Christian Kellermann, co-author of Decent Capitalism: A Blueprint for Reforming our Economies writes for the Global Labour Column on the deep problems still plaguing the global economy and the need for a radical ‘Plan B’ :
A global Plan B should therefore include three interrelated dimensions. First, the model should be ecologically sustainable: preventing global warming, changing to a renewable energy basis and preventing other problematic developments such as a reduction in biodiversity. Second, it should be formed in such a way that the growth process is not jeopardised by either asset-market bubbles or goods market inflation or deflation, and does not result in the excessive indebtedness of individual sectors or even whole economies, thereby leading inevitably to the next crisis. At the same time, such a model should promote innovation and, therefore, technological development necessary both for solving ecological problems and, in the medium and long term, increasing labour productivity and so holding out the possibility of growing prosperity for all. Third, it is critical that all population groups have a share in social progress. Inequality of income and wealth distribution must be at politically and socially acceptable limits.
At the core of Plan B is a more equitable income distribution. It is crucial to reverse the negative changes in income distribution and grant all population groups an adequate share in the wealth created in society. One secret of the success of regulated capitalism after the Second World War was the increasing mass purchasing power of workers, based on growing incomes and relatively equal income distribution. It is now becoming clear that the old model has to be regenerated.
Income distribution has three important components: functional distribution of income in wages and profits, distribution within the national wage sum and the national profit sum, and state redistribution policy. A fall in the wage share is the result of a higher profit mark-up. The latter was possible on the basis of deregulation, particularly due to the increasing power of the financial sector and its willingness to take risks in pursuit of higher returns. The shareholder-value approach and the increasing role of institutional investors drove enterprises to pursue higher profit mark-ups. Correspondingly, the structures and rules of the game in the financial sector must be changed in such a way that the profit mark-up falls again.
Visit the Global Labour Column to read the article in full.
Meanwhile you can track the worsening health of the global economy with The Brokers With Hands On Their Faces Blog.
A Blueprint for Reforming our Economies
Sebastian Dullien, Hansjörg Herr and Christian Kellermann
“Highly stimulating and thoughtful.” – Nouriel Roubini. Sets out realistic alternatives to the neoliberal capitalism that caused the global crisis.
“The authors present a highly stimulating and thoughtful proposal on how to stabilise the world economy and how to make financial crises less likely and less lethal in the future. It is comforting to see such a constructive contribution to this debate coming from Europe.” – Nouriel Roubini, Professor of Economics and International Business, New York University
“An important contribution to the post-crisis economic literature which offers sensible, practical and distinctly non-utopian policy options. Whatever policy agenda is likely to emerge from the current financial mess, I would bet it will be based on the principles outlined in this book.” – Wolfgang Münchau, associate editor of the Financial Times