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15/09/2009
'Bonus Culture' Fears Over Economy
Policymakers have failed to address problems at the root of the recent economic crisis and unless urgent action is taken, there is a real danger that it may not be the last crisis of its type, warns a new report published by the Institute for Public Policy Research.
The think-tank warns that although the worst of the banking crisis appears to be behind us, there are already signs that lessons have not been learnt.
So far, real reform in the way that economies and financial markets work has been very limited, as evidenced by the rapid return of the City's bonus culture.
IPPR's new report How to make capitalism better is the result of an extensive review of the capitalist model, featuring a series of debates and seminars, with leading experts from the world of economics, finance, politics and the media. Its aim is to identify the scope for a better form of capitalism, one that is more stable and sustainable and that delivers better outcomes for all, not just a small elite.
The report argues that policymakers must seize this opportunity to create the blueprint for "Tomorrow's Capitalism", by adopting the following reforms:
Mr Dolphin said the success of the report will depend on how successful policymakers are in meeting a series of challenges.
The report calls for the United States to accept a lesser role in international economic affairs to accommodate the increased importance of countries like China and India. The UK public's "love affair" with consumerism, particularly debt-driven spending, must be tackled and the culture of the City will have to change so that the financial sector better serves the rest of the economy.
Yesterday US President Obama called on Wall Street to support "the most ambitious overhaul of the financial system since the Great Depression".
He said: "We will not go back to the days of reckless behaviour and unchecked excess at the heart of this crisis."
On Monday UK Prime Minister Gordon Brown spoke of his determination to "complete the unfinished business" of cleaning up banks including establishing rules on bonuses. He will join world leaders at the G-20 meeting in Pittsburgh next week.
(GK/BMcC)
The think-tank warns that although the worst of the banking crisis appears to be behind us, there are already signs that lessons have not been learnt.
So far, real reform in the way that economies and financial markets work has been very limited, as evidenced by the rapid return of the City's bonus culture.
IPPR's new report How to make capitalism better is the result of an extensive review of the capitalist model, featuring a series of debates and seminars, with leading experts from the world of economics, finance, politics and the media. Its aim is to identify the scope for a better form of capitalism, one that is more stable and sustainable and that delivers better outcomes for all, not just a small elite.
The report argues that policymakers must seize this opportunity to create the blueprint for "Tomorrow's Capitalism", by adopting the following reforms:
- Greater international coordination of economic policies in the major economies – an outcome that will be more likely if countries like China and India are given a larger role in bodies such as the IMF.
- Economic growth in the UK based more on exports and investment and less on debt-fuelled consumption – which will require the government to be active in addressing market failures in innovation, training, infrastructure and finance.
- A financial system that operates for the benefit of the whole economy, not just in its own narrow, short-term interests – which will require increased regulation, preferably based on internationally agreed principles.
- Recognition that there may be better measures of progress in an economy like the UK than the growth in national income, or GDP, and that reducing inequalities can make for a happier society.
Mr Dolphin said the success of the report will depend on how successful policymakers are in meeting a series of challenges.
The report calls for the United States to accept a lesser role in international economic affairs to accommodate the increased importance of countries like China and India. The UK public's "love affair" with consumerism, particularly debt-driven spending, must be tackled and the culture of the City will have to change so that the financial sector better serves the rest of the economy.
Yesterday US President Obama called on Wall Street to support "the most ambitious overhaul of the financial system since the Great Depression".
He said: "We will not go back to the days of reckless behaviour and unchecked excess at the heart of this crisis."
On Monday UK Prime Minister Gordon Brown spoke of his determination to "complete the unfinished business" of cleaning up banks including establishing rules on bonuses. He will join world leaders at the G-20 meeting in Pittsburgh next week.
(GK/BMcC)
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