The tortuous path of destouristification
In recent months, neighbourhood movements in different parts of Spain have brought to public debate the need to structurally rethink the tourism sector in their areas. They warn that in these places (and perhaps in others as well) the carrying capacity has been exceeded due to the constant growth of tourist activity and its consequences. These include environmental degradation and increased pollution, frequent and in some cases dangerous crowding, deterioration of public services such as transport, increased cost of living, displacement of local people, difficulties for working people to live relatively close to their daily place of work, housing speculation, and loss of local cultural identity. Although perhaps new to the general public, different groups and social agents have been warning about this problem for years thanks to data collected in other locations where the process of touristification has advanced before. Due to this data and the reflections, analyses and publications from the social sciences, some political leaders have tried to provide solutions from the public policy sphere to avoid the most serious effects of the tourist monoculture and, in some cases, to try to reverse it, with mixed outcomes. First of all, it must be recognised that the incentives for policy-makers are not particularly favourable for carrying out this task. For, despite the institutional mandate to represent the interests of their population, and despite the social protests that have taken place in their different forms, significant factors that encourage the opposite seem to have more weight. As a result, we see that the general tendency is to remain the same as before, i.e. to do nothing to alter the tourism mechanism. Arguably, the biggest incentive for nothing to change is that change in general, and this one in particular, is very time-consuming and complex. This is due to inertia, technical difficulties and established power relations. Among the technical difficulties, one that, despite its importance, is often overlooked is the impossibility of replacing the tourist monoculture with another activity (or activities) while maintaining the main indicators in similar terms. Like any other predatory activity, tourism extracts ‘assets’ (beaches and other natural spaces, monuments, climate, architecture, educated and cared-for population, public infrastructures, etc.). ) for free and processes them, generating an economic return (which in many cases does not return to the area, not even to its capitalist class) and generally negative externalities (such as those listed at the beginning of the text: environmental deterioration and increased pollution, overcrowding, worsening of public services, increased cost of living, displacement of the local population, difficulties for working people to live near their daily place of work, housing speculation, loss of local cultural identity). Moreover, when the monoculture of such an activity has been consolidated, too many bridges have been dynamited for it to be considered as just another activity in a range of economic activities to be developed. The tourism process advances towards the socio-economic monoculture phase and, once there, continues to advance in its depredation of the environment and society on which it is based. Indicators that tend to point unequivocally to the fact that the tourist monoculture has become established include the following: the census population is decreasing; disposable family income in the area is increasing due to the expulsion of the less well-off classes because of the generalised rise in prices and of housing in particular; the surface area dedicated to tourism and the hotel industry is increasing in relation to other economic activities, such as industry and education; the saturation of this type of activity is advancing, colonising more and more areas of the city; the proliferation of dwellings for tourist use is spreading exponentially in the absence of effective control mechanisms; shops commonly aimed at the local population, such as food shops, are turning their offer towards tourists, with the disappearance of fresh produce shops such as fishmongers, butchers and greengrocers. In addition, phenomena that are incomprehensible to the naked eye are beginning to be detected, such as the closure of shops (the closing of shutters) in the most overcrowded areas or their surroundings because they are used as warehouses for other premises (mainly restaurants) whose activity cannot develop as desired due to the high demand to which they are subjected and their need for product rotation. This also leads to an increased feeling of insecurity and/or risk in these areas. Under these conditions, an economic return of the same characteristics without incurring serious externalities is not possible. In other words, replacing this monoculture activity with another could only be done by assuming the same (or greater) amount of negative externalities. Negative externalities could be found in two broad groups: those that are outside the law, or those that would put the very survival of the business at serious risk in the short term (such as those of an environmental or social nature that would considerably disrupt the flow of capital). In fact, a large part of the expansion of this monoculture comes from the perception that it is more profitable than other activities and that it is legitimate to facilitate its development. The mechanisms that facilitate its development over other socio-economic options also form part of the very institutional structure (public and private) of the tourist monoculture, which increases the perception of its high profitability and the lack of need for other activities unrelated to it. Therefore, the more the process of deepening the monoculture advances, the more the impossibility of substituting it with another sustainable activity in economic, environmental and social terms grows. On the one hand, the collective and institutional imaginary is moving further and further away from this possibility. On the other hand, in material terms, the growing inclusion of elements that threaten the environment and social rights and conditions, inherent to monoculture tourism, makes it impossible for there to be another activity that, while complying with socio-environmental rules, could generate similar monetary returns. Such an option is ruled out for political action. It is also a tremendously perverse incentive for policy makers
