Ensuring that banks hold enough capital to withstand a moderate crisis is a critical part of 'macroprudential' policy and was a key response to the 2008 crash.
In 2010 the Basel III regulatory reforms allowed regulators to require banks to increase capital held during financial upswings and reduce it during downturns.
Some argue that the time is right for loosening capital requirements to encourage financial institutions to keep lending, although there are warnings that this will increase the risk of a future crisis.
Finance Watch warns that easing bank regulation and supervision could further increase the risk of a financial crisis and cautions against abandoning requirements for banks to hold more capital in times of crisis.
Researchers at the Bank for International Settlements outline a quantitative assessment of the impact of releasing bank capital buffers in response to the crisis. In the event of a financial crisis similar to 2008 it warns that without loosening regulatory requirements lending would severely contract.
Breugel suggests that existing bank capital requirements are not enough to avoid major crises. It proposes a tighter set of capital requirements for those parts of the system that are the most leveraged.
'Community wealth building' is an approach to local economic development which seeks to retain as much wealth and economic activity as possible within a local area, and place local assets and democratic control in the hands of local people. It aims to promote more resilient local economies and local job creation.
Core to this idea is harnessing the spending power of local 'anchor' institutions, such as local authorities, hospitals and universities. By using their procurement budgets to buy wherever possible from local small and medium sized businesses, such institutions can support local economic and civic renewal and retain wealth and jobs within the community. At the same time the local authority can support the development and financing of such businesses.
Many community wealth building initiatives are particularly focused on socially-owned enterprises such as cooperatives and community businesses. The best-known application of the model in the UK is the city of Preston, where the city council has transformed local models of procurement and quadrupled the local spend of its anchor institutions.
The Centre for Local Economic Strategies (CLES) has helped shape the community wealth building approach in Preston. Here they describe how they did it and the key lessons learned. In particular they highlight how replicating the success is not a one-size-fits-all but must evolve from the people and resources within each place.
Making Spend Matter, a network of 7 cities exploring best practice in progressive procurement, released their final newsletter detailing their 3 year journey of sharing learning from partner cities across Europe.
Community Wealth Building and citizen-led transformation are key to the Amsterdam City Doughnut. This is the first city-scale application of Kate Raworth’s model of doughnut economics, which sets delivering wellbeing within environmental limits as the goal of economic policy.
Community wealth building initiatives and proposals in the devolved nations include: the Bevan Foundation’s proposal for ‘Anchor Towns’ in Wales; proposals by CLES and Development Trust Northern Ireland; and CLES's work with the Scottish and Welsh Governments.
COP26 is not the only major environmental summit on the horizon. In May 2021 world governments are due to meet in China for a crucial meeting convened by the Convention on Biological Diversity.
It aims to reach ambitious new agreements on the protection and restoration of biodiversity. This meeting is as critical for nature as COP26 is for the climate. Global biodiversity loss has not slowed since the signing of the first biodiversity plan in 2010, with the world having missed all of its twenty targets.
Greenpeace’s Unearthed blog runs through the main issues at stake within the Convention on Biological Diversity process, including analysing why it receives far less international attention than climate summits despite its importance.
Birdlife International has a series of briefings for what it wants from the post-2021 framework, including new targets to halt species decline by 2030.
The Forest People’s Programme calls for more support for indigenous peoples and communities to help deliver on the Convention’s ambitions.
The decision by the UK government at the end of 2020 to go back on its commitment to spend 0.7% of GDP on overseas development assistance – reducing it to 0.5% – has been widely criticised. First achieved in 2013, the UN target was embodied in UK law in 2015.
Of the 43 richer nations counted by the OECD as providing overseas development assistance (ODA) – defined as aid specifically aimed at reducing poverty in low-income countries – only five now provide 0.7% of GDP or more. The World Bank estimates that the Covid-19 crisis pushed around 120 million people around the world into extreme poverty, with almost all governments pushed into higher debt and their development plans severely retarded.
While many are calling for aid to low-income countries to be increased, others argue that the concept of aid from rich to poor nations is outdated, not least because the majority of the world’s poor no longer live in the lowest-income countries. Proponents of the concept of ‘Global Public Investment’ are attempting to forge a new multilateral approach to investing in the Sustainable Development Goals (SDGs) and ending poverty, opening up decision making to include the poor. Calls for a Global Green New Deal also embody this idea.
The UN’s 2020 Financing for Sustainable Development Report warns that global investment is insufficient to meet the Sustainable Development Goals and calls for a globally coordinated response to the Covid-19 crisis, focused on the countries most in need.
The International Expert Working Group on Global Public Investment (GPI) proposes five ‘paradigm shifts’ away from traditional top-down aid, including more representative decision making and rethinking international public finance as ‘an empowering multilateralism of a common fiscal endeavour’.
