Opinion | Capitalism rethink: innovation needn’t come at the expense of worker protection
- It is possible to encourage innovation and still protect workers from creative destruction. The answer lies in beefed-up competition policy and a Danish-style ‘flexicurity’ system
The Covid-19 pandemic has highlighted major weaknesses in both the US and European capitalism models. In the United States, the crisis has shown the limits of an economic system that fails to protect individuals from the effects of creative destruction and the social consequences of macroeconomic shock.
We do not regard the US model’s lack of protection and inclusiveness as the price of greater innovation. Nor do we think Europe’s lack of innovation a natural consequence of greater inclusion and social protection.
So, besides calling for greater education, we advocate two policies that should stimulate innovation-based growth and make it more inclusive and/or protective: beefed-up competition policy, and a Danish-style “flexicurity” system.
So why has the innovative US economy, which spearheaded the information technology revolution, seen declining productivity growth over the past two decades? Two possible explanations emphasise a competition problem.
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Is the US economy an oligarchy?
Thomas Philippon argued in The Great Reversal that the main reason was the weakening of antitrust policies, which led to greater concentration in many sectors and eroded dynamism, especially company creation.