As the IMF and World Bank meet in Bangkok, academics from the Global Council on New Economics for the 21st Century publish their first report, making the case that the assumptions behind four decades of economic policy cannot meet today’s shocks, starting with how governments define fiscal responsibility
BANGKOK / LONDON, Wednesday 14 October 2026: Academics behind the Global Council on New Economics for the 21st Century, today present their first policy brief. They argue that the assumptions that have shaped policy for forty years (that markets self-correct, that governments should stand back and that growth will trickle down) are failing governments facing energy shocks, climate breakdown, debt distress and the rise of AI.
Fiscal Rules and Long-Term Inclusive Growth is published today, as finance ministers and central bank governors gather in Bangkok for the IMF and World Bank Group Annual Meetings (12 to 18 October). It is the first research written by renowned international academics from the Global Council on New Economics for the 21st Century and aims to serve as a guide to policymakers.
The Council, chaired by Spain’s First Vice-President Carlos Cuerpo and UCL Professor Mariana Mazzucato, is a forum of world-leading economists to promote debate and policies that respond to the rapidly-changing global economy. The council members include (in alphabetical order): Laura Carvalho, Ha-Joon Chang, Jayati Ghosh, Martín Guzmán, Darrick Hamilton, Erika Kraemer-Mbula, Mariana Mazzucato, Ndongo Samba Sylla, Joseph Stiglitz and Isabella Weber.
The brief makes the case that fiscal responsibility matters but has been defined too narrowly. It argues that cutting spending in a weak economy can shrink growth faster than it shrinks borrowing, leaving the debt-to-GDP ratio higher, not lower. Greece is the starkest case. Between 2009 and 2014, real government spending fell by 28 per cent and the economy contracted by 23 per cent. The deficit narrowed from 15 to 4 per cent of GDP, but public debt rose from 128 to 183 per cent of GDP, while successive IMF forecasts projected a recovery that did not come.
A moment for the IMF to act on its own evidence
The brief lands as the IMF reviews how it designs its lending programmes and the conditions attached to them, through its 2026 Review of Program Design and Conditionality. Drawing in part on the Fund’s own research, the policy brief calls on the IMF to:
- Use realistic estimates of how cuts affect growth. The IMF’s own reassessment of the post-2010 European adjustment found that forecasters had assumed fiscal multipliers of about 0.5, substantially underestimating the damage done by consolidation.
- Protect productive investment in programmes, and align conditionality with countries’ own national investment strategies rather than making investment the first thing cut when targets are missed.
- Count what the state owns, not only what it owes. IMF analysis of 31 countries found public assets worth around twice GDP that conventional debt statistics do not capture, and IMF economists have themselves proposed net worth as a fiscal anchor “more conducive to public investment and economic growth”. The Council wants debt sustainability analysis and Article IV surveillance to use public balance sheets and the growth effects of investment.
- Recognise capital-account management as a legitimate policy tool for countries exposed to volatile global capital flows.
- Make liquidity available before shocks become crises, through more regular, needs-based allocations of Special Drawing Rights. The 2021 allocation of US$650 billion was distributed by IMF quota, so the countries with least need received most.
The brief also argues that the same rule hits countries very differently. Faced with the same pandemic shock, government spending rose by 7.6 percentage points of GDP in advanced economies, but by just 0.7 points in low-income developing countries. In 2023, developing countries paid a record US$921 billion net interest, and 3.4 billion people now live in countries that spend more on debt interest than on health or education. Between 2021 and 2023, African governments spent an average of US$70 per person a year on interest, against US$44 on public health.
Professor Mariana Mazzucato, Co-Chair of the Global Council on New Economics for the 21st Century and Founding Director of the UCL Institute for Innovation and Public Purpose, said:
“For forty years, fiscal responsibility has been defined as making a single number fall, and public investment has too often been the first thing cut. The evidence, including the IMF’s own, shows this can leave countries with weaker growth and higher debt. Fiscal responsibility should be judged by what public finances build: the capacity to grow, to withstand shocks and to deliver for people. As the IMF reviews how it designs its programmes, it has a real opportunity to put that evidence into practice.”
What governments can do now
To put that case into practice, the policy brief sets out five levers governments can use now:
- Stabilise what matters: protect essential and productive spending through the economic cycle, including health, education, care and skills alongside infrastructure and research.