Overseas Development Institute research fellow Nilima Gulrajani examines how the Covid-19 pandemic challenges traditional notions of ‘aid’ and argues that Global Public Investment could embed a more reciprocal approach to development cooperation.
The UN trade and development organisation UNCTAD has called for a Global Green New Deal to further economic recovery and development towards the Sustainable Development Goals, with a coordinated global investment programme including both public and private finance.
Through the C40 climate leadership group, mayors of nearly 100 of the world’s leading cities have called for the resources and powers they need to drive a ‘green and just recovery’ from Covid-19 which could deliver transformative economic, health and climate benefits for urban populations.
The UK�۪s banking system is unusual in its dominance by commercial banks. Many other countries have a more diverse range of banks ��� more publicly-owned banks at the national and local levels, and a more thriving cooperative and mutual banking sector.
Such a network of ���stakeholder banks�۪ can help a country�۪s financial resilience, ensure that lending reaches the parts of the economy left behind by mainstream finance, and deliver targeted investment to meet national or local strategic economic goals such as the green economy.
In OpenDemocracy�۪s New Thinking for the British Economy, Christine Berry proposes a UK ecosystem of stakeholder banks.
The New Economics Foundation establishes the economic case for a more diverse banking sector, arguing that this ���ecosystem�۪ would be more resilient, socially focused and give better returns to customers than commercial banks.
Daniel Ticsher explores the benefits that regional banks bring to diversity and resilience, finding that Germany's more diverse banking sector weathered better than its private retail banks after the global financial crisis, and comparing this to the UK.
Automation is the process by which human work is substituted by machines or software programmes of different kinds. Automation has been occurring continuously since the beginning of the industrial revolution, and in general has been responsible for the overall rise in living standards in that time.
Automation is often associated with job loss, but economists point to the difference between its immediate impact on the jobs of those whose labour is substituted, and its effect in the wider economy. Historically, the increase in productivity brought by automation has tended to lead to higher income and employment in the economy as a whole. Some jobs of certain kinds are lost, but more are created.
Today there are widespread fears that a new wave of technologies, particularly those associated with artificial intelligence (AI), may lead to mass unemployment over the coming years.
Sceptics argue that jobs will certainly change with AI, and are already doing so, but there is no reason to believe that the historical pattern of higher overall employment will not continue. Some do however argue that new technologies could worsen job quality for many people and could exacerbate overall inequality, both between highly-skilled groups of workers and others, and between workers and the owners of the capital.
Proposals for policy responses to automation and AI vary according to the analysis of their impacts. Most speak to the need to 'manage' the process of automation to ensure that its benefits are better shared. This could be through workplace bargaining, higher taxation, or widening the ownership of firms. Those who believe that automation may lead to large-scale unemployment propose the development of institutions that either better share available work (such as through shorter working time) or provide non-work-based income such as a Universal Basic Income (see above).
Research published by the IMF (Jan 2021) examines how the Covid-19 pandemic could interact with longer-term trends of automation, concluding that “concerns about the rise of the robots amid the COVID-19 pandemic seem justified”.
MIT economist David Autor explains the historical evidence on the impact of automation on employment, showing how new technologies complement as well as replace labour. He argues that while artificial intelligence will allow computers to substitute for workers in performing routine, codifiable tasks, there will remain a comparative advantage for workers in supplying problem-solving skills, adaptability, and creativity.
Carl Benedikt Frey, Director of the Oxford Martin School’s Future of Work research programme, examines in his book The Technology Trap how the history of technological revolutions can shed light on the political and economic challenges of automation, and warns against increasing inequality. See Frey's lecture here.
The IPPR Commission on Economic Justice outlined proposals for “managing automation” to ensure that automation does not exacerbate existing inequalities and concentrate wealth in the hands of capital owners.
The Institute for the Future of Work launched a project to develop best practice guidance for businesses as they introduce technology to balance employee concerns about work intensity, surveillance and work-life balance.
MIT economist Professor Daron Acemoglu argues that the American tax code’s privileged treatment of capital is encouraging firms to embrace inefficient levels of automation at workers’ expense, demonstrating the importance of correct policy for managing the challenge of automation.
Antibiotic and antimicrobial resistance is a major threat to public health – described by the World Health Organisation as threatening the “core of modern medicine”.
It is driven by the slow pipeline of new medicines development by the pharmaceutical industry and the overuse of antibiotics by humans and in farm animals, particularly pigs and poultry.
Countering this is widely seen to require both tougher regulation and the enforcement of existing rules, where these even exist. In particular regulation is needed for the promotion of antibiotics by the pharmaceutical industry and tighter rules on their usage in animal agriculture.
The major O’Neill review called for a series of measures to tackle drug resistance, including a global awareness campaign.
