Investment-led growth: a solution to the European crisis

Policy Study

09/10/2014

By: Griffith-Jones, S. and Cozzi, G. Chapter in “Rethinking Capitalism” book by Mazzucato, M. and Jacobs, M., forthcoming.

A well-functioning financial sector, both national and international, needs to play important roles to achieve the aims of sustained and inclusive growth.
To achieve this key positive role, the financial sector needs to encourage and mobilise savings, intermediate these savings at low cost, ensure savings are channelled into efficient investment, including in innovation and structural change, as well as helping manage the risks for individuals and enterprises. Because the financial sector has such important effects throughout the economy it also needs to adhere to a key principle of the Hippocratic oath that medical doctors swear to, which is to do no harm to the rest of the economy. Therefore there should be as few and as small crises that stem from the financial sector, as these have huge costs, both fiscal and on growth, employment and investment.

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