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Rethinking Capitalism: Economics and Policy for Sustainable and Inclusive Growth
Western capitalism is in crisis. For decades investment has been falling, living standards have stagnated or declined, and inequality has risen dramatically. Economic policy has neither reformed the financial system nor restored stable growth. Climate change meanwhile poses increasing risks to future prosperity.
In this book some of the world's leading economists propose new ways of thinking about capitalism. In clear and compelling prose, each chapter shows how today's deep economic problems reflect the inadequacies of orthodox economic theory and the failure of policies informed by it. The chapters examine a range of contemporary economic issues, including fiscal and monetary policy, financial markets and business behaviour, inequality and privatisation, and innovation and environmental change. The authors set out alternative economic approaches which better explain how capitalism works, why it often doesn't, and how it can be made more innovative, inclusive and sustainable. Outlining a series of far-reaching policy reforms, Rethinking Capitalism offers a powerful challenge to mainstream economic debate, and new ideas to transform it.
In this book some of the world's leading economists propose new ways of thinking about capitalism. In clear and compelling prose, each chapter shows how today's deep economic problems reflect the inadequacies of orthodox economic theory and the failure of policies informed by it. The chapters examine a range of contemporary economic issues, including fiscal and monetary policy, financial markets and business behaviour, inequality and privatisation, and innovation and environmental change. The authors set out alternative economic approaches which better explain how capitalism works, why it often doesn't, and how it can be made more innovative, inclusive and sustainable. Outlining a series of far-reaching policy reforms, Rethinking Capitalism offers a powerful challenge to mainstream economic debate, and new ideas to transform it.
224 pages, Paperback
First published March 28, 2016
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1230 people want to read
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Displaying 1 - 17 of 17 reviews
May 27, 2017
The system doesn't work, here are all the structural reasons why it systematically never will. so... we should fix it?
I would give this 5 stars if it would just... take it... one step... logically... further...
I would give this 5 stars if it would just... take it... one step... logically... further...
February 7, 2017
If there were to be a prize for the most important futures work for 2016, this book would be a contender to win it. It is a very important book on a very pressing matter. Perhaps a little context would help to establish why this is so?
The financial crash of 2007-08 rather caught the economics profession by surprise. Admittedly, some economists saw it coming, but, in the main, most didn't. Why was that so? Economists largely failed to spot the crisis on the horizon because their models incorrectly described the way in which the economy works. Even after the crisis, the policy response of monetary expansion was condemned for it's inflationary potential. Consumer price inflation failed to take off because the monetary expansion was coupled with a fiscal contraction and there simply wasn't sufficient aggregate demand in the economy to set off inflationary forces. Orthodox economics got it wrong again!
At the time of the financial crash, a number of academic economists correctly saw that the base theory behind many economics models needed to be re-written. If economics, as a discipline, were to be more useful than an intellectual curiosity, then it needs to contain a more accurate description of the way in which the economy works. This book represents a significant down payment on the re-writing of economics. Some of the argument - such as the endogeneity of the money supply - can be a bit technical at times, but it is important nonetheless.
The book contains a sequential set of essays. The most important one, in our opinion, is the last, but the reader will be very handicapped if they skip ahead to the last essay. The argument is developed over the eleven essays in the book. The first essay sets the scene by outlining why the authors believe the economics profession managed to fail to understand the imminent crisis in 2007.
This is followed by the theme of macroeconomic policy. The second essay establishes that fiscal austerity at this point in time is a bit muddle headed, and that current conditions warrant a fiscal expansion; whilst the third essay establishes the endogeneity of the money supply where orthodox economics considers it to be exogenous. What this means in plain English is that we are currently stuck in a loop of secular stagnation, and we are unlikely to find our way out of the maze until aggregate demand recovers. The easiest way to stimulate aggregate demand is through a fiscal expansion. If we remain reliant upon an unconventional monetary expansion (i.e. Quantitative Easing), then all we will see is the further pumping up of asset prices.
The next three essays move away from macroeconomics and start to focus on the microeconomic theory of the firm. The fourth essay looks at short-termism as a feature of Anglo-Saxon Capitalism, and how the need to maintain the quarterly dividend and share buy-back has led to companies failing to re-invest in future productive capacity. This is followed by an essay on the innovative enterprise, in which the author establishes that if a firm wishes to compete in the long term, then it has to innovate, which means that it needs to invest in future productive capacity. This section is then rounded out with an essay - the sixth in the book - on the role of Patient Capital (i.e. investors who are willing to wait for the return on capital to materialise) and the role of the state as a provider of Patient Capital.
