3 - Efficiency, Poverty and Inequalities

Summary

The crises and stagnation have had multiple effects on efficiency and equity. With reference to dynamic efficiency, the effects of the crisis seem not to be negative, as the R&D/GDP ratio has not fallen. But this largely depends on the fact that the drop in the GDP makes the ratio to rise and the absolute amount of R&D expenses does not fall, as they are rather inflexible. Most indicators of poverty and inequality clearly show the negative effects of the crisis, even if the true effects are partially absorbed by the impact of the rise in welfare state expenditures.

The first instrument in favour of dynamic efficiency in general is offered by competition-oriented market policies. In order to foster innovation, proper fiscal or financial incentives can be implemented. As to environmental problems, public policy can focus on regulation, financial incentives, environmental taxes, voluntary agreements to achieve environmental objectives.

Some of the policies for inequalities act on primary distribution, such as the minimum wage, promotion of collective bargaining, guarantee of rights of workers to organize. Policies acting on secondary distribution are unemployment benefits, progressive taxation of income, differential taxation of labour and capital income.

This low growth can be interpreted as the - temporary - product of the financial cycle, reflecting the effects of the banking crises occurring during the crisis, or as the manifestation of a deeper trend, arising from multiple factors and accentuated by the Great Recession and the Covid-19 crisis, by growing inequalities and globalisation. Such a situation requires numerous policies, e.g., strengthening of the public budget, adoption of stimulative monetary policies