Technocrats begin to worry about people’s welfare

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by Hans Dembowski

Afterthoughts concerning the G20 summit in China

The G20 summit near Shanghai in China did not deliver any ground breaking decisions. However, the rhetoric used by some leaders indicates that the conventional technocratic economics approach is falling out of favour. Even the Conservative heads of government from Britain and Australia apparently argued that public discontent needs to be taken seriously. Malcolm Turnbull, the Australian prime minister, apparently spoke of a need to “civilise capitalism”.

This is an interesting trend. Since 1979, Conservative leaders of Anglophone countries have normally been insisting that growth is the only thing that matters and that wealth will eventually “trickle down”. Basically, their approach to economic policy making was to enforce economic models as if those models reflected laws of nature. The truth is that economic models are mind games that make presumptions and then assess what the consequences would be, as I have argued before. This kind of policy is not grounded in empirical evidence and the trickling down does not always occur.

The G20 includes the governments of emerging markets. Summits involving the top leaders began in 2008, and this group was always more open to state interventions in markets than the G7, in which only the world’s leading established economies are represented. That attitude reflected the need to act in response to the global financial crisis after the collapse of Lehman Brothers, the investment bank, as well as the experience of emerging-market governments. They know that their economic rise depends not just on allowing markets to operate, but just as much on building infrastructure and using state capacities to create the preconditions for market success.

At the recent G20 summit, Christine Lagarde, the leader of the International Monetary Fund, and Ángel Gurría of the Organisation for Economic Cooperation and Development, also stated that policymakers must do more to ensure people benefit from growth and globalisation. Apparently, the technocrats are becoming afraid of the globally rising tide of populism. It remains to be seen what impact the new attitude will have on actual policymaking. Are top leaders going to "civilise capitalism"?

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