It is at this point that the contours of the book start to emerge. The economics profession has largely failed the public because the models on which policy of based are too divergent from the real world. We are currently stuck in a position of secular stagnation which is reinforced by the current policy of fiscal austerity combined with monetary expansion. In order to move forward, aggregate demand needs to grow, and the easiest way of achieving this is by reversing the policy of fiscal austerity. If austerity is to be relaxed, then public sector investment in productive capacity is likely to stimulate aggregate demand without the additional productive capital being diverted into unproductive dividends and share buy-backs. The book then continues to examine four specific aspects of this argument.
The seventh essay, using the insights of the first six essays, makes a good case for investment-led growth as a solution to the European Crisis. The European economy finds itself in a very parlous state at the moment, one that needs growth as a solution. The private sector hasn't delivered growth, so perhaps the public sector could? The eighth essay examines the link between inequality and economic growth. I found the argument to be a bit circular in that the best way to reduce poverty is growth, but also that a good way to stimulate growth would be to tackle inequality. The fact that an argument is circular doesn't invalidate it. The ninth essay examines the paradoxes of privatisation and public service outsourcing. The old distinction of private and public sectors has dissolved a great deal in the past thirty years, but our thinking in this regard hasn't. The last essay of this section - the tenth in the book - considers the relationship between innovation, de-carbonisation, economic growth, and climate change.
If the first six chapters laid out the contours of what a new economics might look like, the following four chapters lay out the contours of what economic policy might look like. Starting with a recognition that a fiscal expansion is needed to stimulate aggregate demand at the macroeconomic level, the microeconomics of such an expansion would be to focus on investment in 'green-tech', delivered by private sector agents of public sector commissioners; in tandem with policies to reduce inequality. This sounds like a winning formula!
With this thinking in hand, one is then ready to tackle the final chapter of the book, one that happily has more questions than answers. In the final essay, Carlota Perez takes a far longer perspective on the question of green-tech and helps to map out the contours of our collective future. Here, the focus moves away from the immediate and towards the more distant future. There is enough evidence presented to convince us that the next technological wave will be one based around green-tech. What isn't clear is whether this represents the deployment phase of the Fifth Wave, or the installation phase of the Sixth Wave. I am inclined to the latter view, but the chapter makes a sufficiently good case for the former view to sow the seeds of doubt in my mind. This aspect of the essay needs more thought on my part.
This is a really important book. However, it has to be remembered that it is an economics text book, which means that the style is dry and academic. The prose is turgid and, in places, downright boring. This is not bedtime reading. The book does lack the mass of higher mathematics normally associated with economics texts and, in this regard, is quite accessible. It is the content that underscores the importance of the book. This is a very significant step away from the barren territory of the neo-liberal economics that failed us all in 2007. This is why we recommend it.
The financial crash of 2007-08 rather caught the economics profession by surprise. Admittedly, some economists saw it coming, but, in the main, most didn't. Why was that so? Economists largely failed to spot the crisis on the horizon because their models incorrectly described the way in which the economy works. Even after the crisis, the policy response of monetary expansion was condemned for it's inflationary potential. Consumer price inflation failed to take off because the monetary expansion was coupled with a fiscal contraction and there simply wasn't sufficient aggregate demand in the economy to set off inflationary forces. Orthodox economics got it wrong again!
At the time of the financial crash, a number of academic economists correctly saw that the base theory behind many economics models needed to be re-written. If economics, as a discipline, were to be more useful than an intellectual curiosity, then it needs to contain a more accurate description of the way in which the economy works. This book represents a significant down payment on the re-writing of economics. Some of the argument - such as the endogeneity of the money supply - can be a bit technical at times, but it is important nonetheless.
The book contains a sequential set of essays. The most important one, in our opinion, is the last, but the reader will be very handicapped if they skip ahead to the last essay. The argument is developed over the eleven essays in the book. The first essay sets the scene by outlining why the authors believe the economics profession managed to fail to understand the imminent crisis in 2007.
This is followed by the theme of macroeconomic policy. The second essay establishes that fiscal austerity at this point in time is a bit muddle headed, and that current conditions warrant a fiscal expansion; whilst the third essay establishes the endogeneity of the money supply where orthodox economics considers it to be exogenous. What this means in plain English is that we are currently stuck in a loop of secular stagnation, and we are unlikely to find our way out of the maze until aggregate demand recovers. The easiest way to stimulate aggregate demand is through a fiscal expansion. If we remain reliant upon an unconventional monetary expansion (i.e. Quantitative Easing), then all we will see is the further pumping up of asset prices.
