Sottotitolo:
The difficulties in regulating the big banks and the mistaken European budgetary policy.
With the general freedom of movement of capital the great banks have become the arbiters of the world economy. They have used such freedom to move capital towards low income countries rich of cheap labour and/or of raw materials , creating in this way the present phase of globalisation . The main job of these big financial institutions is no more the relatively simple one of financing investment and production through the Shumpeterian entrepreneurs. To day, the main jobs are to move capital towards high profit area, and to create new instruments –the derivatives- without concern for their effects on the economy of the countries involved.
This last job, the rich one, is for them by far the most interesting, and the one which created the present crisis. After a short pause due to the peak of the crisis, they have come back to the same game, which is the provider of their high profits and increasing bonuses. The traditional function of the big banks, to lend money to he States, is no novelty, but it is now becoming politically more important. The Banks are the controllers of the economic policy of countries , who are no more free of using the State expenditure to reduce the economic dis-equality among their citizens, or simply to sustain the economy , and to try to avoid a deflation which would hit the poorest strata of the population.
This last job, the rich one, is for them by far the most interesting, and the one which created the present crisis. After a short pause due to the peak of the crisis, they have come back to the same game, which is the provider of their high profits and increasing bonuses. The traditional function of the big banks, to lend money to he States, is no novelty, but it is now becoming politically more important. The Banks are the controllers of the economic policy of countries , who are no more free of using the State expenditure to reduce the economic dis-equality among their citizens, or simply to sustain the economy , and to try to avoid a deflation which would hit the poorest strata of the population.
To regulate the banks is difficult, but it is absolutely necessary, first and foremost because of their power, which has no limits, and, second, because they have proved unable to forecast correctly the medium term effects of their activities. The existing fiscal pressure on the banks is generally quite mild, and should be increased. A special tax should be levied on the year end bonuses, which by their very existence are proof of an excess profit, perfectly taxable.
A demand sustained and stable in the long term, which should be produced by a “wise budgetary policy” is a chimera in any kind of economy. Public expenditure is a basic element for economic growth, because it increases both the supply of public services and the consumer’s demand for goods and services. In many European countries it is also a relevant source of industrial investment, especially in key industries, like energy, and infrastructure. There is no reason to expect private capital to launch large infrastructural project with long term profitability. To reduce public expenditure means to reduce consumer’s demand , and infrastructural investments , which would lead to a reduction of the growth rate, which in rich countries could be not too serious , but also to an increase of inequality among the citizens , due to diminishing role of public services .Its effect would be eventually to break up the society in groups increasingly separate one from another. A high level of public expenditure would normally tend to increase the State’s deficit, which might not be too serious, if the debt would be financed wholly, or in large part, by the citizens themselves.
The most unpleasant aspect of the present situation , is that the official structure of United Europe has become the main supporter of the “Washington Consensus” just when it was being abandoned by Washington. This puts such a structure in conflict with the European Governments, which must win elections, and therefore try keep themselves as far as they can from any deflationary risk. The European structure is not democratic, does not answer to anybody, and certainly not to the voters. The only possible line to follow in he near future is therefore to bring the European structure under democratic control, by increasing the power of the European Parliament, at the same time increasing the decision ability of the structure. It may look like some kind of non realistic proposal, but it is in fact the only possible route to avoid losing or reducing European prosperity, and Europe’s importance in the world economy.
The idea the an economy of the size of the United States could not allow a general health insurance , and a decent State school is a paradox . In that country people seem to believe that the Government should not help the poor citizens, but only the rich ones and, above all, the large companies and the big banks. The recent debt crisis, due to mortgages and credit cards, has shown that debt is an absolute necessity of the average American citizen, who pays for essential services much more than the Europeans. The US seems to be a country dominated by an ideology, which consider the State as the protector of the powerful, and not of those who actually need some protection.
Italiano [2]