Policy Briefs

C. Bastasin – Recovery Instrument: An epochal change in political economy

The Recovery Instrument (RI) represents a change in the philosophy of political economy because it breaks the link between liability and responsibility which is the conventional basis of the market economy. This change in the economic rationale is justified by the fact that the current crisis did not have an economic origin. The use of this new Instrument should be inscribed in the lively ongoing debate on the reform of capitalism.

The global economy incurs frequent, unpredictable shocks and with great effects of externalities. For this reason, economic policy needs to strengthen exceptional safeguards with funds from "outside" the current state budgets, such as the RI.

The RI, by its nature, is also based on the ability to repay or remunerate the funds used. It is therefore based on the economy’s growth capacity. Capitalism is showing that it has dynamic forces within itself to restart, but only in divergent measures between countries and sectors. Consequently, the use of the RI must be not only exceptional, but also aimed at raising the potential growth of the beneficiary country.

The change in philosophy extends to relations between states. The breakdown of the relationship between liability and responsibility and the finalization of the funds towards the recovery of growth capacity of the weakest countries shows that from a relationship of "competition between States" we have moved to one of "sharing and co-participation among States".

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