The next three essays move away from macroeconomics and start to focus on the microeconomic theory of the firm. The fourth essay looks at short-termism as a feature of Anglo-Saxon Capitalism, and how the need to maintain the quarterly dividend and share buy-back has led to companies failing to re-invest in future productive capacity. This is followed by an essay on the innovative enterprise, in which the author establishes that if a firm wishes to compete in the long term, then it has to innovate, which means that it needs to invest in future productive capacity. This section is then rounded out with an essay - the sixth in the book - on the role of Patient Capital (i.e. investors who are willing to wait for the return on capital to materialise) and the role of the state as a provider of Patient Capital.
It is at this point that the contours of the book start to emerge. The economics profession has largely failed the public because the models on which policy of based are too divergent from the real world. We are currently stuck in a position of secular stagnation which is reinforced by the current policy of fiscal austerity combined with monetary expansion. In order to move forward, aggregate demand needs to grow, and the easiest way of achieving this is by reversing the policy of fiscal austerity. If austerity is to be relaxed, then public sector investment in productive capacity is likely to stimulate aggregate demand without the additional productive capital being diverted into unproductive dividends and share buy-backs. The book then continues to examine four specific aspects of this argument.
The seventh essay, using the insights of the first six essays, makes a good case for investment-led growth as a solution to the European Crisis. The European economy finds itself in a very parlous state at the moment, one that needs growth as a solution. The private sector hasn't delivered growth, so perhaps the public sector could? The eighth essay examines the link between inequality and economic growth. I found the argument to be a bit circular in that the best way to reduce poverty is growth, but also that a good way to stimulate growth would be to tackle inequality. The fact that an argument is circular doesn't invalidate it. The ninth essay examines the paradoxes of privatisation and public service outsourcing. The old distinction of private and public sectors has dissolved a great deal in the past thirty years, but our thinking in this regard hasn't. The last essay of this section - the tenth in the book - considers the relationship between innovation, de-carbonisation, economic growth, and climate change.
If the first six chapters laid out the contours of what a new economics might look like, the following four chapters lay out the contours of what economic policy might look like. Starting with a recognition that a fiscal expansion is needed to stimulate aggregate demand at the macroeconomic level, the microeconomics of such an expansion would be to focus on investment in 'green-tech', delivered by private sector agents of public sector commissioners; in tandem with policies to reduce inequality. This sounds like a winning formula!
With this thinking in hand, one is then ready to tackle the final chapter of the book, one that happily has more questions than answers. In the final essay, Carlota Perez takes a far longer perspective on the question of green-tech and helps to map out the contours of our collective future. Here, the focus moves away from the immediate and towards the more distant future. There is enough evidence presented to convince us that the next technological wave will be one based around green-tech. What isn't clear is whether this represents the deployment phase of the Fifth Wave, or the installation phase of the Sixth Wave. I am inclined to the latter view, but the chapter makes a sufficiently good case for the former view to sow the seeds of doubt in my mind. This aspect of the essay needs more thought on my part.
This is a really important book. However, it has to be remembered that it is an economics text book, which means that the style is dry and academic. The prose is turgid and, in places, downright boring. This is not bedtime reading. The book does lack the mass of higher mathematics normally associated with economics texts and, in this regard, is quite accessible. It is the content that underscores the importance of the book. This is a very significant step away from the barren territory of the neo-liberal economics that failed us all in 2007. This is why we recommend it.
March 18, 2025
Kiváló olvasmány a "szürke 50 árnyalatáról". A szerzők szépen összefoglalták mindazt ami a földbedöngöli az emberiséget, kérdés csupán az, hogy azt ami deklaráltan egyenlőtlenségek struktúrájára épül, azaz még azt a "naiv" látszatot sem biztosítja, hogy a társadalom szövete az egyenlőség elveire is épülhet, van-e bármi újragondolni való? De nem akarok elrugaszkodni.
Akárhogy is van ez a válogatás szépen summázza a közgazdaságtan indokolatlan túldimenzionálását, ami már az alapvető morális kérdésekben is haszonelvet lop be.
Úgy tűnik máig nem világos, hogy mi is a pénz tulajdonképpen és még sorolhatnám.
Örömmel olvastam a vagyoni egyenlőtlenségek mögötti dinamikáról, ami sok összefüggést érthetőbbé tett.
Szívből ajánlom a kötetet mindenkinek.
