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‘Preparing for Economic Recovery: More Market, Better Government’

  • Call to reject even higher spending and more government intervention comes from former OECD Deputy Secretary-General Ludger Schuknecht
  • Market-friendly domestic economies, open borders for trade and sustainable, high-quality finances represent ‘the triangle of stability’
  • The challenges of our times require well-performing and solvent governments

Following the Chancellor’s declaration in November’s Spending Review that ‘our economic emergency has only just begun’, Politeia today publishes a three-pronged strategy for economic recovery produced by one of the most eminent international economists.

Preparing for Economic Recovery: More Market, Better Government has been written by Dr Ludger Schuknecht, who was until recently Deputy Secretary-General at the OECD and is a former Chief Economist at the German Federal Ministry of Finance.

Schuknecht rejects the interventionist prescription, whether on industrial strategies, big infrastructure projects or other forms of protectionism. Instead he calls for the Government to pursue ‘a market-friendly reform agenda to allow markets to do their job and governments to become better at their own core tasks’.

Dr Ludger Schuknecht observes:

‘It is asking too much of governments to insure us against all contingencies and fix all our problems via more regulation and more spending. If there is anything that our chequered history of crisis and poor growth has shown, it is the need for returning to rules-based economic policy making. The recovery will best be built on well-functioning markets, open economies, and high-quality public services and sound public finances.’

His proposals cover three broad areas which, taken together, he labels ‘the triangle of stability’:

Market-Friendly Policies

  • Strengthen the environment in which people invest through unfussy procedures and market-friendly regulations
  • Avoid interventions which distort the market
  • Improve education and training
  • After the crisis is over, let firms prosper or perish according to the market

Trade-Friendly Policies

  • Keep markets open
  • Avoid the disruption to supply chains caused by protectionist measures
  • Avoid nationalisation of production except for very special cases
  • Seek further international agreements on liberalisation

Sustainable, High-Quality Public Finances

  • Bring down expenditure, deficit and debt ratios via rules-based policies after the crisis
  • Reform public expenditure to focus on the provision of key public services and strengthening their quality

Schuknecht concludes:

‘Market-friendly domestic economies, open borders for trade, and healthy and sustainable finances are the triangle of stability that we need to secure for the future. This is all the more important given all the challenges, from population ageing to financial uncertainty, social stability and climate change, for which we need well-performing and solvent governments.’



Notes to Editors

1. Established in 1995, Politeia is an independent, non-partisan think-tank providing a forum to discuss economic, constitutional and social policy with a particular focus on the role of the state in people’s lives.

2. Preparing for Economic Recovery: More Market, Better Government by Ludger Schuknecht will be published by Politeia on Monday 23rd November. A pdf of the publication is available here. An online launch event will be held on Monday 7th December at 1pm for which you can register here.

3. Ludger Schuknecht is a German economist who was Deputy Secretary-General at the OECD (2018-20) and Chief Economist of the German Federal Ministry of Finance (2011-18) advising on matters of fiscal and economic policy, the international economy and with responsibility for the finance track of the G20 process. He has held posts at the European Central Bank, the World Trade Organization and the International Monetary Fund. His books include Public Spending and the Role of the State: History, Performance, Risk and Remedies (November 2020) and Public Spending in the 20th Century: A Global Perspective, co-authored with Vito Tanzi (2000), both published by Cambridge University Press, and Trade Protection in the European Union, (Harwood Academic Publishers, 1992). His Politeia publications include Paying for the Future: Working Systems for Pensions and Healthcare, with Matthias Dauns and Werner Ebert (2015); More Gain Than Pain: Consolidating the Public Finances, with Philipp Rother and Jürgen Stark (2011); and Going for Growth and Boom, Busts and Fiscal Policy: Public Finances in the Future (2009). 

Dr Ludger Schuknecht

Dr Ludger Schuknecht was Deputy Secretary-General at the OECD (2018-2020). Formerly he was Chief Economist at the German Federal Ministry of Finance (2011-2018) advising on fiscal and economic policy issues, the international economy and responsible for the finance track of the G20 process. His Politeia publications include The Economy, The Public Finances and the Challenges Post Covid (2020) and Paying for the Future: Working Systems for Pensions and Healthcare (2015).

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