„Barely disguised oligarchies“

Appeared, in Italian, in L’Eco di Bergamo, May 15, 2015

How do you interpret the current economic-financial crisis in part of the western world?

It is a return to the normal condition of capitalism: instability, uncertainty, unpredictability, a permanent conflict between social justice and the justice of the market. The return began in the 1970s with the breakdown of the postwar order. The three decades after the war were an exceptional period. Since then, a crisis sequence has begun brought inflation, public debt, private debt, secular stagnation and anarchic money production. The financial crisis of 2008 was the high point up now. More such high points are coming.

Is it the unavoidable consequence of weaknesses inherent in a democratic-capitalist society?

Conflict and contradictions are, as I said, what you must expect under capitalism. They take different forms in different periods. Their latest version is the breaking-up of the marriage between capitalism and democracy under the pressure of financialization. This was an arranged marriage after 1945 and the honeymoon was short. Now the two try to do without each other: which is what we call post-democracy, where democracy is allowed to continue to exist as public entertainment on condition that it leaves the governance of the economy to the so-called “market forces”.

How have we come to all this?

This is a long story. A capitalist economy always tries to struggle free from democratic control; this is in its nature. In the 1970s the end of postwar growth and the abdication of the United States as a responsible hegemon of global capitalism offered capitalism an opportunity to escape from its social-democratic cage. Later center-left parties and governments became themselves supporters of deregulation and “globalization”, in particular of the global extension of free capital markets.

Could this have been avoided?

Here we have to speculate. Perhaps there was an opportunity in the 1970s for the world to move into a different direction. In Italy it might have been the moment when Aldo Moro and Enrico Berlinguer tried to forge a new democratic regime devoted to social reform and economic modernization. This ended with the murder of Moro and the early death of Berlinguer, issuing in the anni di fango under Craxi and Berlusconi.

How is it / will it be possible to get out of this situation?

I really don’t know. The problem is that we miss a collective action capacity that matches the dimensions of what has now become a global economy. We urgently need some kind of restoration of local (national) autonomy. In its absence the latest recipe is “resilience” at the individual level: everybody for themselves, rette sich wer kann (si salvi qui puó): invest in your “human capital”, become competitive etc. etc. The alternative is to raise your voice and demand accountability: from banks and central banks, parties and governments, the media. If people just sit at home and wait for the next edition of the iPhone to become available, nothing will improve.

What are the realistic chances that social and economic stability could be restored?

Again I don’t know, and I maintain nobody does. (If someone pretends to know, he is either a ciarlatano or he has not yet understood the dimension of the problem.) We will have to find our ways by trying. An important part of this is no longer trusting and indeed challenging those who tell us they have everything under control.

Do we have to rely on new social and political models?

There are many ideas around, none of them a panacea: like de-growth, more effective taxation and so on. But they all suffer from the agency problem: where are the powers of collective action that could fight for them? Rebuilding collective action capacities through social movements may be the most important task on the agenda.

If the fiscal pressure is far above the tolerance limits, how is it possible now to get out of the sovereign debt crisis?

The preferred solution of our governments is less public spending and more privatization, at the expense of equity and equality. Some hope for more economic growth but this is nowhere in sight. Some suggest higher taxes for the rich but the big money is extremely mobile, so higher taxation will once more hit the middle classes. What I see coming is a restructuring of the state in the direction of long-term “consolidation”, i.e. retrenchment.

How can the relationship between improving economies (like Germany plus satellite countries) and „PIGS“ be managed?

I think the Euro was a big historical mistake and ultimately we must find ways to restore some kind of monetary sovereignty to European countries. Voters in the North will object to a “transfer union” while people in the South will despise the losses of political autonomy that come with foreign economic “support”. A “European Marshall Plan” is not a realistic solution: it would have to be much bigger than what the North can afford, and it would come with too much intervention from “Europe” in Southern countries. Moreover, it would not work: see the very limited effects of regional policies in Italy (Mezzogiorno!) and Germany (the former East Germany!).

Are our societies still democracies in the real meaning of this term or have they become disguised oligarchies?

Not very disguised, I would say. Everywhere economic inequality is increasing, and the very rich (the one percent, or 0,1 percent) appropriate almost the entire economic growth. Moreover, voter participation is declining, growing segments of the population expect nothing any more from democratic politics, right-wing and protest parties are growing and so on.

Politicians keep on evoking the chimera of growth, but the markets are saturated and the economies are constantly shrinking. After the inflation and the exponential growth of public debt, what will be the next steps taken to maintain a minimal level of social contract and general welfare?

Nobody knows. Right now our rulers flood the world with money to sustain the illusion that everything is fine. But they know this cannot go on forever.

Does globalization mean there will be a historic shift of the wealth axis from Europe and US towards China, India, eastern tigers?

That could well be. But predictions like these are extremely short-lived. Remember the BRICS myth which, we now know, was invented by a Goldman Sachs investment fund manager before 2008. Today Brazil is stuck in a swamp of corruption, Russia is a basket case, India is an unknown continent, China has rapidly declining growth and an enormous burden of debt, public and private, and South Africa never belonged in a group of supposedly fast-growing late developers.