- Measure what the state owns: publish full public sector balance sheets and assess investments over the period in which their returns arise.
- Invest with direction: use procurement, public development banks and conditions on public support to crowd in private investment towards clear goals.
- Align the fiscal framework with the growth strategy: raise revenue fairly, including from high incomes, wealth and economic rents.
- Manage the external constraint: lengthen debt maturities, build a domestic investor base and manage volatile capital flows.
The brief draws on recent country experience:
- Spain used its recovery plan to accelerate investment in renewables, grids and storage. Wind and solar rose from 26 per cent of electricity generation in 2019 to 42 per cent in 2025. In the first nine months of 2026, Spain’s average wholesale electricity price was €74 per MWh, against €108 across EU markets and €119 in the UK.
- The United Kingdom has invested less than its peers for a generation, with public investment averaging 2.6 per cent of GDP over 25 years against 3.5 per cent across the G7. The brief welcomes recent reforms to the fiscal framework, but notes that borrowing £1 billion to build a grid line still counts against the investment rule, even though the public now owns an asset worth about that much.
- Brazil’s 2023 fiscal framework introduced a floor for public investment for the first time, replacing a twenty-year freeze on real federal spending.
- Mexico’s 2027 budget partly reverses a sharp cut to public investment in 2025, with the Ministry of Finance itself recognising that overly rapid adjustment can weaken growth, revenues and debt dynamics.
Beyond national reform, the brief calls for fiscal rules that create space for productive investment, earlier and more comprehensive debt restructuring, long-term finance from multilateral development banks and stronger international tax cooperation.
A Global Council of economists
The Global Council on New Economics for the 21st Century was launched in April 2026 at the Global Progressive Mobilisation in Barcelona, with the Government of Spain as inaugural host and UCL IIPP as main academic partner. Rather than duplicating commissions on single issues such as tax, debt or climate, it targets the economic assumptions that cut across all of them. Fiscal responsibility is the first of eight areas of inquiry, with further briefs to follow on finance, state capabilities, inequality and technology and AI.
Council members include former policymakers and some of the most cited critics of economic orthodoxy:
- Laura Carvalho, Professor of Economics, University of São Paulo
- Ha-Joon Chang, Professor of Economics, SOAS University of London
- Jayati Ghosh, Professor of Economics, University of Massachusetts Amherst
- Martín Guzmán, former Minister of Economy of Argentina; Columbia University and Universidad Nacional de La Plata
- Darrick Hamilton, Henry Cohen Professor of Economics and Urban Policy, The New School, and Chief Economist, AFL-CIO
- Erika Kraemer-Mbula, Professor of Economics, University of Johannesburg
- Mariana Mazzucato, Professor in the Economics of Innovation and Public Value, University College London, and Founding Director, UCL Institute for Innovation and Public Purpose
- Ndongo Samba Sylla, Research and Policy Director (Africa), International Development Economics Associates (IDEAs)
- Joseph Stiglitz, Nobel laureate in Economics, University Professor at Columbia University and former Chief Economist of the World Bank
- Isabella Weber, Professor of Economics, University of Massachusetts Amherst
ENDS
Notes to Editors
About the policy brief
Fiscal Rules and Long-Term Inclusive Growth (Policy Brief 1/2026 GCNE) is the first publication in the Global Council on New Economics for the 21st Century’s Policy Report Series. It sets out five myths about fiscal policy, how they became embedded in fiscal rules, why fiscal constraints differ across countries, and the national and international reforms that would let fiscal frameworks support long-term inclusive growth. The members of the Council are grateful to Lara Merling (UCL IIPP) for substantial support in drafting the brief.
Read the brief online: https://www.neweconomicscouncil.org/publications/fiscal-rules-long-term-inclusive-growth [LIVE 14 October 2026]
Download the brief (PDF): The Global Council Policy Brief 1 [LIVE 13 October 2026]
About the Global Council on New Economics for the 21st Century
The Global Council on New Economics for the 21st Century: Towards a Common Good Economy is a new international council co-chaired by Professor Mariana Mazzucato and Carlos Cuerpo, First Vice-President of the Government of Spain and Minister for Economy, Trade and Business, with the Government of Spain as the inaugural host and the UCL Institute for Innovation and Public Purpose (IIPP) as the main academic partner.
