mitigating and adapting to climate change, and in public services like child care and elderly care, they said.
They also urged states to give organised labour a stronger voice and to bolster regulations in the financial sectors and clamp down on the use of tax havens.
The report also called for the creation of a "global competition observatory" as a "first step towards coordinated international best practice guidelines and policies, and to monitor global market concentration trends and patterns."
"Competition policy more generally should be designed with an explicit distributional objective," it said.