The world must ditch austerity and economic neo-liberalism and undertake a global New Deal to rebalance the global economy and achieve prosperity for all, the United Nations trade and development agency UNCTAD said in a report yesterday.

UNCTAD chief Mukhisa Kituyi said the global economy was picking up but still not lifting off.

“A combination of too much debt and too little demand at the global level has hampered sustained expansion of the world economy,” he said in a statement.

Much of the blame was aimed at “neo-liberalism”, a term used to refer to governments cutting back on their own role and leaving the private sector to lead economic and social development within a free-market capitalist system.

After decades of such policies, the system was perceived to be unduly biased in favour of a handful of large corporations, financial institutions and wealthy individuals, the report said.

There are plenty of alternatives out there and they are urgently needed given the kind of imbalances we are facing

The world now needed a “21st-century makeover”, it said. “The whole neo-liberal mantra that ‘there is no alternative’ has begun to fall apart,” Richard Kozul-Wright, UNCTAD's globalisation director, told a news conference.“There are plenty of alternatives out there and they are urgently needed given the kind of economic and social imbalances that we are currently facing.”

He said central bank chiefs such as Mark Carney in Britain and Janet Yelland in the United States seemed to think they had solved the crisis and blamed any continuing risks on China.

But the global system was still serving narrow interests, and the needed change went beyond simply “tinkering with education or credit for poor people or... putting the word ‘inclusive’ in front of every possible economic process you can imagine and believing you’ve solved the problem”.

“We need a global New Deal,” he said, referring to the policies that revived the depressed US economy in the 1930s.

The aim should be to end fiscal austerity, imposed in 13 out of 14 leading advanced economies between 2011 and 2015, and prioritise reflation, full employment and decent jobs, rather than tackling inflation and cutting government debt.

“It needs a serious regulation of corporate abuse in both the financial and the corporate sector and requires serious redistributionary measures – both fiscal and more innovative measures,” Mr Kozul-Wright said, adding there were signs of a backlash against austerity in the Anglo-Saxon world in countries such as New Zealand and Britain, and the United States could also follow suit. Mainland Europe seemed to be extremely resistant to such a change of direction.