{"id":67461,"date":"2019-06-25T14:11:08","date_gmt":"2019-06-25T14:11:08","guid":{"rendered":"https:\/\/www.fondazionepirelli.org\/?p=67461"},"modified":"2019-08-30T14:31:21","modified_gmt":"2019-08-30T14:31:21","slug":"strategies-against-inequality-to-save-capitalism-and-liberal-democracy-from-decline-and-social-resentment","status":"publish","type":"post","link":"https:\/\/www.fondazionepirelli.org\/en\/corporate-culture\/blog\/strategies-against-inequality-to-save-capitalism-and-liberal-democracy-from-decline-and-social-resentment\/","title":{"rendered":"Strategies against inequality, to save capitalism and liberal democracy from decline and social resentment"},"content":{"rendered":"

\u2018Inequality is shaking up capitalism and politics.\u2019 This ominous statement appeared on the cover of Bloomberg Businessweek<\/em><\/strong>, one of the most widely read magazines on Wall Street, which featured an investigative report on wealth gaps in the US and throughout the world<\/strong>. Indeed, the headline foregrounds one of the key issues in the international political and economic debate, a topic that is coming up more and more often in reports by the International Monetary Fund, the OECD and even the famously elitist World Economic Forum. The theme is inequality. Between different areas of the world, between the countries boosted by globalisation (the new key players in the world economy) and those that have seen their incomes and expectations change (with negative repercussions on the stability of the middle classes). Between generations, with young people experiencing increasing angst and uncertainty. Between those riding the wave of the new digital economy, with its innovative productive processes, and those who\u2019ve been pushed aside by these phenomena, to the point of losing their jobs. Between north and south, as is the case in Italy. Four of the five European regions with the highest unemployment are in southern Italy (Sicily, Calabria, Campania and Apulia). Inequalities are wreaking havoc in well-established social and political structures, fuelling resentment and animosity<\/strong> (often exploited by skilled fearmongers in exchange for political approval). They are creating new cultural fractures and thwarting sustainable development strategies.<\/strong> It is therefore crucial for those who still possess a sense of responsibility and a forward-looking vision \u2013 be it in politics, business, or in areas where public opinion is shaped \u2013 to tackle these matters with great care.<\/p>\n

If we are to avoid the dangers of populism and nationalism, we require \u2018a more equal capitalism<\/strong>.\u2019 It\u2019s one of the arguments put forth by Raghuram Rajan<\/strong> in The Third Pillar: How Markets and the State Leave the Community Behind<\/em><\/strong>, recently published in Italy by Universit\u00e0 Bocconi Editore. Rajan is one of the leading economists of our day. He\u2019s been an executive at the International Monetary Fund and has served as governor of the Reserve Bank of India, the country\u2019s central bank. He now teaches at the University of Chicago, and is thought to be in the running for a Nobel Prize. In 2003, with Luigi Zingales<\/strong>, he also wrote Saving Capitalism from the Capitalists <\/em><\/strong>(whose title was echoed by Colin Crouch\u2019s 2018 book Can Neoliberalism Be Saved From Itself?<\/em>). Rajan is currently arguing that the state, with its sovereignist tendencies, and the markets, dominated by large financial groups and digital multinationals, have become excessively powerful, creating severe new social unbalance and inequality.<\/p>\n

There is \u2018greater polarisation\u2019 between social classes<\/strong>: \u2018The communities most vulnerable to price competition from foreign goods have lost middle-income jobs, held by people with medium to low levels of education, and have experienced progressive decline, while individuals from the upper middle class now have the possibility to compete \u2013 on the basis of merit and skills \u2013 for dream jobs in superstar companies.\u2019 Such a polarisation ends up crushing hopes, unleashing fears and accentuating conflict. It must therefore be avoided if we wish to preserve a market economy, in its most positive sense, and the very institutions of liberal democracy. Rajan believes that \u2018true capitalism flourishes in democratic environments\u2019 and that \u2018capitalism and democracy are symbiotic and combining them leads to prosperity.\u2019 We must therefore break the hegemony of the state and the market and restore the power of society, the \u2018third pillar\u2019 in question<\/strong>. This means nurturing an \u2018inclusive localism\u2019 that values open and welcoming communities, and giving these communities the means to address the needs of their citizens and encourage their participation, making good use of the mechanisms of subsidiarity. In other words, a new economic and democratic balance and a more equal economy.<\/p>\n