The importance of maintaining a balance of power in companies
More and more companies and organisations of various kinds are choosing to operate in a way that promotes social justice, fairness and equality. This ranges from entities that already include these principles among their core values to those that are aware of the benefits of incorporating approaches that tend towards horizontalisation and democratisation into their internal processes. This can be seen more clearly in the case of social market entities, non-profit organisations, activist groups and some third sector organisations, whose specific aims already involve challenges and opportunities for social transformation, starting with the environments in which they operate. In the case of the Spanish economy, the corporate tradition is characterised by an undeniable structural and procedural rigidity in terms of the verticality of the hierarchies that sustain companies, mainly large ones. This rigidity has historically been a problem not only for the possibilities of innovation and expansion of companies but also for limiting the promotion of a broader and more diverse range of economic activities and the development of the people who work in them. The inability to actively participate in the development of business structures from different levels has created a corporate culture that is detrimental to the interests of the companies themselves and to society as a whole. Its consequences are very significant and determine working conditions. Often, as a result of this cultural heritage, what happens is that we assume and normalise a lack of deep understanding of the logic in which we are embedded as workers and of the structures of which we are a part. It is therefore not surprising that, when it comes to the workplace, we tend to resign ourselves to accepting the status quo rather than showing initiative to contribute to and participate in change. Possibilities for change offered by work environments The context in which we currently find ourselves is that of an increasingly fragmented and individualistic society, with a high rate of youth precariousness that has existed for decades, mired in temporary employment, having to gain experience by facing extremely limiting working conditions. The progressive tertiarisation of the Spanish economy in low value-added activities, together with the fact that the working classes have been blamed, while at the same time being subjected to cuts and adjustments due to bad economic decisions for which they were not responsible, have contributed to putting the life prospects of society as a whole at risk. The reality is that a large part of the population faces serious problems when it comes to achieving autonomy, accessing housing, becoming independent and achieving a minimum level of economic stability. We often see this situation justified by appealing to the ‘overqualification’ of young people, while at the same time, educational and training institutions continue to promote meritocracy and competitiveness as a gateway to the world of work, even though these will not be factors that will be used in their future careers. This discontent can also be seen in the decline in trade union membership, which is yet another sign of the mistrust that workers feel towards traditional mechanisms for bringing about change to improve their working conditions. All of this contributes to portraying the collective problem we are currently facing, a social fabric damaged by the progressive loss of channels for citizen participation in a context of crisis and necessary eco-social transition. Added to this is the fact that the types of companies that have been favouring the Spanish economy have archaic and obsolete organisational models in terms of sustainability, social justice and equality, resulting in working environments that are, to say the least, unattractive. That said, it is important to bear in mind that the workplace is still one of the most important spaces for socialisation in the lives of adults and, therefore, represents a key setting for carrying out conscious actions towards fairer and more sustainable development models. So much so that the logic and dynamics that take place in work contexts affect and have an impact on society as a whole. Furthermore, this area is not limited solely to salaried employment but encompasses any work carried out by organised individuals who share common principles, objectives and goals in which they invest daily effort. Conscious organisational culture Most organisations in which labour relations develop, including small and medium-sized enterprises, do not have to adhere to traditional logic or settle for aspiring to replicate hostile power structures that are often incompatible with self-care and shared responsibility. In this regard, many are already opting for operating models that prioritise conscious care for the people who dedicate their work to the organisation. In this sense, all organisations have the opportunity to improve their performance and influence social change through decisions made regarding their own functioning and structure. It is essential to pay special attention to the type of organisational culture that companies promote, being aware that this has a direct impact on people’s lives, as they are spaces for the individual and collective construction of meaning and, therefore, the construction of reality. It is not only a question of seeking consistency with the organisation’s values at all levels, but also of delving deeper into the specific needs for improvement in structures and procedures to ensure compliance with the commitment to equality, the free expression of abilities, the exchange of knowledge and the promotion of responsible participation and involvement. Attention to organisational culture consists of understanding how all of this contributes to the sustainability of the organisation, also from the point of view of business development. The incorporation of transformative practices in working relationships and the establishment of more horizontal structures with more democratic participation mechanisms will benefit the use and promotion of talent, which translates positively into both collective results and the individual development of its members. Preventing horizontality from translating into informality People who work in contexts that tend towards the horizontalisation and democratisation of internal processes often face specific organisational difficulties linked to power vacuums and informal decision-making spaces, which can be prevented by paying
