Gerhard Bosch argues that after Brexit we need to prioritize social Europe, as that decision was a revolt against deregulated markets and social inequalities, and is a consequence of prioritizing the economy over welfare in Europe. The Juncker investment plan is an underfinanced placebo programme, and its expected leverage effect is a fantasy which undermines the EU’s credibility. An interesting alternative is the suggestion by the Confederation of German Trade Unions (DGB) to have a European-style Marshall Plan.
Others follow in this direction. Lawrence Summers makes the case for the return to public investment in infrastructure, as secular stagnation risks reinforce the argument for increasing it. Maintenance investment is particularly important, as prevention is cheaper than curing after the fact, but unfortunately there are little political incentives to do it, as there is little publicity involved in prevention. Borrowing to finance maintenance does not mean incurring new costs but shifting from the fast-compounding liability of maintenance to the slowly compounding liability of explicit debt. New infrastructure investments are also important, but here quality counts as much as quantity, and project should be required to pass a cost-benefits analysis.
Zane Rasnača discusses the European Pillar of Social Rights, an initiative for Europe to earn a “triple-A on social issues” which outlines 20 areas ranging from wages to equal opportunities, from health and safety to unemployment benefits, and formulates some principles to be adhered to or pursued. While the intent and the content is laudable, its uncertain legal status may distort the objectives if they become subjected to a merely economic logic.
For Jana Hainsworth, the success of this initiative hinges on whether the EU puts social rights at the heart of its work. Three core principles should inform the proposal: quality employment, adequate income support, and access to quality, affordable and accessible services. These should apply to every worker, irrespective of his/her type of contract, receiving remuneration equivalent to the level of an adequate minimum wage; every person not working should be entitled to a guaranteed minimum income set at an adequate level; and everyone should have access to quality, affordable and accessible services.
Zsolt Darvas inquires why it is so hard to reach Europe 2020’s poverty target. The fault lies with the indicator, which is not an adequate measurement of poverty but rather of income inequality. Social issues receive little attention in the European Semester, but the few relevant recommendations targeted poverty, employability and social exclusion, not income inequality and thus cannot reduce the indicator. For the future it is important to develop new EU-wide poverty and income distribution indicators which consider the distribution of income within the EU as a whole.
Trump’s new economic ideology
Anatole Kaletsky offers a wide review of of many eminent economists who debated Trump’s new economic ideology on Project Syndicate. Joseph Stiglitz observes pessimistically that Trump promises Reagan’s socially regressive trickle-down economics, with the addition of a trade war with China and the loss of access to healthcare for millions, but this would eventually make his supporters even angrier. Simon Johnson observes that Trump’s economic priorities are reflected in his cabinet, which represents “a coalition of businesspeople who wrongly believe that protectionism is a good way to help the economy”, and “market fundamentalists” who are determined to cut taxes. Martin Feldstein is more optimistic, and welcomes the prospect of a reduction in top marginal tax rates but is skeptical about Trump’s promises of higher wages, more “middle class” jobs, and stronger economic growth under conditions of almost full employment (4.9%).
Even some liberal economists are hopeful about Trump, if only for his economic leaning. Dani Rodrik for example welcomes the president’s opposition to “free trade” deals laden with provisions that have nothing to do with trade. Robert Skidelsky also cherishes the huge project of infrastructure investment, the massive corporate tax and the pledge to maintain welfare entitlements as a kind of “modern form of Keynesian policy”, against the neoliberal obsession with deficits and debt reduction. Similarly, Kenneth Rogoff cautions against letting disapproval for Trump’s politics overwhelms rational judgments about his economic policies, which, while regressive, are likely to make the US economy move faster, at least in the short term.
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Also published on Medium.
– Italy 2017: Back To Austerity – Social Europe
– Panel verdict: the supreme court decision on article 50 – The Guardian