Walther Rathenau, the author of “The New Economy”
When people say that, after Coronavirus, nothing will remain the same, they refer first of all to economy.According to us, this must go much further, first of all inb the financial sector.
Indeed, we seealready now, in many directions, some signs of change, though balanced by the eternal conservatism of our establishments. From one side, digital currencies are altering already now several aspects of traditional economies, especially as concerns digital payments in China, where digital has become, within the framework of the new web economy of the “BATX”, the prevailing means of payment. Their role has been powerfully enhanced by Coronavirus, because the digital network of Alipay has become the key instrument of virus tracking, and digital payments, not involving the physical handling of money, have been a powerful means of prevention, so to become mandatory in high risk situations like the one of Wuhan.
From another point of view, the whole structure of the economic philosophy underpinning the Euro has been eroded, first of all by Quantitative Easing, then by the ongoing generalized economic crisis, already present before Coronavirus, but worsened by the same. This has brought about the need to find out new thinking modes, which we will outline here, and on which we will revert in the forthcoming publications of Associazione Culturale Diàlexis.
1.Central Banks Digital Currencies
It is worth wile going through this report, for picking up information and ideas which would be useful also, and especially, for Europe:“While the world is grappling with the fallout of COVID-19 and speculating on how far China can be blamed for the pandemic, a silent digital revolution is taking place in China. On April 29, 2020, the People’s Bank of China (PBoC), the country’s central bank, issued a cryptic press release to the general effect: ‘In order to implement the FinTech Development Plan (2019-2021), the People’s Bank of China has explored approaches to designing an inclusive, prudent and flexible trial-and-error mechanism. In December 2019, a pilot programme was launched in Beijing. To intensively advance the trial work of fintech innovation regulation, the PBoC supports the expansion of the pilot program to cover the cities of Shanghai, Chongqing, Shenzhen, Hangzhou, Suzhou, as well as Xiong’an New Area of Hebei, by guiding licensed financial institutions and tech companies to apply for an innovation test.’ “
In media reports, in the recent past, China has emerged as the capital of the crypto ecosystem, accounting for nearly 90% of trading volumes and hosting two-thirds of bitcoin mining operations. The People’s Bank of China tried hard to curtail this exuberance but achieved limited success.
The benefits of Central Banks Digital Currencies (CBDC) are:
-paper money comes with high handling charges and eats up 1% to 2% of GDP, which can be spared;
-by acting as an antidote for tax evasion, money laundering and terror financing, CBDCs can boost tax revenues while improving financial compliance and national security;
-as a tool of financial inclusion, direct benefit transfers can be instantly delivered by state authorities deep into rural areas, directly into the mobile wallets of citizens who need them
-CBDCs can provide central banks an uncluttered view and powerful insights into purchasing patterns at the citizen scale
A digital currency would be beneficial especially for Europe, which has a dramatical need to increase is own cash creation power without borrowing on international markets. The expertise of the PBoC could be transferred through cooperation within the framework of the new Investment Treaty, whose scope should be enlarged to various aspects of economic cooperation, alongside the path of the Italian Silk Road MOU.
An investigation carried out by the Bank for International Settlements shows that most Central Banks are working out hypotheses of digital currencies, but China is the pioneer, as in all other social innovations and technologies..
2.An inversion of attitudes between Europe and USA about strong and weak currrencies
The stress since the start of the Euro had been on the idea of “stability”, -whilst, on the contrary, the monetary policies of the FED and of the Bank of China were stigmatized as politicized and volatile-. Such stress has been reversed by the most recent attitudes of European Institutions.
The ECB had already had recourse, against its natural inclination, to Quantitative Easing, after that Abe and Obama had already made massive use of this instrument following to the Subprime crisis, so rendering it “politically correct”. At the occasion of the Coronavirus crisis, the ECB has made recourse again, more than before, to this instrument, so resulting to be the major source of emergency liquidity in favor of Member States. Now we have a further panoply of emergency and recovery funds, which do not comply any more with the preceding monetary orthodoxy, and that could, and should, open the way to the total reversal of past policies .
Now, it is US president Trump, that, for the sake of preserving the role of the dollar as the reserve currency by excellence, is extolling the virtues of stability, as compared with the weakness of Euro and of Yuan .
