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Times of crisis: the return of nation-states and the need to avoid wasteful public spending

Recent crises, from the COVID-19 pandemic to the war in Ukraine, from environmental disasters to the issues affecting global economies – recession, the rise in energy and raw material prices, the shortage of intermediate goods (microchips) and delays in maritime transport – have highlighted the significance and import of nation-states. In fact, national interests are back in the spotlight and seem to be overshadowing the globalist economy, i.e. the ideology of market supremacy. Values and interests that resounded over centuries of nationalism are now echoing back to us, magnified by the screeching tones of sovereignism – and the whole world starts panicking, hit by a shock wave generated by the inequalities ingrained in a multipolar society. New geopolitical tensions are deepening ancient conflicts, while ambitious grandstanding is putting considerable strain on the economic, financial and social relationships that have been shaping international affairs for the past 30 years. Essentially, we’re finding ourselves in the midst of a significant “age of uncertainty” and no clear, reassuring answers are in sight.

Here arises, in a different form, another substantial issue that has been dominating contemporary political debate: the issue concerning the relationships between state and market, emerging from the critical reassessment that’s being explored in political and economic literature of western democracies in particular.

In a nutshell, current debate is prompting us to consider the need to have “more state” and “more market” at the same time. In other words, a better, fairer and more efficient state that manages public spending more effectively, along with a fiscal regime working as both incentive and equaliser, accompanied by a well-regulated open market able to nurture entrepreneurship, competitiveness, meritocracy and employing resources as a support to industrial growth and economic development, as well as – back to “more state” – leading to more widespread well-being in society.

To gain a better and deeper understanding of Italy’s current situation, we can rely upon the wise words contained in “Bentornato Stato, ma…” (“Welcome back state, though…”), a book by Giuliano Amato, published by Il Mulino, describing a state “free from its old habits and distant, no matter what, from the hubris of authoritarian centralisation.” Amato is indeed a man of learning who knows about governance, with considerable experience as a key political player, the competence of a civil servant (as former president of the Italian antitrust authority) and the sound knowledge of a distinguished jurist (he’s just been elected president of the Constitutional Court of Italy). He explains that a return to state intervention, precisely in times of great and dramatic crises such as the ones we’re experiencing and that we mentioned above, must be able to withstand the pressure generated by political patronage, corporations and powerful lobby groups (high-tech multinationals included) and to make strategic decisions so that available resources are dedicated to general interest and common good objectives.

We’re not talking about Italy becoming a “charitable state” trapped by the pressure to perpetuate public spending driven by political patronage (thus exacerbating the increase of public debt, which snowballed in the 1980s and was kept in check by the constraints involved in joining the euro, only to flare up again after the recent introduction of ineffective measures such as the “citizenship income” – a welfare allowance dependant on income and citizenship – and the very costly “quota 100” pension scheme, aimed at encouraging hundreds of thousands of people to go into retirement), nor are we talking about a state taking on the direct management of financial enterprises (except under temporary emergency conditions). We’re talking about a state able to “juggle” temporary pressures and to prioritise political decisions, both during this short-term crisis and over the much longer period that recovery strategies require.

Amato’s book clearly identifies a risk: that of capitalising on the chance provided by the considerable resources made available by the PNRR (the Italian recovery and resilience plan), as per the indications of the EU’s Next Generation Recovery Plan, to reshape public spending in a way that will suit some twisted agenda aimed at reviving and strengthening support for unscrupulous, welfarist political forces. Moreover, knowing EU culture and its thinking patterns very well, Amato reminds us how the current marginalisation of ordoliberalism and of the obsessive ideology that all EU countries’ budgets should be equal does not mean we should just go on a public spending binge – on the contrary, what we need is a spending culture based on productive investments, rather than shaped by political favours (namely, corporations and politically affiliated businesses). Just as Mario Draghi, as former president of the ECB, insightfully observed when commenting on the difference between “good debt” and “bad debt” – a sensible and extraordinarily valuable tactical remark, especially in these times of crisis and war.

The EU recovery, including its vital need for autonomy and strategic safety, currently under threat by authoritarian governments, is founded on principles of foreign policy and joint defence, energy and scientific and technological research, and as such requires outstanding investment policies coordinated by the states and structured along supranational lines – the essence of the EU – in order to contribute to a “new global order”. It’s a “public” responsibility that ties liberal democracy to market economy.

Ultimately, Amato’s excellent book clearly illustrates the importance of “political far-sightedness” and “governing democracies”, and outlines a positive future for the reassertion of democracy and its values, authoritarian governments notwithstanding, as well as for practices allowing social powers and their representatives – the “intermediate bodies” on which liberal democracy is based – to play a broader and more significant role.

