Is There an Economically and Socially Sustainable Solution Space for the 21st Century Economy?

Abstract

The consensus economic policy framework that evolved in the post-Bretton Woods era and the model of globalization to which it gave rise are in crisis due to political blowback. The framework has guided the system into a solution space that features stagnant growth and persistent deflationary pressures (stag-deflation), financial excess and fragility, and waning business dynamism. Perhaps of most immediate importance for the framework’s own viability, it has caused or enabled a massive widening of income and wealth disparities (more so in some countries than in others). As a result, we have witnessed the erosion of the social contract that implicitly (a) offers individuals fair prospects for sharing the benefits that the framework generates in return for political and social buy-in and (b) provides for a fair sharing of the tax burden of providing the public goods that underpin the system. From a longer-term perspective, the model also failed to generate the collective action needed to arrest climate change and the mass extinction event that human industrialization has triggered, which is polarizing polities in a second dimension. The result is disruptive political change, a reaction against the technocratic “elites” who manage the framework, and a burgeoning crisis of sustainability. This paper explores the extent to which responsibility can be attributed to a failure to manage the impacts of trade and technological change and whether globalization has to be “dialled back” in some respects to enable a managed transition to an economically and socially sustainable solution space at minimum cost.