Governance Institutions and Outcomes
New Directions in Modern Economics series
Edited by Mehmet Ugur and David Sunderland
Chapter 8: Economic Governance and Full Employment
Constantine E. Passaris INTRODUCTION The mission and mandate of public policy and its accompanying institutional architecture requires realignment so that governments can respond to challenges posed by two recent economic events: the emergence of the new global economy and the financial crisis of 2008. Whilst the emergence of the new global economy has eroded national borders and increased the degree of policy arbitrage, the financial crisis of 2008 had a devastating effect on growth and employment, challenged the belief in market efficiency and revealed the structural fault lines within contemporary economic governance institutions. Therefore, we argue in this chapter that the institutional architecture of economic governance requires change with a view to provide an anchor for economic policy options concerning full employment. We propose a new set of guiding principles for economic governance and articulate a road map for achieving full employment which is congruent with the structural parameters of the new global economy. ECONOMIC GLOBALIZATION AND THE FINANCIAL CRISIS: THE CHALLENGE FOR ECONOMIC GOVERNANCE INSTITUTIONS The new economy is shaped by three interactive forces, which include financial integration, trade liberalization and the diffusion of the Information and Communications Technology (ICT) revolution. The role of innovation as a catalyst that drives the engine of economic growth has become a fundamental postulate of the new global economy (Passaris, 2006). Furthermore, the pivotal role of a country’s human resources and the unique economic value of its human capital endowment (which is reflected in educational attainment, technical competencies and special skills of the...
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