Recent crises, from the COVID-19 pandemic to the war in Ukraine, from environmental disasters to the issues affecting global economies – recession, the rise in energy and raw material prices, the shortage of intermediate goods (microchips) and delays in maritime transport – have highlighted the significance and import of nation-states. In fact, national interests are back in the spotlight and seem to be overshadowing the globalist economy, i.e. the ideology of market supremacy. Values and interests that resounded over centuries of nationalism are now echoing back to us, magnified by the screeching tones of sovereignism – and the whole world starts panicking, hit by a shock wave generated by the inequalities ingrained in a multipolar society. New geopolitical tensions are deepening ancient conflicts, while ambitious grandstanding is putting considerable strain on the economic, financial and social relationships that have been shaping international affairs for the past 30 years. Essentially, we’re finding ourselves in the midst of a significant “age of uncertainty” and no clear, reassuring answers are in sight.

Here arises, in a different form, another substantial issue that has been dominating contemporary political debate: the issue concerning the relationships between state and market, emerging from the critical reassessment that’s being explored in political and economic literature of western democracies in particular.

In a nutshell, current debate is prompting us to consider the need to have “more state” and “more market” at the same time. In other words, a better, fairer and more efficient state that manages public spending more effectively, along with a fiscal regime working as both incentive and equaliser, accompanied by a well-regulated open market able to nurture entrepreneurship, competitiveness, meritocracy and employing resources as a support to industrial growth and economic development, as well as – back to “more state” – leading to more widespread well-being in society.

To gain a better and deeper understanding of Italy’s current situation, we can rely upon the wise words contained in “Bentornato Stato, ma…” (“Welcome back state, though…”), a book by Giuliano Amato, published by Il Mulino, describing a state “free from its old habits and distant, no matter what, from the hubris of authoritarian centralisation.” Amato is indeed a man of learning who knows about governance, with considerable experience as a key political player, the competence of a civil servant (as former president of the Italian antitrust authority) and the sound knowledge of a distinguished jurist (he’s just been elected president of the Constitutional Court of Italy). He explains that a return to state intervention, precisely in times of great and dramatic crises such as the ones we’re experiencing and that we mentioned above, must be able to withstand the pressure generated by political patronage, corporations and powerful lobby groups (high-tech multinationals included) and to make strategic decisions so that available resources are dedicated to general interest and common good objectives.

We’re not talking about Italy becoming a “charitable state” trapped by the pressure to perpetuate public spending driven by political patronage (thus exacerbating the increase of public debt, which snowballed in the 1980s and was kept in check by the constraints involved in joining the euro, only to flare up again after the recent introduction of ineffective measures such as the “citizenship income” – a welfare allowance dependant on income and citizenship – and the very costly “quota 100” pension scheme, aimed at encouraging hundreds of thousands of people to go into retirement), nor are we talking about a state taking on the direct management of financial enterprises (except under temporary emergency conditions). We’re talking about a state able to “juggle” temporary pressures and to prioritise political decisions, both during this short-term crisis and over the much longer period that recovery strategies require.

Amato’s book clearly identifies a risk: that of capitalising on the chance provided by the considerable resources made available by the PNRR (the Italian recovery and resilience plan), as per the indications of the EU’s Next Generation Recovery Plan, to reshape public spending in a way that will suit some twisted agenda aimed at reviving and strengthening support for unscrupulous, welfarist political forces. Moreover, knowing EU culture and its thinking patterns very well, Amato reminds us how the current marginalisation of ordoliberalism and of the obsessive ideology that all EU countries’ budgets should be equal does not mean we should just go on a public spending binge – on the contrary, what we need is a spending culture based on productive investments, rather than shaped by political favours (namely, corporations and politically affiliated businesses). Just as Mario Draghi, as former president of the ECB, insightfully observed when commenting on the difference between “good debt” and “bad debt” – a sensible and extraordinarily valuable tactical remark, especially in these times of crisis and war.

The EU recovery, including its vital need for autonomy and strategic safety, currently under threat by authoritarian governments, is founded on principles of foreign policy and joint defence, energy and scientific and technological research, and as such requires outstanding investment policies coordinated by the states and structured along supranational lines – the essence of the EU – in order to contribute to a “new global order”. It’s a “public” responsibility that ties liberal democracy to market economy.

Ultimately, Amato’s excellent book clearly illustrates the importance of “political far-sightedness” and “governing democracies”, and outlines a positive future for the reassertion of democracy and its values, authoritarian governments notwithstanding, as well as for practices allowing social powers and their representatives – the “intermediate bodies” on which liberal democracy is based – to play a broader and more significant role.