This post was edited by UYA at 2017-10-25 18:05|
Lord Adair Turner, who is also a former City regulator, made the comments ahead of the release of third quarter growth figures for the UK on Wednesday.
He said the basic idea that "a rising tide raises all boats" had gone wrong.
Economic growth was not feeding through into people's incomes and living standards, he said in a BBC interview.
"Everybody knows that capitalism is not egalitarian, but the broad promise has been that, over a ten year period, you can be pretty confident that a rising tide raises all boats and everybody feels somewhat better off, and that's gone wrong," he told BBC Radio 5 Live's Wake Up To Money programme.Productivity puzzle
Lord Turner is a cross-bench peer, but has also headed the Low Pay Commission after a career in business and academia.
He pointed to a toxic mix of stagnant productivity, falling real wages and rising inequality.
"The combination of that is a lot of people do not feel the system is delivering for them. This is a big challenge for economists.
"Why, in a world of apparently extraordinary capabilities of technology, do we have these very low productivity growth rates?"
On Wednesday morning the Office for National Statistics will release the first estimate of UK GDP growth for July to September, a key indicator of the health of the eLord Turner said sluggish economic growth is only in part a hangover from the financial crisis and high levels of consumer and corporate debt.
"The more fundamental thing is, where we are getting growth?
"The UK economy has grown a bit in the last five years and we have created lots of jobs, but they have been low productivity jobs," he said.Rise of the robots
Lord Turner noted certain sectors such as manufacturing, retail and logistics have managed to improve productivity through automation, replacing human workers with robots. But those workers displaced by technological change have ended up in low paid jobs - Deliveroo cyclists working in the gig economy, for example.
"I think paradoxically that we should expect to see in a world of huge automation the continued proliferation of low paid, low tech jobs," Lord Turner said.
"We are going to have to face as a society the question of how do we make sure that people have a good enough standard of living to be equal citizens of society even if the wages they get will be relatively lower?"