Development of energy communities in Spain
Generally, in the development of new economic-business models the first projects are driven by those actors who concentrate a sufficient number of elements that give them a certain advantage over the rest. These advantageous elements are usually grouped into economic capital, technical knowledge and public infrastructures.In territorial terms, this phenomenon gives some areas more possibilities for development than others to the extent that some have easier access to a sufficient combination of these advantageous elements. Social capital is the sum of actual and potential resources, material or immaterial, of a given community, which can be mobilised among the different actors that make it up, whether they are individual or collective, public or private. The development of energy communities will largely depend on the combination of social capital intensity and accessibility to renewable energy resources in each case. Categories of territories according to social capital intensity The result of the characterisation of the territory according to the intensity of social capital offers the possibility of classifying energy communities in a more complex way. Types of energy communities Download report
Towards the institutionalisation of public-community partnerships in the energy sector
The complex contemporary economic processes that enable the material and symbolic sustenance of people depend on energy. It is a resource of primary necessity and this makes it strongly linked to power and conflict. Access to and control over energy has historically been a fundamental political issue. The development of our fossil economies has led to the preponderance of energy ownership schemes (public and private) consistent with the liberal vision of ownership (exclusive and exclusionary) and with the dynamics of dispossession inherent to capitalism. But the energy transition towards renewables contributes to experimenting with alternative forms to the traditional ones: public (state) and private ownership of energy. This is due to the fact that in this impasse, renewable electricity becomes relevant, allowing the involvement of a wide diversity of actors: from large financial groups to SMEs of different legal natures (including social and solidarity economy enterprises), public bodies at local or regional level, and the citizenry as a whole. However, the fact that energy is such an absolutely strategic element for a country means that it is highly intervened by States and by supra-state bodies such as the European Union, fundamentally to guarantee security of supply in a framework of international economic competitiveness and a global energy and climate crisis. Intervention mainly involves a very high degree of regulation and ownership in the global energy sector, either through the acquisition of assets or through state-owned enterprises, especially in the electricity sector. According to the report State-Owned Enterprises and the Low-Carbon Transition published by the OECD (2018), 31 of the 51 largest electricity utilities in the world have a majority public shareholding, most of them Chinese and Russian. In Europe, the so-called ‘neoliberal consensus’ of the last quarter of the 20th century led to a reduction in the weight of the state in the electricity business and, as a result, only the Swedish Vattenfall, which is fully public, the French EDF (85% owned by the French state) and, in second place, the French ENGIE and the Italian ENEL, with a minority shareholding by their states (33% and 24%, respectively), stand out. On the other hand, it is also true that the very nature of energy makes public intervention indispensable. If we focus on electricity, it should be stressed that, unlike fossil fuels, once it has been generated, it circulates through the networks with little or no possibility of being stored. This key detail conditions its management because it requires precise coordination to match supply and demand at all times. To do so, it is also necessary to take into account the constraints imposed by the different generation technologies or processes: from their capacity to regulate production (for example, a nuclear power plant cannot be shut down suddenly or the production of a wind turbine varies depending on the wind blowing) to their geographical location (the distance between the point of generation and the point of use). Nor should we forget the management of international grid connectivity with neighbouring countries. In short, these issues cannot be ignored when discussing possible – and desirable – models of energy ownership. Energy is a resource that is difficult to compare to any other, and public non-intervention is inexcusable in order to adapt to its peculiarities. Energy ownership in Spain Before continuing, it should be noted that, depending on how one looks at it, linking ownership and energy does not only mean addressing the question of the possession of legally sealed titles in the energy sector. From a republican perspective, to speak of property is to speak of access to the set of material and immaterial resources considered relevant – of a nature and quantity contingent on each spatio-temporal context – to guarantee people a dignified livelihood. The social function of property has to do with enabling people to live a life of socio-economic independence. It is also assumed that the only interdependencies with others are those that are free from arbitrary interference. Thus, ownership is also defined by the right to control these basic resources. No one doubts that energy – and more so electricity in the current transition – falls into this category of basic resources and that public authorities are needed to guarantee the right to access them. However, citizens must have the mechanisms to control these public authorities. On the one hand, so that they do not allow certain private actors to interfere arbitrarily over others, giving rise to relations of dependency; and on the other, so that they do not feed clientelistic practices that lead to oligarchic and despotic logics. Looking at the Spanish case, we can conclude that the energy ownership model is far from fulfilling its social function: on the one hand, the regulation does not define electricity as an essential good in terms of universal accessibility, and on the other hand, the structure of property rights over energy infrastructures is controlled by a small and powerful block of private companies. As accessibility to electricity is not guaranteed ex-ante, what we do find in Spain are ex-post corrective measures whose level of effectiveness in universalising reasonable access is debatable: the bono social, Law 24/2015 against supply cuts, emergency aid, advisory services on rights, generation and optimisation of consumption, tax incentives or subsidies for renewables, or municipal supply companies. These measures do not tackle a problem that is structural and related to the legal system. Beyond ex-post public intervention, it is fair to point out that there are private initiatives whose actions are not profit-oriented and which offer a supply service with certain public service overtones, as they put the coverage of their members‘ or clients’ energy needs before obtaining profitability. This is the case of the energy cooperatives, among which Som Energia stands out. In its case, it is also an actor that promotes and facilitates popular participation in renewable generation projects, as well as an energy culture based on the values of sustainability, social justice and democracy. Energy communities and public sector participation Energy access schemes are
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
Green rating of the General State Budget
The analysis of the methodology used by the Government to establish the degree of alignment of the General State Budget with the ecological transition offers ample room for improvement. The modifications proposed in the report are aimed at addressing the two major weaknesses identified in the methodological analysis: Download report
Challenges of inclusive digitisation
Digital technologies and data are, for better or worse, transformative. People, businesses, and governments live, interact, work, and produce differently than they did in the past, and these changes may be accelerating rapidly due to digitalisation. It is vital to ensure that the immense promises of digital technologies and data are directed exclusively towards growth and social well-being, while limiting and minimising their negative impacts. Download report
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