Rebuilding growth and optimism in a new fiscal era

T. Shanmugaratnam

Financial Stability Review, 2012, issue 16, 211-216

Abstract: We risk an unravelling of globalisation and its benefi ts, if we do not address with clarity the twin challenge of inclusive growth and sustainable public finances. Prolonged fi scal deleveraging in the advanced world is now inevitable, but it also greatly complicates the task of achieving inclusive growth. We have to build such growth, to bring back a sense of optimism in the advanced economies, and confidence in the global economy that they constitute the largest part of. Fiscal policies therefore have to be renewed in purpose and scope. We have to move beyond the legacies of both the left and right. We need activist states, intervening boldly but on fewer tasks. The most important task must be to sustain social mobility by improving the breadth and quality of opportunities from young, and to help workers develop the skills and expertise that keep them in demand in a global market. Broadening opportunities, rather than entitlements, has to be the defining purpose of the activist state. Demand management remains critical in the current context, but will be most effective if focused on strengthening the supply-side capabilities that will spur longer term growth. We must keep the political narrative focused on the long term, on the social benefi ts of sustainable public fi nances, and on the need for a fair deal for our children.

Date: 2012
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