Confronting the Coronavirus Crisis: A case for a Pandemic Basic Income with evidence from Spain
The coronavirus crisis is easily comparable to the great financial crisis of 2007-9 and might even turn out to be more severe. Its impact on the long-term development of the world economy could also prove crucial because neoliberal, financialised capitalism entered the crisis in a state of structural weakness, especially in the USA. Ιn the course of the great crisis of 2007-9 the leading nation states took steps to rescue finance and prevent a structural challenge to financialisation and globalisation, while shifting the costs of adjustment onto working people and the poor. Consequently, the years 2009-19 bear the hallmarks of a declining social system trapped in unmanageable conflicts of interest. Throughout that decade, investment, production, and capital accumulation were historically weak, particularly in Europe. Even more remarkable was the weakness of productivity growth despite the constant chatter about a new “industrial revolution” through Artificial Intelligence. At the same time, the profound inequalities of neoliberal financialisation were maintained, and even worsened, as the rich were protected by the machinery of the state. Toward the end of the decade even some thoroughly systemic mainstream economists argued that the core of global capitalism has been mired in stagnation for some time. Since the outbreak of Covid19 nation states have implemented quite different policies reflecting the historically distinctive nature of this crisis. Some states have adopted extraordinarily expansionary fiscal and monetary policies, above all, the USA. Other states, such as Germany, have been equally expansionary in fiscal policy while also providing gigantic support to domestic industry. And still other states, such as those in the Southern periphery of the EU, have been much more constrained in their actions by the great burden of public debt. The likely outcome will be even greater divergence among national capitalisms in the years ahead. In this historically unprecedented context, social struggles have already broken out among competing interests in each country, and they are likely to lead to significant changes and perhaps even in paradigm shifts. There are signs that the representatives of international capital as well as the national oligarchies are trying to use the crisis to further their interests. This could only mean that the livelihoods of workers would be badly affected. The way to defeat these attempts and to obtain a new social dispensation favourable to the interests of labour and the social majority is to be bold in proposing new socioeconomic structures and mechanisms of social interaction. An important policy concept in this respect is that of a Pandemic Basic Income. The distinctive character of the Coronavirus Crisis and the role of the state The distinctive features of the Covid19 crisis are due to state-imposed lockdowns, which immediately affected the side of production and circulation of goods and services. A major shock was delivered to manufacturing that disrupted interlinked supply chains and international trade by reducing the availability of inputs. The shock was manifestly more severe in the field of service provision, particularly travel, tourism, entertainment, restaurants, hotels, pubs, and so on. Lockdowns also immediately affected the side of aggregate demand by restraining social contact and forcing people to stay at home. Consumption declined precipitously, leading to a jump in private saving, perhaps also as a response to the profound uncertainty created by the disease and the unprecedented state responses to the pandemic. Investment collapsed equally precipitously in the USA, the EU and elsewhere as enterprises set aside investment plans in the face of extreme uncertainty. Finally, lockdowns also affected the sphere of finance by immediately deflating the overblown stock markets across the world but also by restricting portfolio flows to developing countries and raising the prospect of a full-blown global financial crisis. Faced with the unfolding economic disaster caused by the lockdowns that they had instigated, nation states had to respond urgently. In the heavily financialised US economy, the state undertook an extraordinary expansion of its fiscal deficit through tax cuts, public spending, and direct support for household income. The state also provided guarantees for bank loans to industry. At the same time, the Federal Reserve provided enormous volumes of liquidity to private banks and corporations driving interest rates to zero. The ensuing expansion of the money supply has been very great, It is instructive to observe the contrast between the USA and China in confronting the crisis Chinese economic policies reflected the different structure of the country’s economy, which is much less financialised, as well as its different internal power balance. Rather than relying primarily on incentives provided to private enterprises, the Chinese state boosted employment directly by mobilising the State Operated Enterprises, which are still crucial to the core of the economy. It also engaged in a wide programme of public investment in new technologies, including 5G. However, the Chinese state was much less concerned with supporting personal income, shifting much of the burden onto the poor, and it relied proportionately much less on credit provision through the central bank. It is equally instructive to note, nonetheless, that the US government has been extremely careful to buttress its global hegemony via dollar provision. Faced with a shortage of international liquidity as capital flows dried up and trade was disturbed, the Federal Reserve stepped in and provided dollars through swaps with the central banks that it had also traded with in the previous crisis. Not only this, but the Fed also allowed institutions to obtain dollars by swapping US Treasury Bills. It appeared, furthermore, that the most pressing need for dollars originated with Japanese institutions that had previously provided funds to the Collateralised Loan Obligations market among US enterprises. The actions of the US government indicate that it intends to prevent any challenges to the role of the dollar as the world currency in the years ahead. The EU faced with Coronavirus Crisis For our purposes, however, it is even more important to observe the contrast between the EU and the other two leading economies. In the EU the crisis was confronted largely by each separate nation state, with no evidence of coordination. For EU states in the EMU,
