Download 1 5 10 15 20 25 30 35 40 45 50 [T1 Two schools of policy thought

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[T1 Two schools of policy thought] Since the 2008 financial crisis threw the world economy into a
tailspin, there has been much talk about the need to pursue inclusive, sustainable prosperity. Yet
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policymakers in developed and developing countries alike have largely continued to rely on reactive,
one-dimensional strategies aimed at boosting economic growth, instead of adopting a systemic
approach that moves beyond output to account for social and environmental objectives. This may be
about to change.
10 A recent report called New Growth Models – produced by the Nobel laureate Michael Spence and an
array of distinguished policy and business practitioners, and released at the World Economic Forum’s
meeting in Davos – highlights the deficiencies of the current approach. More important, it calls upon
15 policymakers worldwide to commit to new growth models that foster inclusiveness and sustainability,
alongside prosperity.
[T2 World's problems] The problems with the world’s current growth trajectory are well documented.
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The planet is creaking under the burden of a fast-growing and increasingly consumption-hungry human
population.
Moreover, despite great strides in poverty reduction – largely a result of China’s unprecedented
economic rise over the last three decades – inequality is on the rise worldwide. And the world’s
25 increasing interconnectedness has contributed to increased volatility, as individual countries struggle to
address challenges ranging from food security to financial reform. [T3 Justifications for new
approach] If policymakers continue to focus exclusively on output growth, the global economy’s
30 stability – indeed, its viability – will be seriously threatened.
Of course, this is not a new notion. The Club of Rome’s controversial 1972 study Limits to Growth set
a new standard for modern, ecologically-inspired catastrophe theory, warning that continued
consumption at contemporary levels would lead to “global economic collapse and precipitous
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population decline.” Malthus
Disparaged by mainstream economists as technically inadequate, Limits to Growth was effectively
buried in the following decades, as the pro-market policies spearheaded by US President Ronald
40 Reagan and UK Prime Minister Margaret Thatcher took root and spread. More recently, the widely
distributed benefits of China’s rise confirmed to many that a single-minded focus on growth works in
practice, even if it is theoretically flawed.
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But three recent developments have reignited the debate about the dangers of unfettered growth. For
starters, the global financial meltdown and subsequent recession laid bare the consequences of freemarket fundamentalism, thereby undercutting popular and ideological support for the neoliberal view
that markets are best at shaping societal outcomes.
50 Furthermore, China – the embodiment of the go-for-growth movement – has signaled a policy shift
toward the pursuit of better social and environmental outcomes, alongside more moderate GDP gains.
To be sure, this is largely a case of virtue arising from necessity; as export-driven growth has slowed,
the risk of social unrest over issues like air pollution, food toxicity, and corruption has risen. But the
new approach is also based on the recognition that China’s continued development depends on a
healthy balance between ecology and economy.
This shift is linked to a third, broader development: the world’s growing understanding of where the
planet is headed environmentally, especially in terms of climate change. While the science is constantly
improving, the evidence concerning the looming challenge is abundant and clear. It is the economics of
environmental action that now forms the core of the policy debate – unlike in 1972.
[T4 Increasing acceptance of new approach] The good news is that fewer and fewer economists
question the need to shift to a green economy, though this emerging consensus is not yet reflected in the
pro-growth rhetoric of economics or in politics and public policy outside of China and exotic outliers
like Bhutan. The question now is how to change the economic rules of the game to provide incentives
for potential winners to drive progress – or at least neutralize likely losers’ ability to obstruct it.
New Growth Models argues that markets alone should not decide our collective fate; non-economic
goals and metrics – both social and environmental – are also needed to guide countries’ economic
aspirations and policies. This is a radical view; if applied to mainstream economic policymaking, the
results would be nothing short of revolutionary.
T1 Two schools of policy thought
T2 World's problems
T3 Justifications for new approach
T4 Increasing acceptance of new approach
T1 Two schools of policy thought
Conventional current approach vs. New approach
T2 World's problems
i fast-growing and increasingly consumption-hungry human population
ii inequality is on the rise worldwide
iii increased volatility caused by challenges ranging from food security to financial reform.
T3 Justifications for new approach
i the global financial meltdown and subsequent recession laid bare the consequences of free-market
fundamentalism
ii China – the embodiment of the go-for-growth movement – has signaled a policy shift toward the
pursuit of better social and environmental outcomes, alongside more moderate GDP gains.
iii world’s growing understanding of where the planet is headed environmentally, especially in
terms of climate change
T4 Increasing acceptance of new approach