snakes and ladders of europe - amartya sen
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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.
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