Letter. Value creation appears to be more and more the result of much more complex processes than just economic competition alone, which is why we need a more sophisticated form of capitalism, imbued with goals which are more social in nature.

The problem of the state and neoliberalism’s resilience

The persistent economic and social problems in Italy—for which some important potential solutions to be developed are outlined in the “path” set out by the 2020 Stability Law—should be interpreted in the light of the extraordinary scope of the transformations that are taking place all over the world. This is the kind of wide scope that should be adopted at the much-awaited Democratic Party program conference, which ends Sunday in Bologna. There is, in fact, a global need for a radical change of perspective at the highest level, pushing us toward questioning weighty topics such as capitalism itself.

In August, in the US, Business Roundtable (an association of CEOs of American corporations) published a manifesto which proclaimed the need to abandon the shareholder value theory (i.e. the primacy of maximizing value for shareholders to the exclusion of all else, the cornerstone of neoliberalism). And the Financial Times has declared the need for a “new agenda,” in which companies deliver “profit with purpose.”

The point is that neoliberalism has shown itself to be highly resilient, including in spurious combinations with populisms of different kinds, but its outcomes remain strongly anti-egalitarian and its effects unhealthy: an exponential increase in the value of assets, a dependency on bubbles (financial, credit, real estate), large amounts of speculative private debt, enormous amounts of liquidity not channeled toward investments, technological development only as an “indirect” effect, and very high unemployment, especially for young people and women.

It is significant that, more than 10 years after the 2007-2008 crisis, we are again debating secular stagnation linked to the dynamics of capitalism, which Keynes had already anticipated, after studying the structural tendencies of capitalism toward the underutilization of the basic factors of production, labor and capital, generating unemployment and underinvestment, finally devolving into crisis and/or stagnation. These issues offer the foundation for the ‘varieties of capitalism’ approach, which has reignited a crucial debate (one which disputes Streeck’s thesis of the inevitable “convergence” toward the sole model of neoliberal capitalism). 

Furthermore, new research is being conducted right now on these issues, linked to the observation of new technologies and how they affect ownership rights and the predatory extraction of new rents, with the risks of a digital feudalism. In this way, the left is called to offer solutions for a full spectrum of questions and interpretation needs. We are led to radically question a number of notions, such as institutions, the public sphere and statehood. How can one define a new statehood? What are the essential public functions? How can one express the “strategic” attributes of the “strategic state”? What are the possible forms of planning and democratic planning? At issue is also the encoding of the nature of capital and property rights which is accomplished by the law and the state.

Far from observing any egalitarian effect, where the benefits would “trickle down” from the owners of capital downward, we are seeing the very opposite: a “trickle up” toward the top of the pyramid, the capital holders, as the rise of the stock market becomes the universal standard measure. Thus, if many rights are in reality camouflaging privileges, rights don’t actually have the immutable solidity that we commonly attach to them, and Europe continues to be an island of “public law” whose potential should not be underestimated. In addition, the new hyper-technologized capitalism fuels over-financing techniques which are truly disturbing in nature. 

And we must also contend with the paradox of knowledge: the fact that new knowledge, instead of encouraging widespread economic activities and small businesses, which would seem to be its natural target, instead rewards the large monopolistic corporations. The paradox is due to the nature of knowledge as a “non-rival good,” which can be made available both as a public good and as a commodity—which implies that, when knowledge is not available as a public good, this always represents a waste of its other potential uses that would not have involved any additional costs, a waste which results in lower investments, lower production, lower productivity and less development.

Therefore, the argument will necessarily open up toward the notion of economic democracy, the participation of workers in company decisions and the various types of companies that can be imagined. Value creation appears to be more and more the result of much more complex processes than just economic competition alone, which is why we need a more sophisticated form of capitalism, imbued with goals which are more social in nature. 

From the notion of private property, we can trace a different path of intellectual evolution, overcoming the classical notion of absolute non-interference over a small sphere left for the freedom of choice, proposing instead a bundle of rights which include responsibilities, multiple fiduciary duties, different degrees of participation, a right of access to the social surplus and so on.

Furthermore, the new technologies offer powerful features for cooperation, in the direction of creating productive systems that can self-design and self-regulate, and which can open exceptional windows of opportunity that can be used by workers who want to “co-design” an alternative. 

A need that is showing itself again as absolutely crucial for the center-left is that of grasping the depth of the transformation to which we must aspire, and, consequently, the possibility of directing innovation towards precisely such a transformation, together with the kind of democratic institutions needed that would be able to operate in this way.

Laura Pennacchi is an Italian economist and former member of parliament.

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