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PIIGS Can Fly, Episode #2. Host: Davide Vittori

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PIIGS Can Fly comes back on air for its second show, after the interview with Keynesblog.com cofounder Guido Iodice – an accurate report is available here.

This time our guest is Davide Vittori (1987-), blogger for Pagina99, a fairly recent national newspaper, and – probably most surprising given his extremely young age – president of the Rimini section of the Gramsci Institute. His current fields of research are European Political Economy and the international role of the European Union. On this blog you can find a sample of Davide’s work, a publication on the Eastern Journal of European Studies, titled “A Political Crisis in an Economic Tempest”.

In his essay, Vittori openly states that as a result of particular political choices, the European market is based on neoliberal values. So, asks Nicolò, what kind of values?
According to Vittori, it is fundamental to remember that the EU, ever since Maastricht, has been going through a degeneration, unexpected to some extent. Macroeconomics phenomena had been depoliticized for a long time, but it was the raging insurgence of the crisis that turned such phenomena into political issues, resulting in the wave of protests we all have been witnessed in these past few years.

Neoliberal values, he says, are firmly based on a key assumption: the centrality of macroeconomic data, a clear example of which are the Maastricht parameters. These values translated in shocking policies for Europe, taking the continent to the brink of collapse.

The emergence of the troika is but a consequence of an unresolved conflict between macroeconomic policy, which is largely devolved to the EU, and the almost exclusive power member States have over welfare policy.

Now we may ask ourselves: “What kind of policies are we talking about, in particular?”.

First and foremost, Vittori says, the deficit/GDP 3% ratio, a limit that seems to actually be worth just for the weakest members. Secondly, the “golden rule”, term he uses to refer to the various balanced budget amendments introduced in many constitutions – such as the Italian one – as a necessary condition to be a part of the European Stability Mechanism.

In the general trend labour reforms all around the EU stress mainly flexibility for the “exit” side of the market, and very few on the “inclusive” side. That is, policies which make easier to fire, but not directly to hire workers.

Taking a look to Italy in particular, there is a sort of “unanimism” towards large privatization plans of public services, regardless of the consequences on the weakest members of our society.

Summing up, Vittori believes that the values sketched here resulted in dramatic effects all around Europe. Nevertheless, EU technocrats like Commissioner Olli Rehn seem to be far more concerned with the public debt than the extremely poor economic performances, or the record-high unemployment.

As Guido Iodice did last week, Vittori points out the example of Britain after the Great Depression in early 1930s, which pursued successfully expansive policies even if its public debt overcame by far the 100% debt/GDP ratio. Likewise, he also thinks that “expansive austerity”, highly fashionable in the past few years, has no real basis; the main point is to boost aggregate demand again.

Nicolò then turns to a more “political” reasoning: he wonders how austerity began to be perceived as “automatic”, like a standard emergency procedure, pushing aside much of the regular political debate in most troubled member states.

Vittori says that after the Maastricht Treaty it was commonplace that the “European economy is too important to be left to short-sighted politicians”. An over-the-top trust in economic “laws” – term he rejects – led policy makers to neglect any “emergency” mechanism in case of major threats to the architecture of the Union. For instance, a regular withdrawal procedure was only introduced in 2009, while withdrawing from the monetary union without leaving the EU itself is still not possible.

Mattia notes how throughout his paper, it is highlighted that the current constitutional architecture of the EU lacks coordination between economic and fiscal policies. So, he asks, what are the consequences?

Vittori answers that, even if supranational institutions strive to extend their powers in fiscal matters, member States want to keep fiscal policies into their own hands for nothing short of a democratic issue.

Therefore, monetary and fiscal policies are separated as a result of a compromise: a single market is established, but national sovereignty is still relevant. According to Vittori, it is clear that such a framework features inherent and unavoidable imbalances, and that EU monetary policies, while effective for a few states, are in fact ineffective for many others.

Against the the widespread rhetoric about the PIIGS, Davide recalls that Italy has been achieving for the past 20 years a structural primary budget surplus. That is, yearly revenues exceed expenses if interest expenses – which are very significant – are not included. Meanwhile, many other relevant countries in the Union, such as France, have a structural budget deficit.

Nicolò goes on to present a key point of some “fringes” that oppose expansive policies for the Euro Zone. According to them, abundant liquidity injections would have a counter-effect in devaluing the euro against the dollar. The status of “reserve currency” the euro recently acquired would be damaged, with a significant advantage for the American competitors.

Vittori is not convinced by this objection: “We must think about our business first”. Negative consequences on the dollar/euro exchange rate are way less important than skyrocketing unemployment and the disruption of social bases of the European society itself.

Let us now turn to something apparently very different: Davide’s other field interest, organized crime.

Coming from Rimini, Italian East Coast, Vittori lives very close to the small independent Republic of San Marino, which is perceived by most people living around as nothing less than a tax haven. An enormous amount of organized crime capitals was “laundered” in San Marino banks, at least until Italian authorities managed to force the small country to withdraw banking secrecy rules.

Even if the government took some important steps forward, at least against San Marino, Italy still lacks a legislation against “autoriciclaggio” (roughly translatable as “self money-laundering”).

Money laundering is still an economy, of a different kind; that’s why it is important to study it”, he holds.

The EU market unification has been an enormous opportunity of expansion for Italian organized crime. Nowadays, its activities are heavily present all around the Union, notably in big seaports such as Hamburg, Rotterdam, and Marseille; an active Sicilian Mafia “cell” was discovered even in far Lithuania.

Mattia extends the argument to an eternal plague of Italian politics: corruption.

Vittori says that unfortunately, even since 1800s, Italy is used to political incoherence and this prevented a “moral bond” between citizens and politicians from rooting; a misbehavior widespread among civil servants as well.

However, he thinks it is dangerous, as it often happens in Italy, to equate politics and corruption, because it harms the legitimacy of all democratic institutions.

Nicolò then moves on to a hot topic in European policy-making: lobbying. Can its regulation be effective to counteract corruption?

Vittori has a strong preference for public-funded politics, which he sees as the best remedy against the spread of corruption. He is highly skeptical of the American lobby-funded system, even going as far as calling it “legalized corruption”: politicians are at risk of being “blackmailed” by their wealthy supporters with a remarkably undemocratic result. According to him, the recent – and successful – campaign against public funding for parties in Italy has been a case of “throwing away the baby with the bathwater”.

We come to the end of our conversation trying to throw in a spark of light. Are EU elections, Nicolò asks, an opportunity to reignite a real debate about the economic policies of the Union?

Vittori agrees: a polarized electoral campaign – even if a shallow one – can be very useful. Campaigning on truly European issues can be a great starting point for European parties to discuss ways to overcome the faux-technique bases of austerity and to put politics in the first place again.

So, if a revolution is coming, can students be the first revolutionaries? Guido Iodice thinks they can and, in fact, already are. Vittori, instead, affirms that his philosophy is more similar to a “know your enemy” one. Leaving classrooms, as Iodice advised, does not appear to him a productive choice.

Davide concludes: European integration had a very desirable consequence, because it dismantled the Westfalian system of power struggles between nation-states in the continent. The traditional functionalist approach to integration is now in doubt because, so far, the economic integration did not result in a real political integration: we have been waiting for a spillover which has yet to fully happen.

What we need today is to move on the foreground the political side of European integration. Without common politics, the common market cannot fully develop.

Davide Vittori is on twitter: @DaveVitto.
Davide’s blog on Pagina99 is here: Areopagitica.

The website Davide’s group on organized crime: Gruppo Pio La Torre.

This report was kindly delivered to you by Roberto Volpe, @afoxinspace.

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