The draft of the contract to form a government between the Lega Nord and the 5 Star Movement, which seems to have been agreed upon Wednesday, appears to contain, barring any further changes, an undeniably right-wing political program.
However, it also contains some proposals that the Left should refrain from treating with irony, shock or severe criticism.
I am referring to the difficult issues regarding rewriting the European Treaties and debt cutting.
These two issues go straight to the heart of the Italian problems: poor growth, low investment, high unemployment, widespread poverty.
Of course, deficit spending and the recovery of a portion of the money that now goes to “debt servicing” could serve both to cut taxes on the rich (as would happen with the flat tax) and to boost domestic demand and pursue policies of reducing social inequality. This has been effectively demonstrated in the American case (and, in part, in the Japanese).
There is also the issue that at this point, economic growth does not create wealth for everyone. This is a salient feature of this phase of capitalism, marked, on the one hand, by slow and unstable growth (some have spoken of “secular stagnation”), and on the other hand by a pronounced accumulation of wealth.
In the US, for example, household income in 2014 was, in adjusted terms, about the same as in 1990, while during the same period the GDP grew by about 80 percent.
Recognizing these contradictions, however, does not mean one has to side, ipso facto, with the austerity party. At the heart of the European architecture is the market, not people. Tight fiscal measures are useful for maximizing the profits of big business and draining resources from labor to direct them towards the world of finance.
These are not mere slogans—this is what has been happening for over 30 years now. Everywhere, the share of the GDP that goes to the workers is going down, and the share that goes into profits is growing. Business is booming, yet the number of poor people has never been so scandalously high.
What would do wonders would be a pause on the fiscal compact and a “sterilization” of a slice of the debt by the European Central Bank (an argument often recurring in the analysis and debates on the Left).
Would it be easier said than done? Would the other European countries pull up their drawbridges? Would there be a revolt of the markets? These are legitimate potential objections, but what is left of politics without the ambition to change current the state of things?
In order to exit the crisis, the United States has brought their deficit up to 12.5 percent of GDP, and France has had it constantly above 3 percent. What about Italy? We are supposedly head of the class, with an estimated deficit for this year of 1.6 percent (thus, close to no deficit at all). For the Commission, though, this is not enough: we have to take it down another 0.3 percent, which means €5 billion (in addition to what is needed to defuse the safeguard clauses). As our growth teeters on the edge of 1 percent, this is madness.
Meanwhile, the Bank of Italy, as part of the quantitative easing program, keeps buying treasury bonds. To date, the Italian central bank’s holdings include government bonds at a value of €334 billion (with a yield of €2.8 billion as interest). What if these were converted to “perpetual bonds” (without maturity), losing, in fact, their character as “debt”? Nothing terrible would happen at all, and this has been a topic widely discussed in political and academic circles in recent years, with greater intensity after the Greek crisis.
These are all political choices, nothing else.
So, am I saying that the contents of the contract between Salvini and Di Maio are all right from an economic point of view? Not in the slightest, because their idea of flexibility in public finances depends on a neoliberal vision of economic and social relations.
In this worldview, there is no incompatibility between a flat tax and a basic income: Both measures promote a social model with fewer rights, weighted toward the interests of business. Less taxes, more subjection of workers in the race to the bottom in the labor market—a “blackmail income,” rather than a “citizenship income.”
Accordingly, it is against these decisions of economic and social policy that the Left must raise its critical voice. On the other hand, the proposal for radically changing the Treaties in order to put an end to the existing financial constraints, and to pose, at the European level, the question of a moratorium on debt, should be encouraged by the Left as well.
It is quite unfortunate that such proposals have only been put forward in negotiations to form a government by a radical right-wing political force, which can now boast of being the one to challenge the markets.
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