ESG criteria to condition EU recovery
In the context of the Covid-19 crisis, it is highly foreseeable that European member states will spend and invest large sums of public money. Part of that money will go to strengthen the health and social protection systems, and the other part will be employed to the support the social and economic recovery. In fact, both the EU and its member countries have started to draw up their recovery plans, which will be applied in phases as the lock-down is relaxed. The use of conditionality in the Covid-19 crisis In relation to the social protection of the most vulnerable groups affected by the lock-down and that might be affected by the foreseeable reduction in activity in later stages, in some countries (for instance, Spain) temporary basic incomes are being considered. Such provision of income will have a triple objective: first, ensuring material living conditions; second, avoiding the spread of the pandemic by reducing the pressure to leave the house seeking subsistence means; and third, sustaining internal consumption. Accessing this basic income is subject to a series of conditions as: being part of the active population, the level and period of income loss, personal wealth, family structure, and other social variables. Conditionality is also attached to aid to companies that face a reduction in activity. In Canada[1], Denmark, France and Poland[2], for instance, companies that are registered in tax havens will not be allowed to access public aid that is being granted to protect the supply of goods and services at the national level, protect jobs, and maintain tax revenues. In Portugal, although no concrete measure has been presented so far, both government and opposition have argued publicly that banks should not make a profit during the years 2020 and 2021, and that they should increase credit provision to support the economy in return for the bail-outs that they received after 2008. This last case points to the main bias of the recovery policies after 2008, which was that conditionality was omitted in the transfer of public money to ‘too-big-to-fail’ agents (Financial, Insurance and Real Estate corporations). The asset prices of the FIRE sector were reassured through new indebtedness assumed by states and households, which imposed few to no constraints related to social, environmental or governance responsibility. This has had a large negative impact in the form of inequality, environmental crises, corruption, lack of public control and accountability, and in turn, a large damage to democratic legitimacy. Conditionality based on ESG criteria In a scenario of -3.8% of GDP in the EU in the first quarter, governments should aim at reactivating the supply of goods and services, at avoiding the destruction of the productive tissue and laying the foundations for a new and more resilient production model. The consequences of this crisis will favor a re-localization and re-industrialization of European economies to reduce dependence on global supply chains, especially in the sectors most sensitive to domestic security (health, food, energy, etc.). As has been mentioned before, generally, nation-states will attach conditionality to public aid within their borders, either in their direct income provision to the population or other different types of aid to enterprises and banks. The sums of this expenditure will be very high, so high should be the degree of responsibility demanded to agents receiving this money, specially the most powerful. Responsibility should not only be demanded as a short-term condition until the crisis has been overcome, but as a permanent set of conditions that allows for the generation of more resilient and sustainable production-consumption models. In recent years, environmental, social and governance responsibility criteria (ESG) have become part of the usual vocabulary of institutional investors, both public and private. The ESG approach is a system of assessing the impact of business practices from environmental, social and governance (ESG) perspectives. The Ekona Center of Economic Innovation, based on these general premises, has developed an ESG Certification system that targets the real economy, including the SME system. Its aim is to assess the commitment to responsibility of enterprises. The certification provides an objective measurement of a representative set of variables associated to the environmental, social and governance areas of companies, which produces a composite indicator. This model allows, on the one hand, to measure current performance in ESG responsibility, and on the other hand, the detection of possibilities for strategic development regarding ESG responsibility. The advantage of Ekona’s model compared to self-declarative Corporate Social Responsibility (CSR) reporting lies on its objective measurement and absence of conflict of interests. As is shown in Figure 1, this model allows public and private fund providers to identify responsible enterprises through the rating obtained in the process of certification. With this information, public administrations can direct their effort through public procurement or other aid, which places them in a very advantageous position of influence in improving the responsibility of the economy[3]. Source: own elaboration Precisely in the period prior to the Covid-19 crisis, the use of ESG criteria was growing rapidly, as climate change was generating public pressure for both public administrations and the private sector to act accordingly. In fact, ESG concerns are rapidly shifting from the field of impact investing into conventional investment practice, as climate risks become increasingly apparent. Currently, the global responsible investment market is several billion euros in size, and is growing at a double-digit annual rate, despite the fact that so far it has been focused on large companies rather than on small and medium-sized companies, which have not yet found a method to be included in the ESG investment category. The growing importance of these new criteria is evident at institutional levels such as that of the European Union, which has developed an Action Plan for Sustainable Finance[1], which will serve as the basis for integrating ESG criteria in the evaluation of financial risks, as well as the United Nations Working Group on Transnational Corporations and Human Rights[2]. Ekona’s approach to the ESG criteria responds to social, environmental and governance concerns, but also to concerns related
