In his new op-ed in the OECD Observer, INET Executive Director Robert Johnson cuts right to the chase. We’ve got our economics wrong.
“Our economic thinking has been revealed to be unsound in recent years,” Johnson writes. “In fact, it has been distorted by the overwhelming power of vested interests in the financial sector. This is now quite evident.”
Following his keynote speech at the OECD conference in Paris, Johnson takes on the “old financial paradigm” that got us into the current mess and that is perpetuating problems in the U.S. and Europe. Johnson instead tries to point readers in the right direction.
“In light of the calamitous evidence since 2008, we can now see that we will not emerge from this crisis until the architecture of our financial system is thoroughly reformed” Johnson writes. “It is this overhang rather than excessive fiscal spending that threatens business confidence today.”
But its not just old economic thinking on the right that’s inadequate; we’ve got to look to all ends of the spectrum if we’re going to renew economics and society. “You cannot cut your way to growth and solvency while in a slump. But the traditional Keynesian approaches of just spending money to get the economy back to full employment aren’t appropriate either” Johnson says. “Because in addition to stimulus you are incurring debt that will have to be serviced over the long term.”
What we need is new economic thinking, “however unsettling that might be,” he says.