What is it about?
A major problem exposed by the COVID-19 crisis is that public deficits seem to be the normal state in the business cycle’s booms and downturns, limiting capacity for emergencies. Capitalism has an incentive to perpetuate deficits to increase growth, provide risk-free interest income to financial institutions, and to increase inequalities and economic injustice. To counter this problem, the purpose of this communication is to suggest that countries need to issue equity capital, which we term macro-equity. This macro-equity will give dividends to its shareholders in times of public surplus and issue new shares in times of public deficits.
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Why is it important?
It is contended that the use of macro-equity will reduce countries’ stress, created by high public debt. With appropriate incentives, it may create an entrepreneurial mindset in political leaders that may even reduce corruption and promote redistribution.
Perspectives
The moral and ethical issues need to be weighed against street violence in the absence of any change.
Professor Arvind Ashta
Burgundy School of Business
Read the Original
This page is a summary of: Towards a New Form of Undemocratic Capitalism: Introducing Macro-Equity to Finance Development Post COVID-19 Crisis, Journal of Risk and Financial Management, March 2021, MDPI AG,
DOI: 10.3390/jrfm14030116.
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