Of Strong and Weak, of Arrogance and Ignorance
Let’s explode the myth that a surplus economy is good and a deficit economy is bad. The euro zone will work only if deficit (South) countries can borrow to keep the surplus (North) countries trading. It is stupid and arrogant to think otherwise. We are the strong, the others are the weak. The Dutch-German mantra is not only arrogant, it’s stupid. Whoever utters it only shows that he has not the slightest idea of co-operation between nations. “Where there is need, foolhardiness becomes wisdom,” Niccolò Machiavelli once said – and he is right. In times of need, it shows who is the child of whose spirit, who can be trusted and who cannot be trusted. It also shows who has the intellectual ability to leap over his own shadow and question his own dogmas. Germany, the Netherlands and Austria are just showing that they do not have the foolhardiness that becomes wisdom. That will have dire consequences. To know exactly what this is all about, you only have to listen to the interview that Federal Minister of Economics Peter Altmaier gave to Deutschlandfunk Thursday, April 9. There it is clear again that only those in Europe “who have really made an effort in the past few years” can now have the opportunity to borrow the money they need to fight the corona crisis without any problems and without any interest surcharge. Altmaier said literally: “The state… we are all part of it. But together, by adhering to the debt brake, by consolidating public finances in recent years, we have created the conditions for us to be able to take money in hand now, for us to be able to temporarily increase government spending significantly in order to save companies, to save jobs, to save the prosperity of this country”. Which, conversely, can only mean that “the others”, who have not done just that, cannot now take money in their hands either, because they have none. They have not created the conditions for saving their economy today. And the German media – how could it be otherwise – have jumped right on this government bandwagon. In a special programme by the German state television station ZDF this week, there was repeated talk of the “weaker” countries in the South and the “economically strong” ones in the North, who are supposed to be liable for the weak. ntv has the effrontery to talk about the “credit addicts” in the South. But also DIE ZEIT says that countries kept afloat by the ECB could “slide into bankruptcy” if interest rates do not remain permanently low. The weak logic of the “strong” “Weak” and “strong” seem to be quasi natural categories. Weak countries are those that have not succeeded in consolidating their national budgets and reducing their public debt since the financial crisis of 2008/2009. And this despite the fact that a country like Italy has made greater efforts to save money than any other European country. “Strong” are those who, like Austria, the Netherlands and Germany, have taken advantage of the “good times” to prepare themselves for an emergency like the present one. All this, to put it bluntly, is the German view, which is narrowed down to a tunnel vision, which has absolutely nothing to do with macroeconomic logic and therefore nothing to do with the reality of European Monetary Union (EMU). At the same time, it is an impressive testament to intellectual poverty. The underlying error is the years of refusal by German policymakers and the mass of the German media to acknowledge the importance and consequences of Germany’s current account surpluses. After all, whether or not it is possible to reduce public deficits depends almost exclusively on whether or not it is possible to build up current account surpluses under present global economic circumstances. It is precisely at this point that there is a logical restriction in the form of a zero-sum game, because not all countries in the world can post current-account surpluses at the same time. Nor can EMU as a whole build up huge current-account surpluses because it would then provoke counter-reactions in the rest of the world, especially in the USA. The euro would appreciate in value and prevent a current-account surplus strategy on the scale that Germany and the Netherlands have been pursuing for years. The very fact that every surplus country necessarily needs deficit countries is a reason why the arrogance of surplus countries is completely out of place. The classification of strong and weak is stupid from the outset. The same logic applies to the argument over competitiveness. People say that the countries in the South have lost competitiveness and pretend that this is all their fault. Anyone who has understood that EMU cannot have persistently large current-account surpluses vis-à-vis the rest of the world also understands how void of any logic is the idea that within EMU all countries could and should have improved their competitiveness. This idea has not become any more logical over the years, even though it has been repeated like a mantra by most German politicians, above all Angela Merkel, and because it was and still is seriously considered an economic strategy for Europe. It is precisely because, for logical reasons, not all EMU members can become more competitive together that the northern members of EMU needed the loss of competitiveness of the southern members, otherwise they would never have been able to increase their own competitiveness so enormously. And how was that possible? Contrary to the economic rules of EMU, the northerners did not increase their wages as much as would have been appropriate in view of the jointly agreed inflation target. If all countries had tried to pursue the same wage restraint policy from the outset, EMU would have been in a deflationary situation much earlier and no country would have improved its competitiveness. The statement about competitiveness (those who increase it are right, those who decrease it are wrong) is therefore just as nonsensical