Akárhogy is van ez a válogatás szépen summázza a közgazdaságtan indokolatlan túldimenzionálását, ami már az alapvető morális kérdésekben is haszonelvet lop be.
Úgy tűnik máig nem világos, hogy mi is a pénz tulajdonképpen és még sorolhatnám.
Örömmel olvastam a vagyoni egyenlőtlenségek mögötti dinamikáról, ami sok összefüggést érthetőbbé tett.
Szívből ajánlom a kötetet mindenkinek.
July 5, 2017
Dobrý prierez aktuálnym stredo-ľavým zmýšlaním o ekonomickej politike.
March 29, 2019
I first became aware of this book while visiting the website of the New Consensus, a group that is trying to develop and promote the idea of a Green New Deal in the United States. While supporters of the Green New Deal talk about a lot of issues that don't directly relate to a more sustainable economic system, the core concept is that American society must mobilize to create a post-carbon economy that is more dynamic and equitable than the one we have today. This book does a tremendous job of discussing some of the main ideas behind the Green New Deal, which is particularly beneficial since the legislative proposals are still in the embryonic stage.
Readers may be surprised to learn that the predominant theme that runs through this essay collection is the need to create a dynamic and innovative economy. While all of these authors are left-leaning, you won't find much discussion of Karl Marx here. The authors are far more likely to cite the work of Joseph Schumpeter, an Austrian economist and noted opponent of Marxism. In various ways, the authors present the argument that government policy plays an important role in setting the broad agenda of economic development and developing the social ecosystem necessary for meaningful innovation and increased worker productivity. The post-war boom in the American economy can be traced directly to the sustained government investments that were made during the 1940s, 50s, and 60s; we have entered a period of low growth and "secular stagnation" in large part because we have tapped out most of the dividends from that earlier period and failed to make comparable investments to propel the next round of innovation. It's a relatively simple idea that has considerable support in the historical record, but one that has been suppressed due to the ascent of neoliberalism since the 1970s.
I would not call this essay collection an "easy read," but the authors do a good job of avoiding unnecessary academic jargon and the discussion does not involve any use of advanced mathematics. If you want to know more about the heterodox economists who criticize neoliberalism without giving up entirely on capitalism, this is an excellent place to start. If you want to know more about the philosophical foundations of the Green New Deal, this book would also be an extremely valuable resource. I highly recommend this book and expect that I will be referring back to it regularly in the years to come.
Readers may be surprised to learn that the predominant theme that runs through this essay collection is the need to create a dynamic and innovative economy. While all of these authors are left-leaning, you won't find much discussion of Karl Marx here. The authors are far more likely to cite the work of Joseph Schumpeter, an Austrian economist and noted opponent of Marxism. In various ways, the authors present the argument that government policy plays an important role in setting the broad agenda of economic development and developing the social ecosystem necessary for meaningful innovation and increased worker productivity. The post-war boom in the American economy can be traced directly to the sustained government investments that were made during the 1940s, 50s, and 60s; we have entered a period of low growth and "secular stagnation" in large part because we have tapped out most of the dividends from that earlier period and failed to make comparable investments to propel the next round of innovation. It's a relatively simple idea that has considerable support in the historical record, but one that has been suppressed due to the ascent of neoliberalism since the 1970s.
I would not call this essay collection an "easy read," but the authors do a good job of avoiding unnecessary academic jargon and the discussion does not involve any use of advanced mathematics. If you want to know more about the heterodox economists who criticize neoliberalism without giving up entirely on capitalism, this is an excellent place to start. If you want to know more about the philosophical foundations of the Green New Deal, this book would also be an extremely valuable resource. I highly recommend this book and expect that I will be referring back to it regularly in the years to come.
November 4, 2018
enlightening and thought provoking collection of articles aimed at questioning the current economic paradigm, and suggestions about how to shift it. Some sections are downright scary, for instance Crouch's article outlining how the corporate rich are basically hijacking democracy, but we know that instinctively, I guess, when looking at the current situation in the world.
One personal criticism I have is that many of the articles still propose economic growth as the only way forward, and look for more sustainable ways of achieving that growth, whereas there is a growing body of literature that is now actively questioning the need for constant growth. But this is still a worthwhile read for its academic strengths
One personal criticism I have is that many of the articles still propose economic growth as the only way forward, and look for more sustainable ways of achieving that growth, whereas there is a growing body of literature that is now actively questioning the need for constant growth. But this is still a worthwhile read for its academic strengths
October 1, 2022
I am mesmerized by Mazzucato & her team’s work these days. Last week I read her Mission Economy: A Moonshot Guide to Changing Capitalism. This week I read Rethinking Capitalism: Economics & Policy for Sustainable & Inclusive Growth.