The European Public Health Alliance draws recommendations for EU AMR policy from a spate of infections in Romania. Their proposals include investing in education of health workers on the threat of AMR, and tougher legislation.
Compassion in World Farming and World Animal Protection propose stronger regulation of farming antibiotics.
The UK has committed to reducing emissions to net zero by 2050. This means having a balance between the emissions produced and those taken from the atmosphere. Many consider 2050 too late given the urgency of climate emergency.
Economic decisions taken in response to the pandemic may help accelerate, or further slow, the transition to an environmentally sustainable economy. Demands for a green recovery are adding new urgency to existing calls for industrial strategy and economic policy to prioritise sustainability.
Before the pandemic environmental groups said 2% of GDP needed to be spent in the UK to adequately tackle the climate and environmental emergency. Without similar action around the world there will be little hope of avoiding the most destructive consequences of the emergency.
The global Energy Transitions Commission (ETC) has concluded that it is "technically and economically possible" to have a carbon free economy in the developed world by 2050 and the developing world just 10 years later, at the cost of 1% of GDP a year to accomplish this. The ETC concludes that most areas of the economy can be decarbonised at "very low, nil or even negative cost"
The Oxford University Institute for New Economic Thinking sets out five lessons from the pandemic for climate action. These include that delay is costly, inequality can be exacerbated without timely action and that global problems require multiple forms of international cooperation.
Former Director of E3G and GreenAlliance Tom Burke has written on the need for stronger enforcement and institutional frameworks surrounding legal environmental targets.
A peer-reviewed paper in the Frontiers in Climate journal examines the issues with treating emissions reductions and offsets as equivalent in climate goals, and suggests different and differentiated targets to encourage ambitious and just climate action.
There is as yet no widely agreed name for a new, post-neoliberal economic paradigm. But those seeking to build one largely agree on its core goals. They seek an economic system which is
In such an economy democratically elected governments would play a significant role, seeking to shape and regulate markets to serve the public interest, and limiting the power of major corporations and financial markets.
These goals cannot be achieved, it is argued, by minor reforms to present economic systems. Fundamental reform is required, a structural transformation which hard-wires these goals into the way the economy works.
The IPPR Commission on Economic Justice, whose members included the Archbishop of Canterbury and prominent business and trade union leaders, provides a comprehensive analysis of the failings of the UK economy and over 70 policy recommendations in a ten-point plan for fundamental reform.
The New Economics Foundation, the Zoe Institute and the Wellbeing Economy Alliance set out a joint plan for systemic economic change in the UK, seeking a fundamental transformation towards a resilient economy promoting equality, environment and wellbeing.
Describing the principles set out in her book Doughnut Economics, Kate Raworth argues that economic activity needs to fall within the two boundaries, social and ecological, that together encompass human wellbeing. Such an economy would be ‘regenerative and distributive’ by design.
The scale and radicalism of US President Joe Biden’s proposals since entering office have strengthened the argument that a paradigm shift is underway in American, and global, economic policy making. Economist Noah Smith (Noahpinion) argues Biden’s policy reforms are comparable to the New Deal or Reaganomics in scale, and offers an analysis of the “unifying philosophy” of Bidenomics.
Tony Danker, Director General of the CBI, gave a speech to its annual conference dubbed as a “damning critique of free-market capitalism”. It exemplifies the new consensus (though not in the Government) around the importance of state intervention and industrial strategy. Danker noted that “we’ve had five decades where the free market has palpably failed” and called for a “partnership with government.”
In its ‘Reset’ report for a post-Covid society, the All-Party Parliamentary Group on a Green New Deal has set out a vision of a new economy, and the principles and policy ideas which could inform it.
A key dimension of ‘building back better’, it is widely argued, is greater investment in the ‘caring economy’. A ‘care-led recovery’ would see priority given to increasing employment and wages in the health service, social care and childcare.
The Covid crisis has exposed serious under-funding in these sectors, and the need to pay many of those working in them more. Investment in care creates more jobs, especially jobs for women, than comparable spending in sectors such as construction.
The Women’s Budget Group calculates that investment of around 2.5% of GDP in child care and social care would create over 2 million jobs as well as helping reduce the gender employment gap.
The Commission on a Gender-Equal Economy sets out a detailed blueprint for how investment in adult social care, healthcare and childcare can be combined with improving the pay and conditions of workers, action to end discrimination, deprivation and poverty and environmental protection to create an economy that improves wellbeing rather than maximises economic growth.
Writing for the Bright Blue blog, Fawcett Society CEO Sam Smethers points to deepening gender inequalities around childcare during the pandemic and argues for strategic investment in childcare infrastructure.
IPPR and the TUC call for a ‘family stimulus’, increasing social security payments for children and investment in childcare.