This Crisis Has Exposed the Absurdities of Neoliberalism. That Doesn’t Mean It’ll Destroy It
The coronavirus shock has shaken the world’s stock markets, imposing the need for massive state bailouts. But the measures to deal with the crisis risk spurring an authoritarian controlled capitalism — one that protects corporate interests while offloading the costs onto the rest of us. The COVID-19 public health emergency has rapidly turned into a crisis at the core of the world economy, which also threatens developing countries in the periphery. It has changed the balance between state and market, once again exposing the emptiness of neoliberal ideology. This economic crisis casts a harsh light on contemporary capitalism — and is likely to prove even more important than the blow to public health. Indeed, this crisis has deeper roots, in the diseased workings of financialized and globalized capitalism over the past decade. The Great Crisis of 2007–9 brought an end to the 1990s-2000s “golden era” of finance, and the years that followed were marked by poor growth at the core of the world economy. Profitability was weak, productivity growth was low, and investment showed no dynamism at all. Finance was also in trouble, exhibiting lower profitability and none of the extraordinary dynamism of the previous decade. Where the historically unprecedented crisis of 2007–9 marked the peak of financialization, the equally novel coronavirus crisis crystallizes its deterioration.Of course, the immediate spur for the crisis owed to nation-states’ actions faced with the epidemic. Having initially ignored the medical emergency, several states then frantically locked down entire countries and geographical areas, restricting travel, closing schools and universities, and so on. This hit hard the already weakened core economies by inducing a wholesale collapse of demand, disruption of supply chains, falling production, millions of worker layoffs and loss of corporate revenue. All this spurred an unprecedented nosedive of major stock markets and panic conditions in the money markets. It is as if the Black Death of the fourteenth century had staged a return, and twenty-first century societies responded with a similar mix of blind fear and isolation of communities. Yet the plague killed a third of Europe’s population back when its states were poor and backward feudal monarchies. In contrast, the coronavirus appears to have a low mortality rate and has struck advanced capitalist states of peerless technological accomplishments. There is already an intense debate among epidemiologists on whether wholesale lockdown was an appropriate and sustainable response, or if states should instead have focused on intensive testing of the population. It is not for political economists to assess epidemiological policies. But there is little doubt that several states’ reactions and the ensuing collapse of economic activity are of a piece with the fundamentally flawed nature of neoliberal financialized capitalism. An economic system based on competition and naked profit-seeking — both guaranteed by a powerful state — proved incapable of dealing calmly and effectively with a public health shock of unknown severity. Several advanced countries lacked the basic health infrastructure to treat those who became seriously ill, while also being short of equipment to test the population on a large scale and to protect those most likely to catch the disease. The lockdown and wholesale isolation of huge sections of society are, moreover, likely to have very severe implications for wage workers as well as the poorest, the weakest, and the most marginal layers. The mental and psychological repercussions will also be devastating. The social organization of contemporary capitalism was shown to be dysfunctional even from an engineering point of view. Equally striking, however, have been even powerful states’ actions after the magnitude of the unfolding economic collapse became clear. In March, the central banks of the United States, the European Union, and Japan engaged in massive liquidity injections and brought interest rates down to zero, attempting to stabilize stock markets and assuage the shortage of liquidity. The US Federal Reserve, for instance, announced that it would buy unlimited volumes of government bonds and even freshly issued private corporate bonds. Governments in the United States, the European Union, and elsewhere, meanwhile, planned massive fiscal expansions, taking the form of loan and credit guarantees for companies, income subsidies for affected workers, tax deferrals, social security deferrals or subsidies, debt repayment holidays, and so on. In an extraordinary move, the Trump administration announced plans to provide $1,200 per adult, or $2,400 per couple, with additional payments for children, starting with the poorest families. This disbursement was part of a package which could exceed $2 trillion — roughly 10 percent of US GDP — further providing $500 billion of loans to stricken businesses, $150 billion to hospitals and health care workers, and $370 billion of loans and grants to small and medium enterprises. In an equally extraordinary move, Britain’s Tory government declared its intention effectively to become the employer of last resort by paying up to 80 percent of workers’ salaries, if companies kept them on their payroll. These payments would be worth up to a maximum of £2,500 per month — just above the median income. Not content with this, the British government also effectively nationalized the railways for six months and there was talk of nationalizing airlines. Just days earlier, even left-wing academics would have considered these measures to be radical. The shibboleths of the neoliberal ideology of the last four decades were rapidly swept aside, and the state emerged as the regulator of the economy commanding enormous power. It was not difficult for many on the Left to welcome such state action, thinking that it indicated the “return of Keynesianism” and the death knell of neoliberalism. But it would be rash to come to such conclusions. For one thing, the nation-state has always been at the heart of neoliberal capitalism, guaranteeing the class rule of the dominant corporate and financial bloc through selective interventions at critical moments. Moreover, these interventions were accompanied by strongly authoritarian measures, shutting people inside their homes en masse and locking down enormous metropoles. The state has also demonstrated its vast power to police society by collecting information through big
