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By Root 1584 0

economic growth experienced in the leading economies for the past generation has been unsustainably flawed. There has been an overconsumption of nonrenewable resources and natural wealth has been squandered; the amount and way we consume will need to change to avert climate and ecological catastrophes, although there is (forgive the pun) heated debate about the extent of the changes needed. The social structure of Western countries has allowed current generations to consume at the expense of an intolerable burden of debt on future generations, one which the workers and taxpayers of the future will reject, with the potential for socially and politically catastrophic consequences. The viability of some societies is threatened by their deep unfairness and by the gradual corrosion of trust between people who must nevertheless live together in an everyday miracle of mutual dependence for the economy and society to thrive. The sense of crisis is everywhere, reflected in public cynicism about politics and brought to a boil by a sense of urgency about the environment and the state of the economy after the financial crisis. The upward trend in the number of natural disasters around the world seems an apt reflection of the financial and economic crisis, and the sense of crisis so many people in many countries feel about their political and business elites.1

We’ve reached the point of Enough. The recent experience of economic growth is that it has destroyed opportunities, either for particular social groups or for future generations. Can it be reshaped in order to continue without incurring such untenable costs?

One possible conclusion would be that this point marks the end of the triumphant free market capitalism that has ruled economic policy since the fall of the Berlin Wall and collapse of communism. The financial crisis and subsequent recession have certainly made the role of government more prominent, but mainly as a result of crisis management. Many commentators have argued that the state should reenter economic management in a more deliberate way, given the staggering demonstrations of market failure we’ve experienced.2 I will indeed go on in this part of the book to discuss the many ways in which markets fail, and the policy conclusions to which pervasive market failures point. But there are also many ways in which governments fail too. It was because these government failures were taken to extremes behind the Iron Curtain that communism collapsed so dramatically. The pendulum then swung, during the 1990s and 2000s, firmly toward the free market model, but sending it swinging right back to the starting point of 1970s style statism would be foolish. Markets have many virtues as well as flaws.3

In fact, there is a broad crisis of governance, encompassing both markets and governments. It is rooted in deep technological and social changes as well as in the dimensions of unsustainable choice described in the first half of the book. Growth, which dramatically improves social welfare, rests on innovation. We’re in the habit of thinking of innovation simply as a matter of technology, new inventions such as computers and medicines. But the profound social impacts of fundamental technical change, whether it’s steam or computing, mean that innovation must also include the social rules that organize the way we live together and cooperate. The rules haven’t kept up with the technology. Now, just as in the early Victorian era, the mismatch between the underlying technological structure of the economy and the institutions governing the economy is the source of political and social upheaval.

Society is experiencing a broad crisis of governance—a jargon word which is nevertheless a useful shorthand for all the ways in which we cooperate to organize our lives together in society. In the wake of the financial crisis, attention has focused firmly on the shortcomings of markets. The solution to many people lies in a return to the kind of government intervention linked to the economics of John Maynard Keynes, who did so much to shape the postwar