A human paradigm for economic growth

The global economy has been shaken by the breakdown of global governance.

- ARUN MAIRA

The UN is unable to prevent the ongoing genocide in Palestine and stop wars that have broken out in Europe, West Asia, and Africa. Global coordination of finance and trade has ended: Control of the dollar has given the US control of the global financial system. Climate change, a global problem, has become ungovernable. Demographic changes are another global problem requiring new solutions, as I will explain later. All these systemic problems must be solved simultaneously.

Daron Acemoglu, Simon Johnson, and James Robinson (AJR) have won the 2024 Nobel Prize in economics for their research on how institutions shape economic prosperity. Others have criticised AJR in Business Standard and other journals for their Western colonial bias. Less than 10 per cent of the global population lives in the G7, the former colonial powers. Voices of the rest—in G20+ and BRICS+—demand to be heard. Other fundamental problems with AJR are, firstly, that ideas and institutions that guided progress in the past, in a different context, are not likely to work now. Secondly, their overall measure of progress is economic growth, which is an incomplete measure of the health of a society and its natural environment. In an economist's calculus, institutional arrangements, such as the concentration of property rights to increase economic growth, are better than other institutions that enable equitable and sustainable use of resources but may dampen gross domestic product (GDP) growth.