This necessitated abrupt change of the European financial policy, though maintained, uo to now, within a strict political and ideological control, cannot avoid to shadeimportant doubts on the traditional metapolitical grand narrative of Euro.
According such narrative, this currency was a cornerstone of the European integration because it embodied to the utmost extent the stability goal attainable by the preeminence of economy over politics, which purportedly was the civilizational achievement of the European Union, rendering it superior to any other political form in history (including the United States). This hegemony of economics corresponded to the ideal of “Douce Commerce” expressed by Benjamin Constant as the landmark of representative constitutionalism, which, by this way, was supposed to set the concrete bases for the “Eternal Peace”, which, according to Kant, would have been grounded on the preeminence of merchant values on the ones of glory a and honour, typical of old monarchies.
Europe could have achieved such goal of “Douce Commerce” because, as stated eventually by Juenger and Schuman, WWII would have shown to Europeans the necessity of avoiding wars, and, therefore, to find a peaceful organization of Europe. Such peaceful Europe would have required giving up strong national identities, and the related cultural atmosphere oriented towards war. This was even the characteristic which distinguished Europe from U.S. (for Kagan, “Europe coming from Venus, US from Mars”). According to this narrative, US hegemony constituted even a blessing, avoiding to Europe the burdens of war and allowing to it to carry out that historical experiment.
Following to a mix of marxist determinism and Rostow’s Development Theory, mainstream Euro ideology maintained that wars are a by-product of economic contradictions. In particular WWII would have been the outcome of Weimar inflation and Great Depression, which, by disenfranchising the German middle-classes, had created the psychological background for Nazi revisionism. By contrast, the new stability policies of the Federal Republic would have been the main instrument for preventing the falling back of Europe, and especially of Germany, into the “cultural atmosphere” of the Thirties (the “Destruction of Reason” described by Lukàcs), which had rendered the Axis possible.
The problem for these theorists is now that the present fall of the economic background set up with the Euro could make possible a disenfranchisement of middle classes parallel to the one of the Thirties and their orientation towards populism, which, at its turn, could make possible the rebirth of violent forms of empowerment (“Selbstbehauptung”).
Albeit the ideological Byzantinism of the above narrative is self-evident, there is something true in its reasoning. The end of the illusion of an unprecedented richness of Europeans, which has been so well cultivated in post-WWII Europe – by the ERP, by the mythologies of neo-realism and of dolce-vita, of welfare State and Occidentalism, had been seriously set in doubt by the 1973 Oil Crisis, by the crises of the Twin Towers and of Subprimes and by the comparative reduction of Europe’s GNP as compared with China and developing countries. The higher growth rate of such countries not having given up to their sovereignty and to a realistic orientation of their ruling classes have shown that Rostow’s Development Theory is not apt to explain the real economic trends of the world.
The need, by European Institutions, to follow , for salvaging European economy, paths alternative to monetarist orthodoxy, such as Quantitative Easing, monetization of debt, deficit spending, State aids, shows that there is no unavoidable trend in world economy, and that Europeans are free again to choose their economic destiny.
According to me, the case of Italy is the most perspicuous. Italy’s economy had grown at a very fast pace before and during the two world wars because the ambitions of the unified State had led it automatically towards expansionism and militarism. Eventually, the huge industrial structures and widespread industrial culture created for the needs of war had purposefully not been destroyed by the Allies because they would have resulted to be too useful after the war. The conversion of Europe from a war economy to a consumption society had brought about the so-called “Italian Miracle”. Unfortunately, since it was just an epiphenomenon of wars, such “Economic Miracle” finished less than 30 years after the war (in 1973, with the Oil Crisis), even if this abrupt end was masked by the increased salaries,inflation , the extension to middle classes of social benefits already accrued to blue collars, and a large dose of propaganda, by State, media, enterprises and trade unions.
3.A further step forward
Presently, the need for a realistic approach to the management of economy is felt more than ever.
At knowledge level, it must result clear that economy is a human science, and, as such, it is not an exact science. As a consequence, all of its theories, stories, approaches, solutions, are always very subjective.
