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George Magnus, a senior economic adviser at UBS Investment Bank, says we’re facing a crisis in capitalism and policymakers should read up on Karl Marx for dealing with it, he wrote in an Op-Ed for Bloomberg.Magnus writes that as companies pursue greater profits and productivity, they are trimming their workforces. (Notice how his own firm, UBS, announced last week it was cutting 3,500 jobs as part of cost-cutting efforts.)
This has created a crisis — U.S. income inequality is now close to its highest level since the 1920s.
To address the crisis, “policy makers have to place jobs at the top of the economic agenda, and consider other unorthodox measures.”
Here’s five things he says policymakers should do:
1. Cut employer payroll taxes and create fiscal incentives to encourage companies to hire people.
2. Allow for eligible households to restructure mortgage debt, or swap some debt forgiveness with future payments to lenders.
3. Well-capitalised and well-structured banks should be allowed some temporary capital adequacy relief to try to get new credit flowing, especially to smaller companies.
4. In dealing with the euro zone debt crisis, European creditors should extend the lower interest rates and longer payment terms recently proposed for Greece.
5. Instead of using just bond-buying programs to defend against deflation and stagnation, central banks should target a growth rate of nominal economic output.