Nino Galloni isn’t a household name in Anglo Saxon quarters, yet this distinguished academic and leading economist enjoys an international reputation. He isn’t a radical either, coming as he does from a Christian Democrat background (his father was a minister several times over), so what he revealed in a recent interview on Italian TV is astonishing – but perfectly sensible.
The original interview topic was the betrayal of the European manufacturing sector, but inevitably this had to be placed into a global economic context and it is precisely at this level that his revelations are so interesting. Many other economists have expressed similar views, of course, but he is uniquely terse in his denunciation of the neo-Keynesian monetarist policies of the early ‘80s (those embraced by Thatcher). These policies have radically shifted the economic compass from medium/long term strategies to short and, as a consequence, to a pan-European approach that has since favoured the withdrawal of the state from its role as growth generator to a mere regulator of privatised services.
Vested interests and a banking elite
Obfuscation is also evident in discussion of the role of a country’s debt. Powerful vested interests have become inextricably linked to politicians, influencing public opinion to the extent that even trade unions were led to believe the axiom that inflation is caused by the amount of money in circulation at any one time in a specific market economy. In fact, as recent events have shown, there is no direct correlation between the two. If there were, in countries with an established policy of so called ‘quantitative easing’ (effectively printing money, liberally), inflation would now be sky high. So, other factors must fuel inflation instead.
Such strict application of monetarist policies has led to a vicious cycle of short term investment. Banks have engaged in quick speculative ventures to make money merely from one quarter to the next, underselling underperforming assets and creating a chain reaction that led to the events of 2007. Regrettably, however, there are no signs of this trend declining, in part because top bankers aren’t being rewarded for the wisdom of their investments, but for the quantity of transactions controlled by complex algorithms. This approach continues to reward short termism and risk-taking – ensuring even greater financial benefits to this ruling banking elite.
An almost unfathomable abyss
The enforcement of economic ignorance can be attributed either to laissez faire politics or, in a more sinister way, to the desire to create a subservient low and middle class system. The truth is that we would never be able to repay the total amount of toxic debt in circulation globally. Even the annual servicing of its losses (approximately 10% of the total) is three times greater than the entire global production! Tackling such a debt mountain can’t be done on the back of the kind of housekeeping that many current governments are advocating (more sacrifices for the low and middle classes = higher unemployment and the offensive rhetoric that we are somehow all ‘suffering together’). We must, freeze and transform this colossal debt mountain into something else, linking it to brave long term investments on a scale that will effectively redefine the entire economy of industrialised nations. Eventually, the natural process of inflation will also see to the reduction of the debt mountain.
In essence, this process would kick-start the entire global economy under some quite different rules, based on sustainable growth and renewable resources. But the very last thing we want to do now is stop everything and repay the debt – it can stay where it is, and as long as interest rates are lower than growth rates, there is no crisis. Otherwise we will run the risk of turning entire regions into copies of today’s Greece, where for the sake of a paltry 300 billion euros of national debt over 3000 billion euros were burnt in the restructuring process in the EU stock exchange. This is the economy of the mad house, but in tune with dogmatic monetarism.
The madness of privatisation
The worst thing we could do would be to embark on a programme of privatisation of public assets, at least on two counts. The first is that these assets are inevitably always undersold (see the sell off of Royal Mail, for example), thus realising little for the public purse. If these assets were priced correctly, they would not be acquired by private interests. The second is because if we divested the state of its role as investor, we would fundamentally weaken it, transforming the state into a regulator at best – and we know how toothless these entities are (look at all the Ofwats and Ofgens in the UK). When it comes to kick starting an entire economy, only a state can intervene – no private enterprise would ever embark on the kind of long term infrastructural projects that are so critical to economic revival. So, privatisation equates to depredation of existing assets and a worsening of the current situation – except, of course, for those vested interests involved in the process itself.
The prevailing European approach, with its strict adherence to budgetary balance, is also economic madness. Its only obvious results are even greater poverty, and economic stagnation. The correlation between quantity of money and inflation is spurious; the current crisis was created by bad debt (speculations) and certainly not by debt accrued by governments to undertake infrastructural developments. Right now, the current imbalance between the economy of Germany and those of the other Eurozone countries requires a more sensible monetary approach, one that may well result in concurrent dual currencies, a national and a European one.
A fairer deal
In conclusion, a blind adherence to a dogmatic monetarist system will result in depredation of resources and global ruin for many, but even greater wealth for the few – a state of global inequality that will engender global instability. It’s time to consider money for what it is, a tool to achieve such ends as equitable distribution and economic regeneration that pivots on renewable resources and sustainability. Money is not an end in itself.
The Green Party wants a more equitable society, one based on long term sustainable investments. We have had enough of the casino economy. We have had enough crude political propaganda. If voters are ever to take intelligent decisions, they must be informed decisions. We believe that voters vote Green because they are informed.
Stuartmacdonald 