The Council proposes an intervention at the level of economic thinking itself. Important work has been done by vertical commissions and high-level panels on specific issues: tax, inequality, debt, climate, water. The Council complements rather than duplicates that work, addressing the cross-cutting assumptions in economic theory and modelling that constrain progress on all of them: housing, public services, the climate transition, inequality, and multilateral governance.
Its framework is centred around four interdependent principles (justice, equality, sustainability, and global solidarity) and translates these into implementable principles and reforms, grounded in lived experience and focused on building fairer, more resilient, and cooperative economies.
The Council was announced on 18 April 2026 at the Global Progressive Mobilisation in Barcelona.
More information: neweconomicscouncil.org. For historic information on the Council, see the UCL page about the Council.
Council members: Laura Carvalho (University of São Paulo); Ha-Joon Chang (SOAS University of London); Jayati Ghosh (University of Massachusetts Amherst); Martín Guzmán (Columbia University / Universidad Nacional de La Plata); Darrick Hamilton (The New School / AFL-CIO); Erika Kraemer-Mbula (University of Johannesburg); Mariana Mazzucato (UCL Institute for Innovation and Public Purpose); Ndongo Samba Sylla (International Development Economics Associates, IDEAs); Joseph Stiglitz (Columbia University); Isabella Weber (University of Massachusetts Amherst).
About Mariana Mazzucato
Mariana Mazzucato (PhD, CBE, FREcon) is Professor in the Economics of Innovation and Public Value at University College London (UCL), where she is Founding Director of the UCL Institute for Innovation & Public Purpose. She is winner of international prizes including the Grande Ufficiale Ordine al Merito della Repubblica Italiana in 2021, Italy’s highest civilian honour, the 2020 John von Neumann Award, the 2019 All European Academies Madame de Staël Prize for Cultural Values, and 2018 Leontief Prize for Advancing the Frontiers of Economic Thought. She is a member of the UK Academy of Social Sciences (FAcSS) and the Italian Academy of Sciences Lincei. In 2025, she was appointed Commander of the British Empire (CBE) for services to economics in the King’s Birthday Honours List. In April 2026, she was appointed as the first Economist-in-Residence at Whitechapel Gallery. Pope Francis appointed her to the Pontifical Academy for Life for bringing ‘more humanity’ to the world.
Her award-winning books include: The Entrepreneurial State: debunking public vs. private sector myths (2013), The Value of Everything: Making and Taking in the Global Economy (2018), Mission Economy: A Moonshot Guide to Changing Capitalism (2021), The Big Con: How the Consulting Industry Weakens our Businesses, Infantilizes our Governments and Warps our Economies (2023) and The Common Good Economy: a new compass (2026).
She advises policymakers around the world on innovation-led inclusive and sustainable growth. Her policy roles include: Co-Chair of the Global Council on New Economics for the 21st Century, Chair of the World Health Organization’s Council on the Economics of Health for All, Co-Chair of the Global Commission on the Economics of Water, member of the South African President’s Economic Advisory Council, Co-Chair of the Group of Experts to the Brazilian 2024 G20 Task Force for the Global Mobilization against Climate Change, and Special Representative of President Ramaphosa to the 2025 G20 Taskforce 1 on Inclusive Economic Growth, Industrialization, Employment, and Reduced Inequality.
About UCL IIPP
The Institute for Innovation and Public Purpose (IIPP) at University College London (UCL) brings together cutting-edge academic theory with teaching and policy practice, to rethink the role of the state in tackling some of the biggest challenges facing society.
IIPP works with partners to develop a framework which challenges traditional economic thinking, with the goal of creating, nurturing and evaluating public value in order to achieve growth that is more innovation-led, inclusive and sustainable. This requires rethinking the underlying economics that have informed the education of global public servants and the design of government policies.
IIPP’s work feeds into innovation and industrial policy, financial reform, institutional change and sustainable development. A key pillar of IIPP’s research is its understanding of markets as outcomes of the interactions between different actors. In this context, public policy should not be seen as simply fixing market failures, but also as actively shaping and co-creating markets. Re-focusing and designing public organisations around mission-led, public purpose aims will help tackle the grand challenges facing the 21st century.
IIPP is uniquely structured to ensure that this groundbreaking academic research is harnessed to tackle real world policy challenges. IIPP does this through its high-quality teaching programme, along with its growing global network of partners, and the ambitious policy practice programme.