Second, at meta-political level, the fact that war has not appeared, at least in Europe since WWII, in the traditional forms of direct and massive violence, does not impede that a “war without limits” is carried out every day under our eyes, with propaganda,mafia, excellent murders, military expenses, ethnic wars, terrorism, espionage, extraordinary renditions, humanitarian wars. A State which gives up to counter this kinds of violence carried out by other States or organizations against itself, its territory, its citizens, its economy, is damned to disappear within a short period of time.
At political level, this situation is opening up the possibility to discuss concretely each specific issue on a solid basis, showing which have been the mystifications and the mistakes of the past, the political distortions influencing still now a correct strategical approach, and in any case proposing alternative paths, apt to reverse the structural weaknesses of European economies.
It is loughly is that, when thinking of the “necessary reforms” of our economies, everybody thinks of the reduction of employment and social benefits, as well as a further minimization of the role of States.
Unfortunately, these processes, which have been the most evident causes of acceleration of Europe’s decline, are not the ones apt to reverse it. On the contrary, a serious “reform” should start from a thorough study (now possible thanks to Big Data), of what Europeans are really doing and of what the market really need.
There will be many great surprises.
Such study would bring us to ascertain that, today, the largest part of Europeans is not present on the labor market (because many women work at home, the number of pensioners is growing exponentially, young people do not start working before 20 years, there is a lot of unemployed and under-employed workers, sick persons and prisoners. Secondly, most people who are employed are producing things which are relatively not useful for European societies (such as the huge amount of commercial businesses, which now are almost bankrupt, or the production of luxury cars, which have no market, or military bureaucracy, deriving from the existence of 40 different armies), whilst, on the contrary, products and services which are badly needed, either for homeconsumption (such as education, research, industrial restructuring services, maintenance of territories), are not produced by anybody.
Today, the European market, left to itself, is not able to match society’s needs with workforce availability. Europe must set up, first of all, the Big Data which will be able to map this situation and provide for a general plan for the next 7 years, during which people will be trained, financing will be provided, enterprises will be restructured, employees will be hired, in such way that all necessary activities will be carried out by somebody, and that everybody finds an occupation corresponding to his skills.
All this has not very much to do with Keynesianism, which is just one of the options within the prevailing American- type liberalism. We cannot call it “corporatism”, nor “State command economy”, both having resulted, in the government practices of the XX century, to be just two alternatives compatible with Western globalization, all of them falling within the Aristotelian definition of “Chrematistiké”.
That “good government”should be an application, in practice, of the ideas of Aristoteles about “oikonomìa” as alternative to “chrematistiké”, or, in a more recent application, of the ones of Hilfereding, about “Staatsmonopolistischer Kapitalismus” or of Kalecki, about “military Keynesism”.
4. A European NATO-like Emergency Service
The problem of the European post-Coronavirus interventions is that the very complex structure of the European Union renders its intervention slow, ineffective and not transparent.
1)each action has to go through:
-a proposal phase (through Member States, and Commission);
-a decision-making phase (ECB, Council, Parliament)
-an implementing phase (Financial markets, Governments and Parliaments)
-an administrative phase (Ministries, Regions, banks);
-a jurisdictional control.
b)Each phase imply lengthy negotiations with egoistic interests, which hinder emergency interventions (Member States, Central Banks, political parties, Ministers, enterprises, professions, regions, cities):
-disputes about the nature of the aids;
c)it is impossible to understand really what happens (Byzantinism of European regulations; uncomplete nature of compromise regulations; need of national implementing activities;fraudulent implementation):
-the swinging attitudes of financial markets;
-the upredictable impact of the financial compact;
-the ever changing decisions of parliaments, goverments, regions and mayors.
The EU authorities would have liked to be able (as Josep Borrell dreamed), to send armored convoys with European flags to bring first aid to victim popuilations. On the contrary, whilst Chinese, Russian, Cuban and Albanian aid arrrived physically and officially within a few days from the requests of the relevant governments, European aid has nort yet arrived, and will never arrived with military medica and with European flags.
Under these conditions,how to be surprised that most Italians consider China as the most friendly country?
This constitutes an objactive drawback of the European system. Ursula von der Leyen, David Sassoli,Josep Borrell, Paolo Gentiloni and Dubravka Suica must work harder on that, creating a complete system of European enìmergency intervention, if necessary as a joint intergovermment project, like NATO, with own dotations, own personnel, equipment, stock, commandment, without being bound to discuss everything with everybody.