To understand more, it\u2019s worth reading Inequality: A Short History<\/em> by Michele Alacevich and Anna Soci<\/strong>, two economists from the University of Bologna who previously taught at Columbia University in New York. The authors explain how economic theory has mostly failed to address this topic, allowing so-called \u2018spontaneous market dynamics\u2019 to take hold. But in recent years, the effects of globalisation and the emergence of a digital economy have disrupted social and productive balances as well as traditional welfare policies, casting a shadow on the core values of liberal democracy itself. A serious critical analysis is therefore required. The authors cite the relevant existing literature (including works by Joseph Stiglitz, Jean-Paul Fitoussi, Dani Rodrik, Thomas Piketty and others) and insist on the need for social reforms and active policies, for example in the EU. In their conclusions, they write that \u2018how we solve the issue of inequality will determine whether we are able to give globalisation a human face, preserving the credibility of democracy as a viable political system.\u2019<\/p>\n

One of the main forms of inequality affects younger generations. Niccol\u00f2 Zancan details the problem in his book<\/strong> Uno su quattro. Storie di ragazzi senza studio n\u00e9 lavoro<\/em> (One in Four: Young People Not in Education or Work<\/em><\/strong>, Laterza). In Italy today, there are 1.2 million NEETs (not in employment, education or training)<\/strong>. They\u2019ve tried everything, from temporary positions found through employment agencies to underpaid internships, and from under-the-table odd jobs to useless education courses, before finally waving the white flag. But their surrender reflects a tragic social waste. It is a scathing indictment of a society that is becoming less and less inclusive. What to do? Invest in education, research, innovation (including social innovation) and new welfare models. In Italy and in Europe. \u00a0<\/em><\/p>\n

One thing, however, must always be clear: there\u2019s no such thing as a free lunch, as Lorenzo Forni, an economist at the University of Padua, states in the title of his recent book, Nessun pasto \u00e8 gratis<\/em><\/strong>, published by Il Mulino. The subtitle reads Perch\u00e9 politici ed economisti non vanno d\u2019accordo <\/em>(Why Politicians and Economists Can\u2019t Agree<\/em>) The answer? the former are obsessed with short-term approval ratings, the latter are too bound to doctrines. The crux of the matter is the budget. You can circumvent it for a while, but sooner or later you have to pay the bill. And it\u2019s the weak who have to pay. Forni mentions the cases of Argentina, Belarus and Spain. He also highlights the limits of protectionism and fiscal expansion in the US under Trump. And he warns that \u2018public deficit spending, which can only be paid back through growth,\u2019 is \u2018a modern attempt to reproduce the miracle of the five loaves and two fish.\u2019 He reminds us that growth can only be achieved through changes that make the economy more digital and competitive, not with loose spending hikes, tax cuts and printing money. In summary, yes to investments in research, education and environmental sustainability, but no to welfarism founded on debt<\/strong>.<\/p>\n

Once again, this leads us back to the ideas of John Maynard Keynes<\/strong>, which we discussed in a blog post last week. It isn\u2019t a matter of burdening the state with debt or overindulging in welfare policies (as some superficial and politically motivated readings have suggested in recent years), but rather of balancing budgets and stimulating investments that increase demand and employment. A contemporary adaptation of Keynes\u2019 lesson: reducing waste, consumption, transfers and tax evasion, and investing more in innovation, productivity and competitiveness. Reforms, infrastructure, high-quality training, welfare. This is the path to sustainable growth, to fighting gaps and inequalities<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

\u2018Inequality is shaking up capitalism and politics.\u2019 This ominous statement appeared on the cover of Bloomberg Businessweek, one of the most widely read magazines on Wall Street, which featured an investigative report on wealth gaps in the US and throughout the world. Indeed, the headline foregrounds one of the key issues in the international political […]<\/p>\n","protected":false},"author":1,"featured_media":67460,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[55,56],"tags":[],"class_list":["post-67461","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blog","category-corporate-culture"],"acf":[],"yoast_head":"\nStrategies against inequality, to save capitalism and liberal democracy from decline and social resentment - Fondazione Pirelli<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.fondazionepirelli.org\/en\/corporate-culture\/blog\/strategies-against-inequality-to-save-capitalism-and-liberal-democracy-from-decline-and-social-resentment\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Strategies against inequality, to save capitalism and liberal democracy from decline and social resentment - Fondazione Pirelli\" \/>\n<meta property=\"og:description\" content=\"\u2018Inequality is shaking up capitalism and politics.\u2019 This ominous statement appeared on the cover of Bloomberg Businessweek, one of the most widely read magazines on Wall Street, which featured an investigative report on wealth gaps in the US and throughout the world. 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