Coronabonds: Administer with Caution
Once again, the Covid-19 crisis has exposed the Eurozone’s weaknesses. Faced with the extraordinary expenditure that the different countries will have to make to counter this crisis, the question once again, as in 2010, is: how will this be paid for? Or more specifically, who is paying for it? Faced with this question, different proposals are already emerging with various mechanisms for sharing costs to a greater or lesser extent. Despite the fact that Peter Altmaier (German Minister of Economy) has already ruled them out, around these proposals the concept of Euro bonds is once again emerging. There is a very broad spectrum of what this policy should look like, for some it means one thing and for others something completely different. Traditionally, from the European Left, the concept is considered progressive and there has already been a collection of signatories (here) to demand them, with a text so unspecific that it is impossible to know the implications of what was actually signed, opening the door to proposals that would only deepen the crisis. To date, three proposals seem to have prevailed in the debate, the result of which will mark the future of the lives of tens of millions of people in Europe. The first proposal is that the European Stability Mechanism (ESM, informally, the «European rescue fund») should finance the crisis effort with the money it has available (410 billion euros) through a credit line for those nations that request it (see proposal here) and issue new bonds in case more resources are needed, which is likely. This would mean that countries that need it would have to apply for a loan from the ESM, associated with a Memorandum of Understanding (MoU), a document of macroeconomic commitments, such as those that have served to impose austerity until now. The Eurogroup meeting on 24 March agreed that this would be the way to finance countries in need and Italy and Spain are already preparing to apply for loans. Despite the fact that, due to the current spirit of solidarity, it is claimed that these loans would be offered without conditions, Article 7 of Regulation 472/2013, which regulates the economic supervision of the Member States, allows the European Council to change the conditions of the loan merely with a qualified majority (55% of the countries or countries with 65% of the Eurogroup population) if it considers that the state that has requested the loan is deviating from the macroeconomic objectives of debt reduction. It is not difficult to think that this would happen when things return to relative normality, given that the debt levels of Italy, Spain, Portugal or Greece are very high and any small deviation could serve as an excuse for the more orthodox countries of the Eurozone to impose drastic debt reduction prescriptions. It should be remembered that these states enjoy a majority and the decision to intervene could be taken by the countries that have signed these MoUs. In short, this proposal is tantamount to a rescue like those practiced during the financial crisis from which Spain is still recovering, with the only difference being the initial goodwill to offer favourable conditions. This is why this proposal is a huge danger for nations like Spain and absolutely unacceptable. The second proposal would be for Member States to issue sovereign bonds with maturities of 50 or 100 years, or even perpetual (non-maturity) bonds at interest rates close to 0%, for example 0.5%. These bonds, despite being issued by the states, would be guaranteed by the European fiscal authority, that is, by the Eurozone budget, which would have to be expanded in the near future to give these bonds credibility. Nine Eurozone Member States have just called for such an initiative. Such a proposal is more interesting than the previous one, but nevertheless keeps us within the neo-liberal monetarist framework. The monetarist theory, already proven to be false, is the theory behind the idea that states should not spend too much, nor intervene in the economy, and even less if they do so with their own currencies and their own central banks, because this causes inflation to rise. It is this theory that prompted the treaties that have imposed austerity on Europe, such as the Stability and Growth Pact, which have justified the tight control of deficits and forced a retreat from the welfare state in recent decades. It is also this theory that has underpinned the anti-inflation doctrine of central banks such as the Bundesbank or the European Central Bank (ECB) that are prohibited from financing public deficits and has served to impose the independence of most Western central banks that have been expropriated from the ministries of finance and economy, putting them at the service of the private banking sector. Thus, this proposal, despite being associated with fewer austerity constraints, admits that it is the markets that must give the states permission to finance their effort to exit the crisis, since it would be these markets that would buy the issued debt and allow the ECB not to organise the crisis effort at its discretion and indefinitely. In short, it would be tantamount to increasing debt through market mechanisms. It is true that these «safe assets» that would be the Eurobonds could serve to break the dependence between the banks and the public sector of the same state, allowing a greater banking internationalisation and thus a greater integration of the European markets. However, it is highly debatable whether we need more financial globalisation and more market mechanisms to be able to finance this crisis effort. And it is also very dangerous to use the pressures of the crisis to associate the fate of the EU integration project with the successful resolution of the crisis. In short, in our opinion, the issue of Eurobonds in the market would legitimise this theoretical neo-liberal framework that we should bury forever. This proposal, moreover, continues to distance the economic tools available to states from their citizens, which would deepen
