The “endless” 2008 crisis is producing difficult growth, excessive unemployment, increasing inequalities. All this is stimulating interest in the recurrent tendencies in capitalism to “secular stagnation”. The term was coined in 1938 by Alvin Hansen, who argued that the depression of the Thirties was not so much a severe cyclical crisis as a symptom of the exhaustion of a long-term dynamic. In his opinion counter-cyclical public spending was not enough to stabilize employment, but large collective projects were necessary, like the electrification of rural areas, the redevelopment of run-down areas, and the conservation and protection of natural resources, so as to identify new investment opportunities and restore dynamism to the economic system. He underlined the importance of public investment for re-galvanizing the economy and bringing about full employment, which required new inventions, the discovery of new resources, and an increase in a declining population.
Many of Hansen’s analyses have become newly topical since the faltering economic recovery (in some countries) and the long stagnation and repeated recessions (in others), following the global crisis of 2007/2008, caused by an enormous increase, not of the public debt, but of private debt. It was the inevitable deleveraging following this crisis that created strong deflationary pressures. In such situations a tweak of monetary policy and abundant use of additional “non-conventional” tools prove, even if providential, inadequate. One enters inevitably an ever-deepening “liquidity trap” with minimal effects on agents’ behaviour. On the other hand, monetary support and credit subsidiaries via central banks function by stimulating a paradoxical new increase in debt, which may gradually reinforce vulnerability to financial and economic instability. This is shown by the fact that debt, excess leverage by the banks, the possibility of creating bubbles, and risks that are out of control are by no means lower now than their already high levels before the crisis. Fiscal policy interventions and direct public investments become essentials.
Hansen’s thesis may have been belied by the exceptional development of the following “thirty glorious years” at the end of the second world war, but it nevertheless contained some prophetic elements. There was something in Hansen’s concerns that is proving very fertile today, and that is his research, underlying the analysis of “secular stagnation”, into the deep reasons for the underemployment equilibrium identified by Keynes. Some economists, such as Michael Kalecki and Paolo Sylos Labini, had been trying, ever since the years immediately following the war, to get beyond the weaknesses in Hansen’s account, shifting the focus from the decline in the inclination to consume to the slowdown in investment caused by the behaviour of the great oligopolistic companies. Rather than echoing the concern for what, already in the mid-1970s, seemed like capitalism’s structural reluctance to invest, the Rehn-Meidner Plan of Swedish social democrats took up such ideas.
Today, some other economists such as L. Summers invoke the need for a “politicization” of investment, openly echoing the “socialization of investment” that Keynes and Minsky spoke of. The point is that this reproduces conditions strikingly similar to those studied by those two afore-mentioned economists: the destruction of net financial assets hurts all operators, investments collapse but profits remain unchanged, and there is a reduction in income as well as mass unemployment and debt deflation. To prevent the destabilizing forces taking the upper hand, Keynes and Minsky theorized that the intrinsic instability of capitalism entails, not just new regulations, but the need for large-scale public fiscal stimuli – the very same direct intervention of the state (or EU in today’s Europe) that neo-liberals are the first to demand when it comes to saving the banks and financial operators but who otherwise are satisfied with cuts and privatizations.
Today, the theme of investment returns insistently and it lays bare the serious fallacy and inadequacy of the Fiscal Compact. Employment and investment for a “new model of development” emerge as the crucial questions. But if the creation of new jobs is the decisive test, it is alarming that for the European – and Italian! – governing classes, making use of market-based indirect incentives and reducing fiscal pressure seem to be the only possible solution. The option of intervening via public expenditure to re-launch investment and employment is not even considered, given that all the sources agree that, on the basis of the same resources used, programmes of expenditure are more effective in boosting growth than programmes of simple tax cuts. In the Report I coordinated to accompany the Jobs Plan 2013 of the Italian trade union, Cgil, we calculated that, with €5 billion, the public sector in Italy – in all its various central and local forms, and with serious, properly organized projects – could directly create 400,000 jobs within a year.
Indirect stimuli and generic money transfers or monetary bonus are not enough – still less if through an indiscriminate reduction of taxes – to re-launch employment and give a new dynamism to the economy. We need large collective projects, from territorial improvement to urban renewal, from the development of new networks to environmental regeneration. Discussion should once again centre on the role of “labour” and the “ends” of a “new model of development” that, as it did in the work of the unforgettable Tony Atkinson, should focus on “full, good employment”. With the awareness that the revolutionary intrusiveness of the goal of full employment compared with the spontaneous working of capitalism is at its greatest just when the economic system does not naturally create jobs and is preparing for the jobless society. But leaving space for a jobless society would mean interposing nothing between us and catastrophe.
Laura Pennacchi, a former junior minister of state at the Italian Ministry of the Treasury, Budget and Economic Planning, is a member of the Scientific Committee of Fondazione Basso and co-ordinator of the National Economy Forum of CGIL (the most important Italian trade-union confederation).