Beyond growth: towards a new economic approach

OECD NAEC Synthesis Report




27. OCTOBER 2019


20 MIN

1. Introduction: why we need a new economic approach

In the decade since the great financial crisis, it would be hard to claim that many OECD economies have been performing well. For most, the recovery after the recession was among the slowest on record; while economic growth has been restored in the last few years, it remains generally fragile. Productivity growth has stalled in some countries, and is historically low in many others. In most, unemployment remains high, particularly for young people. Many kinds of work have become more precarious. In many countries average earnings have stagnated, with living standards for many households barely above those of a decade ago. Inequalities have risen almost everywhere – particularly between the incomes and wealth of the top 1% of the population and those of the rest of society. In most countries the gap between richer regions and those on the periphery has widened.

These problems have had unsurprising and now familiar political consequences. Popular discontent with politicians and the political system has risen. Trust in established institutions and ‘elites’ has declined. Societies which once experienced high levels of social cohesion are now widely felt to be more fragmented, prone to cultural as well as economic divisions. In many countries large numbers of people report feelings of economic and political disempowerment – a sense that they are unable to determine their own fortunes, and that in a more globalised world national societies have somehow ‘lost control’ of their own destinies. Perhaps as a consequence, political parties which once dominated government have seen their vote shares fall, in some cases dramatically, with ‘populist’ parties of various kinds gaining ground, and some entering government. In many countries (though not all) there is a widespread sense of social and economic conflict and crisis.

At the same time, we have begun to understand the magnitude of the environmental challenge the world now faces. The 2018 report of the Intergovernmental Panel on Climate Change has made clear that, to achieve the international goal of holding the average surface temperature rise to 1.5 degrees Celsius, global emissions of greenhouse gases must be halved by 2030, and reach net zero by around the middle of the century. That is a transformative task of unprecedented proportions. It is made greater by the need to tackle simultaneously the wider problems of biodiversity loss, soil depletion and air and marine pollution, many of which were documented in the 2019 report of the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services.

Environmental breakdown is only one of many rising challenges our societies and economies face. Rapid technological change is transforming many aspects of our economies. It has led to the growth of major digital platform companies whose market dominance in key sectors is unrivalled in modern times. At the same time the development of automation technologies, including artificial intelligence, is changing both the ways jobs are organised and the form they take, leading to widespread concern about the ‘future of work’. New patterns of global investment and trade are emerging, as economic activity shifts to the south and east of the world, and transnational corporations – many now based outside the old industrialised countries – form new global production networks and supply chains. The ‘financialisation’ of most advanced economies continues, with higher levels of private debt than in the past, higher returns to holders of share capital, and in some cases larger financial sectors relative to the rest of the economy. All these trends are underpinned by demographic change, with many developed countries significantly ageing, and all experiencing the pressures of increased migration.

It is not surprising that in this context many politicians and commentators – not to mention many voters – are questioning whether current economic policies are sufficient to address the problems and challenges their countries face. Many of the policies which have been used across the OECD, not just over the last decade but over the last forty years or so, seem no longer able to improve economic and social outcomes in the ways they once promised. Ten years after the crisis, most OECD economies remain on the emergency life support system of ultra-low interest rates and hugely expanded central bank balance sheets. Systemic risk has not been eliminated from the financial system. Labour market and regional policies have not reduced overall inequality; environmental policy has been insufficient to prevent catastrophic risk; competition policy has not kept pace with the growth of near-monopoly companies.

Above all, economic growth as conventionally defined and measured no longer seems able to achieve countries’ principal economic goals. There used to be a strong correlation between aggregate GDP growth and improvements in living standards, higher wellbeing, reduced inequality, and even (in some cases) environmental improvement. But this seems no longer to be true. Many countries are experiencing growth, but these critical dimensions of social and economic progress have not been improving.

One consequence of this has been a renewed interest in how progress is measured – if GDP growth doesn’t capture all the elements of a well-functioning economy, what indicators would do so better? But underlying this debate is actually a more profound one. Many people, including many economists, have begun to ask whether the entire model of economic progress which has dominated policymaking for the last forty or so years need rethinking. 

Of course, OECD countries have not all followed exactly the same path in this period. Economic policies have differed, not least under different kinds of governments. But it remains true that there has been a widespread consensus on the broad contours of what makes for a successful economy. It has been widely accepted, for example, that increasing global trade is a good thing, with countries doing better the more integrated they are into international trade and capital flows. Most countries have sought to make their financial and labour markets more ‘efficient’, deregulating and liberalising them where possible to widen the opportunities for financial activity and reduce restrictions on employers. Central bank independence to conduct monetary policy has been accompanied by constraints on public borrowing. Corporation taxes have been reduced almost everywhere, and in many cases marginal income tax rates too.

The economic problems and challenges countries are experiencing today have perhaps made it inevitable that this broad model of how economies work best should find itself under question – and from right across the political spectrum. But the questioning in fact goes deeper than this. For the model has been based on frameworks of economic understanding and analysis which are themselves now under challenge. Many of the economic theories which have underpinned the dominant economic policies of the last forty years have been subjected to serious critique – both from within the economics discipline and from outside it. New economic theories, evidence and techniques have emerged which offer richer ways of understanding how economies work, why they often now don’t, and how they can be made to work better. Analytical methods based on the new powers of data collection and computing, for example, have opened up insights not available to previous generations. Taken together, a 21st century economics has begun to come into view which looks more able to help policymakers find solutions to the 21st century economic problems they now confront.

Over the last seven years the OECD’s New Approaches to Economic Challenges initiative has attempted to bring together much of this new thinking, and many parts of the OECD and member states have engaged with it.  The debates have been deep and much has been learned. It is now possible to see how many of the critiques and explorations can be brought together to create a ‘new economic narrative’. Broadly speaking, this consists of three elements:

  • A new conception of economic progress – a deeper understanding of the relationship between growth, human wellbeing, a reduction in inequalities and environmental sustainability, which can inform economic policymaking and communication
  • New frameworks of economic theory and analysis – a richer basis of understanding and evidence on how developed economies work, and new tools and techniques to help policymakers devise policy
  • New approaches to economic policy – a wider set of policy and institutional reforms, based on the new frameworks and analysis, to achieve the new social and economic goals

This report aims to explain these elements and how they fit together. In doing so we hope to help economic decision makers and policymakers make better sense of the economies we live in today, and provide them with stronger tools to achieve their goals.



After decades of overly naive market belief, we urgently need new answers to the great challenges of our time. More so, we need a whole new paradigm to guide us. We collect everything about the people and the community who are dealing with the question of a new paradigm and who analyze the historical and present impact of paradigms and narratives – whether in new contributions, performances, books and events.