Yet another guardian of market orthodoxy has uttered what was once an unspeakable heresy.
This week, the European Bank for Reconstruction and Development‘s (EBRD) acknowledged that its old approach of encouraging growth in client economies by reducing the role of the state and fostering private ownership was “simplistic”.
“The problem with this view is that markets cannot function properly unless there are well-run, effective public institutions in place,” the London-based development bank said in its annual transition report.
The EBRD was set up at the end of the Cold War to help former Soviet bloc economies make the transition to free markets so this admission is startling to say the least.
Barely three years ago, the belief that untrammelled free markets were anything but a force of good was unassailable. Other tenets of this creed were that market forces could best allocate resources and that ‘light-touch’ regulation of the financial industry ensured growing prosperity for all.