Snakes and ladders of EuropeAmartya Sen, «The Economic System We Need», 10 May 2012

The author

• Amartya Sen is an indian economist and

philosopher, who mainly deals with welfare

economics and economic and social justice.

• He won a Nobel Prize in 1998 for his contribution to

the welfare economics with the social choice

theory.

• He is currently teaching at Harvard University

(Economics and philosophy).

Elena Colli – «Diritti e cittadinanza europea» – LM Sociologia - Università degli studi di Milano-Bicocca – A.A. 2014/2015

The Europe situation as a board game

The ladders: if you happen to

hit the bottom, you have the

bonus of going straight up to

its top

The snakes: you come straight

down to the tail, nullifying

some of the progress you

made earlier

What kind of snakes is Europe facing right now, and what are the ladders that are

potentially available?

Structure of the article

The economic crisis

Two separate issues: democracy and economics

The “Euro” question

The global recession

Where are the ladders?

1. The economic crisis

In an economic world that is still emerging very slowly from the gigantic crisis in 2008...

What is as closer as a snake than a huge programme of comprehensive and indiscriminate economic austerity?

Languishingdemand

Hugeunemploy

ment

Very lowgrowth

Demanding large-scale cutting

of every kind of government

expenditure

- including those that

decimate the lives of

vulnerable human beings

- Causing the avoid of the

possibility of economic

growth

2. Two separate issues: democracy and economics

Democratic priorities: need for governance by discussion

Economics: demanding exacting sacrifices from precarious European countries (highly restrictive monetary and fiscal policies)…

• Allowing the international financial institutions and rating agencies the power to commanddemocratically elected leaders

In contrast to

•Deliver the viability of their economics

•Guarantee the long-run continuation of the Euro within an unreformed pattern of financial unity

Would not…

•Undermined the popularity of European leaders

•Led to the downfall of the precarious national economies…But has already

Economic austerity has not been helpful to move these countries into a responsible

forward-looking recovery programme.

Europe would not be forced to face such a crisis but for the decision of the

centralized economic leadership of Europe to impose its parochial view of salvation

without public dialogue and simply asking to obey central orders.

• Problems on financial responsibilityand accountability for the large governmental expenditure

• Systematic violation of responsible action in many countries – not just Greece

From the frying pan…

•Of indiscriminate cuts

to satisfy the creditors

and to placate the

rating agencies

… To the fire

3. The Euro question

Damages to the single countries:

They had to give up the freedom of monetary policy and exchange rate adjustments (which have helped many countries in the past)

They have been forced into a “fiscal straitjacket” without getting a more

coordinated and integrated fiscal regime (as they have in the USA for example)

The decision to have a monetary union without a fiscal

union and no significant progress in political union

has substantial part in causing and intensifying the

crisis, even considering the financial transgressions

committed in the past

…The wonderful political idea of United Europe (A. Spinelli) has been

transformed into a precarious programme of incoherent financial unity

NO YESSo what is the

most feasible

solution?

This could cause huge political disruptions

This means marginalization of

European democracy

4. The global recession

All this is happening in the frame of the global recession, which began first

in USA and then engulfed the world, including Europe.

An example of global public reasoning: G-20 in London, 2009

There is no country in the world that remained completely immune to it (especially those economies that are more vulnerable and more

dependent on EU and USA)

What are we suffering today are mainly the consequences of the inadequacy

and weakness of the policy response to the crisis.

5. Where are the ladders?

Keynes theory

There is plenty of evidence that the best way of cutting deficit is to have economic growth (e.g. the II World War)

… State expenditure should be used to fix lags in market economy…

Beyond Keynes: Adam Smith

The market economy is very influenced and limited by:

- economic and social disparities- externalities- public goods and asymmetric information

...but it can be immensely important in itself, in providing - human security- looking after the problems of the sick, the disabled, the ill-educated, the economically and socially excluded, and the standard problems of the old and the very young

And not to forget…

The intellectual roots of the European welfare state, from

the socialist thought to the “socially enlightened ideas” of

humane leaders such as Bismarck)

The lessons of European traditional wisdom in economics and democracy

Which is needed is humane reasoning which involves:

Broad-minded economics

Capacious democratic politics

…But this is very far from the dominance of the“superior

economic thinking” coming from the central financial powers

of Europe.

… In conclusion

Europe has to avoid the combined snakes of

Authoritarian politics: marginalization of democratic decision making, relying on the financial pressures coming from the rating agencies and the parochial view led particularly by Germany on “how things should be done”

Unwise economics: monetary union without fiscal and political union

And to get the chance to meet the ladders of

Making good use of public reasoning, remembering the humane and enlightened intellectual roots of Europe

Re-elaborate the strategic role of State expenditure, not only to steady the market economy, but also for non-market operations to reach the lives of people that cannot get enough support from the market economy in itself.