IMHO, the top 3 essays from this book are:
1. Innovation, the State and Patient Capital by Mazzucato.
2. Innovative Enterprise & the Theory of the Firm by William Lazonick. He gives three key social conditions of innovative enterprise.
3. Decarbonization: Innovation & the Economics of Climate Change by Dimitri Zenghelis. His section on path-dependence, phenomenon of ‘lock-in,’ and innovation is great!
IMHO, the top 3 essays from this book are:
1. Innovation, the State and Patient Capital by Mazzucato.
2. Innovative Enterprise & the Theory of the Firm by William Lazonick. He gives three key social conditions of innovative enterprise.
3. Decarbonization: Innovation & the Economics of Climate Change by Dimitri Zenghelis. His section on path-dependence, phenomenon of ‘lock-in,’ and innovation is great!
November 15, 2020
Not being a professional economist, it’s obvious that today’s neoclassical marginal utility has stopped working. It fails to explain most of what is taking place in the world, and - worse - has become a religion that is now taught in universities. Mazzucato, Perez and other economists give their own views of the shortcomings, and what can be done about. Higly recommended!
January 1, 2021
Libro interessante, una lettura consigliata a chi vuole affacciarsi sull'economia non mainstream. Ma rimangono pecche di fondo: mancanza di coerenza e contraddizioni tra un capitolo e l'altro (dovuta al fatto che sia sostanzialmente una raccolta di saggi) e appiattimento di alcune teorie dell'economia "standard".
June 22, 2020
Lavoro fatto a più mani di sicuro interessante e formativo. Le proposte innovative finali dovrebbero essere mutuate dagli attuali governanti. Il volume è le analisi in esso esposte andranno sicuramente riviste alla luce del Covid e gli effetti da esso prodotti.
September 9, 2022
Not the book I expected but still, this composition of essays represented solid scholarly work addressing some of the more intractable and potentially lethal to our species aspects of the global capitalist system.
April 15, 2021
A collection of positively brilliant writings! Can't recommend this book enough! Clear, cogent, and insightful.
October 24, 2021
Rimandato. Non ho ancora le competenze per capirlo (e non è scritto per tutti)
May 17, 2025
Some good essays by heterodox economists. The thing is, almost every author here has a book where the idea expressed here has been developed much better there instead.
December 16, 2016
Hmm...
The authors argued that the world and the economists are facing two kinds of failures, namely, the failure of the western capitalism, and the failure of the economists who failed to figure out the first failure. The authors went on to contest that the symptoms of the western capitalism failure are 1) Weak and unstable growth (make sense), 2) Stagnant living standards and rising inequality (why is it a characteristic sin of the ill-capitalism), and 3) Climate change and environmental risk (WTF, this is a bit too far...).
I believe that the authors simply wanted to talk about the failure of the governments. But governments fail all the time. There is nothing to worry about it, and indeed, there is nothing one could help to save the poor governments.
Anyways, God will send us somebody to save our economy. This is for sure, and surely, as usual, the glorious savior cannot be an economist! That said, the economists have been actively participating in our economy. You know, they contest for research fund, and travel, and buy stuff... and they produce books for sale!
The authors argued that the world and the economists are facing two kinds of failures, namely, the failure of the western capitalism, and the failure of the economists who failed to figure out the first failure. The authors went on to contest that the symptoms of the western capitalism failure are 1) Weak and unstable growth (make sense), 2) Stagnant living standards and rising inequality (why is it a characteristic sin of the ill-capitalism), and 3) Climate change and environmental risk (WTF, this is a bit too far...).
I believe that the authors simply wanted to talk about the failure of the governments. But governments fail all the time. There is nothing to worry about it, and indeed, there is nothing one could help to save the poor governments.
Anyways, God will send us somebody to save our economy. This is for sure, and surely, as usual, the glorious savior cannot be an economist! That said, the economists have been actively participating in our economy. You know, they contest for research fund, and travel, and buy stuff... and they produce books for sale!
August 23, 2016
This is a fantastic collection of essays. What I found particularly good about the collection is that if you wanted to read a distilled version of Crouch's views on privatisation, for example, his contribution to this book sets out his views succinctly. Well worth a read.
April 11, 2019
Libro interessante con molti spunti interessanti. Non di facilissima lettura per chi non mastica l'economia
Displaying 1 - 17 of 17 reviews