French economist Thomas Piketty has analyzed in an article for the newspaper The World The report presented to the European Commission by Mario Draghi, former president of the European Central Bank, on Monday. Draghi’s plan, which aims to ensure that the European Union does not fall behind the superior economic development of China and the United States, proposes that the 27 countries make a “massive injection” of funds into the organisation: an increase of 800 billion euros per year in investment, which represents approximately 4.4% to 4.7% of the bloc’s GDP.
The EU would thus return to investment levels not seen since the 1960s and 1970s. The former ECB president insists that these funds must be allocated to research, the development of new technologies and green infrastructure, and to finance this he suggests resorting to the issuance of European debt, as was already done with the recovery plan after the pandemic. “Let us be clear from the beginning,” says Piketty about the proposal, “it is a step in the right direction.”
The French professor and economist, who specializes in economic inequality, applauds Draghi for having proposed a policy that “has the immense merit of ending the dogma of budgetary austerity,” an approach that, he says in the column published in The Worldhas unnecessarily harmed European economies.
Piketty notes that some quarters, especially in Germany and France, have defended austerity by arguing that “European countries should do penance for their past deficits and enter a long phase of primary surpluses.” This would imply, according to this position, that taxpayers should “pay much more in taxes than they receive in spending.”
“In reality, this austere dogma is based on economic nonsense,” he says. “Firstly, because real interest rates have fallen to historically low levels in Europe and the United States over the past twenty years: less than 1% or 2%, or even negative levels in some cases. This reflects a situation in which there is a huge manna of savings that is under- or badly used in Europe and on a global scale, ready to be poured into Western financial systems with hardly any return. It is up to the public authorities to mobilise these sums and invest them in training, health, research and new technologies, large energy and transport infrastructures, thermal renovation of buildings, etc.”, adds the French economist, in line with Draghi’s proposals.
He also defends Draghi’s European debt strategy: “As for the level of public debt, it is indeed very high, but not unprecedented.” He adds: “What history shows, however, is that such high levels of debt cannot be dealt with using ordinary methods: exceptional measures are needed, such as higher taxes on private assets.”
A “fairly traditional technophile, mercantile and consumerist approach”
Piketty is also critical of some key aspects of the Italian report. While welcoming the proposal for a higher level of investment, he criticises him for adopting a “fairly traditional technophile, mercantile and consumerist approach”, focused on granting public subsidies to large private companies in sectors such as artificial intelligence, the environment and the digital field. “There are many reasons to believe that Europe should take the opportunity to develop other modes of governance and avoid once again giving full power to large private capitalist groups to manage our data, our energy sources or our transport networks”, he criticises.
As for investment in research and higher education, Piketty agrees with Draghi that the European Research Council should directly fund universities, but he says that the plan is generally “too elitist and restrictive”. The Italian proposes focusing only on a few centres of excellence in large cities, something that Piketty considers “economically dangerous and politically unacceptable” by leaving out economically less favoured regions. “Public health and hospitals are almost totally absent from the report”, he adds.
“If France, Germany, Italy and Spain, which together account for three-quarters of the eurozone’s population and GDP, manage to agree on a balanced, socially and territorially inclusive compromise, it will be possible to move forward without waiting for unanimity and relying on a core group of countries (as the Draghi report envisages). This is the debate that Europe must now engage in,” concludes the French economist.
Source: www.eldiario.es