Debt is not necessary to end this crisis
The expansion of Covid-19 is leading most developed countries to a crisis similar to that of 2008. The first challenge we face is finding a way to return to normal levels of economic activity. This inevitably involves finding a solution to the health crisis and, therefore, makes it necessary for all States to mobilize as many resources as possible to stop it. We urgently need to provide the public health services with material, human, technological resources, etc., in a massive way, without thinking about the bill, only in the needs, and adapt our health system to treat critically ill patients in unimaginable quantities so far. In parallel, the stoppage of economic activity will lead to a sudden drop in demand that will greatly reduce the income of the self-employed, companies, and workers, making it impossible to pay payrolls, supplies, rents and debts. In parallel, the State will suffer a decrease in tax revenues and an increase in expenses: in health, research and development, unemployment benefits and other automatic stabilizers and discretionary social compensation policies for the most affected groups and companies. To avoid a negative spiral much more devastating than the 2008 crisis, and the policies that helped aggravate it, we need to act on many fronts: guarantee a minimum income for citizens (a basic income for a pandemic); liquidity to companies and financial entities; decree a moratorium on contracts (rental, mortgage, loans …); subsidize expenses for supplies or help pay wages to avoid layoffs. All this supposes a massive expense, much higher than the bank rescue that led us to the change of article 135 and the European rescue. And for this, we need to use all the tools available to the EU. To finance the massive spending necessary, the ECB needs to provide states with the possibility of anti-crisis spending, so it must transfer the necessary resources without generating debt or imposing conditions. In other words, this amounts to this institution creating money out of nothing and unconditionally putting it in the hands of the States, without counting it as a deficit or adding it to future obligations. Doing a fiscal quantitative easing that the states manage is the way that the costs of the crisis can be distributed in a balanced way. In the current context, this unconditional creation of money is one of the few (and most powerful) tools that we have to avoid a socioeconomic devastation typical of wartime. It is not acceptable that, as Christine Lagarde insinuated, the ECB abandons the “whatever it takes” (Draghi’s commitment that the ECB would do “whatever it takes” to save the euro) and goes on to state that “the ECB is not here to reduce the risk premiums “of the countries’ debt – these are rising in the countries on the periphery of the eurozone, especially that of Italy – and that” there are other instruments for this “, referring to the possibility that the Italian government asks for a ransom from the European Stability Mechanism (ESM), obviously in exchange for the usual neoliberal reforms. This was already discussed last Friday in a teleconference between the ministers, as reported by the Financial Times. This change in the political position of the ECB has been perfectly interpreted by investors, who are already pushing up the risk premiums of peripheral countries to the upside. It is not surprising, then, that recent surveys show that 88% of Italians consider that the EU does not help them in this crisis and that almost 67% believe that being part of it is a disadvantage. If this continues, Italy may find itself at risk of bankruptcy. To avoid this, the story is emerging that a community debt bond must be issued to create community taxation as salvation. As it has already been said, it is not necessary to issue debt to get out of a situation as serious as the current one, but institutions with the capacity to issue money simply have to create money from nothing and transfer it to the States. If the European elites try to take advantage of this crisis situation to force more degrees of European integration by creating a common tax system, we run the risk of a new euro crisis being unleashed. Therefore, to avoid a repetition of the debt crisis that our countries suffered in the period 2010-12, we must be clear that a debt bond is not necessary at this time. If the pressure rises in Italy, the contagion from Spain will be immediate. In fact, this Monday, at the Eurogroup meeting, Italy and Spain asked to be able to use the 410 billion euros available in the ESM unconditionally to deal with the crisis, but the proposal was rejected. At the moment, the agreement in the EU is to allocate a meager 1% of GDP for added spending and 10% of credit guarantees and tax deferrals, always “within EU budgetary rules and respecting medium-term financial sustainability. ” This is the logic of the anti-crisis packages that governments have announced so far and that will not be enough. If the EU does not make a 180 degree turn and guarantees that the States have total freedom to face the crisis, this will be its end. Thus, as in 2008, the expansion of the Covid crisis19 is highly likely to trigger the institutional weaknesses of the euro. Lagarde’s words last week and the Eurogroup’s decision on Monday give us reasons for pessimism in the medium term. Some Member States have already made, and others will have to prepare for, exceptional decisions, far from the neoliberal orthodoxy that has governed the EU in recent decades. In Spain, it is convenient for a social dialogue table to be activated, with political forces and representatives of all kinds of economic and social actors, given the possibility of signing new Moncloa Pacts. Agreements that cushion the political costs of decision-making, distribute social costs carefully and make it possible to maintain the country’s political stability. As the emergency measures lengthen,