Origins of the financial crisis, underlying responsibilities and possible exit strategies to return to real economy, to production and to the wealth of human labor.
Back to Basics
Neo-Keynesians or neo-liberists? Protectionists or monetarists? Up until a few months ago any criticism of the free market economic system was unthinkable, yet today we are witnessing the delegitimization of the global model, an outcry against financial capitalism. Unlike comparable globalization phenomena in Western history such as the Roman Empire, the British Empire at the end of the 19th century, or the Bretton Woods system of nation-states, today’s globalization lacks the checks and balances of a central power; its distinguishing feature is substantial anarchy, where the law of the market and competition seems to be the only law, conditioning the nationstates and limiting their economic and productive sovereignty.
The promises of globalization have been betrayed: the economic and financial convergence of the regions of the world has been transformed into an uneven redistribution of wealth, while the removal of barriers and duties and the speed at which phenomena proliferate have left markets exposed to the effects of foreign financial crises. As a period of exciting prospects for economic, social and cultural growth on a planetary scale came to an end at breathtaking speed, two decades of exceptional growth have given way to skepticism and uncertainty. The collapse of America’s financial giants, the fragility of the US economy, the energy crisis and the climate emergency, the West’s loss of credibility as a benchmark economic model, and a recession that has not spared the emerging countries are phenomena requiring serious thought and timely countermeasures.
Some commentators are calling for regulatory action by the State, with bank rescues, subsidies for national industry, closure of relocated overseas factories, public packages promoting domestic markets and local economies. A mixture of protectionist measures for tighter control of and restrictions on capital flows, leading to de-financialization of the production system and the end of the financial markets’ domination of the real economy. Other participants in the debate on ways to overcome the crisis regard the specter of protectionism as an absolute evil to be resisted, an error not to be repeated: the 1930 Buy American Act and Britain’s protectionist laws of 1931 amplified the Great Depression and dragged the world into the nightmarish stagnation of the 1930s, and from there toward growing nationalism and the Second World War. The temptation of State intervention is the classical response to recession, the most reassuring solution, but it is not the most effective answer: crises are cyclical, endemic phenomena of capitalism and the free market, risk is part of the game, but open economies grow and innovate more than closed economies and are the only system capable of creating new jobs. Patching up the balance sheets of companies or credit institutions that have effectively gone bust would only undermine efficiency, suffocate private investment and send inflation soaring.
Finding the right remedy is no easy task: clearly, the Free Market failed to regulate itself and globalization has to be governed, not left to its own devices. The question is not whether we want globalization, but what sort of globalization we want: if the market operates in a global dimension, then all the economic, political and social rules — and responsibilities —have to be set at global level too. Recapitalizing the banking system, creating liquidity and cutting taxation to support business and the real economy are all urgent and necessary measures, but in themselves are not decisive at systemic level. Effective, lasting results should be sought through investment in innovation and technology, and through a new virtuous finance where the role of the money markets is to generate and sustain growth, provide correct information and education about economics, and stimulate accumulation of human rather than material or financial capital.
A return to the fundamentals, in other words, a return to work to start producing wealth again. A “Back to Basics” that is not just a slogan for a recovery in the real economy, but a genuine social and cultural review, an opportunity for a new architecture in world finance and also for a new urban architecture designed for man. “Let’s go back to chairs that are chairs, houses that are houses, to creations without labels, without adjectives, to things that are real, true, natural, simple and spontaneous” Giò Ponti (1949).