Is the old economy collapsing like a house of cards?

Sky-high inflation, exploding housing and stock markets, and international trade grinding to a halt due to geopolitical tensions. Is this an economy heading for crisis or a world in transition? Professor of Transition Studies Derk Loorbach and chief economist of ABN-AMRO Sandra Phlippen discuss this during Studio Erasmus.

Sandra Phlippen, chief economist ABN-AMRO and affiliated with Erasmus School of Economics, about the economy during and after the corona pandemic: "Normally, when you have such a big shock, there is also a bankruptcy wave. As a result, the housing market collapses, because people can no longer afford it. But what happened was that almost nobody got unemployed. That was because the government pumped about 40 times more money into business than it had done during the whole financial crisis of 2008. With this money, the balance sheets of companies were propped up." 

The government continually takes on all the risk, so there is no longer any business risk

According to Loorbach, we do not have a serious transition plan: "The Netherlands is a fossil, linear BV. The earnings model of the national government is our consumption. Suppose you say: this is just the end, we are going to get rid of Russian gas, for example. Then you force households and businesses to be creative and entrepreneurial. Now the government continually takes on all the risk. So there is no entrepreneurial risk any more. That is supported by our tax money. And we remain trapped in that," says Loorbach. He also explains that because of this, the goals for circularity and the energy transition are not actually taken seriously.

Reasoning back from a point in the future

According to Phlippen, the government shapes policy for the future based on of a path from the past: "You want to take into account that everyone can join in, so everything must be feasible and affordable. The fallacy here is that you don't always have to reason from the past in all circumstances. Sometimes you have to reason back from a point in the future."

"We have all the ingredients together for a radical transition"

According to Philippen, we have the ingredients together for a radical transition: "On the one hand, the old system must be actively phased out. Secondly, there must be new technology alternatives. Thirdly, you have to have the social push that triggers change."

Watch the entire conversation between Derk Loorbach and Sandra Phlippen

Derk Loorbach en Sandra Phlippen praten in Studio Erasmus over inflatie, grondstoffentekort en de houdbaarheid van het huidig economisch systeem

Stort de oude economie als een kaartenhuis in elkaar?

Assistant professor
Sandra Phlippen
More information

All about the 'Zomergasten' episode with Sandra Phlippen on the VPRO website.

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