Working Paper: CEPR ID: DP16515
Authors: Samuel Bowles; Wendy Carlin
Abstract: The climate emergency, rising inequality, and pandemic diffusion have raised the question: for what purpose is capitalism fit? Implementing new policies and institutions to meet these challenges will require a realignment of political forces on a scale similar to that achieved by neoliberal policies and ideas over the past four decades. We suggest that a successful new paradigm must provide the basis of a dynamic and sustainable economy and be constituted by a synergistic set of ethical commitments, economic models, emblematic policies, and a new vernacular economics by which people understand and seek to improve their livelihoods and futures. We illustrate these four components by reference to the classical liberal, Keynesian-social democratic, and neoliberal paradigms. Using an expanded space for policies and institutions that integrates markets, states, and civil society, we propose elements of a new paradigm, including diminished space for capitalism and greater equality not only of economic endowments but also of dignity and voice.
Keywords: inequality; power; paradigm; principal-agent model; classical liberalism; keynesian social democracy; neoliberalism; ethics; civil society
JEL Codes: B1; D01; D02; D21; D31; D82; D86; D90; O31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| decline of social democratic parties (P27) | rising inequality (D31) |
| decline of social democratic parties (P27) | stagnant wages (J31) |
| neoliberal paradigm's rise (E65) | weakened labor's bargaining power (F66) |
| neoliberal paradigm's rise (E65) | enhanced market power for firms (L10) |
| climate emergency (Q54) | economic inequality (D31) |
| new paradigm integrating ethical commitments (F02) | effectively tackle challenges (O36) |
| shift from goods production to services (O14) | less hierarchical workplace structures (M54) |
| nature of work (J29) | organizational structures (L22) |
| intrinsic motivation and cooperative work arrangements (M54) | better outcomes (I14) |
| diminishing role of traditional capitalist firms (P12) | enhanced productivity and satisfaction (O49) |