His visible hand of the State is back (and maybe that’s not a bad thing) – Corriere.it

The signals have been multiplying for some time, even if they remain the heritage of a handful of economists and some enthusiasts: the state is returning. He had never left, of course, but he had been reduced to a minimum, transformed into a weak, ancillary, necessary but hated structure, a stumbling block, a machine of bureaucracy and cronyism. An internal enemyto fight.

Paradigm shift. Even in economics it works like in other sectors: in this case we don’t call them fads, it would belittle scientific assumptions, but economic theories. And crisis. Considering that cyclically the political, economic and environmental crises make us take another round of the carousel. And then suddenly there is there invisible hand by Adam Smith, which grabbed selfishness and spread it in the form of collective well-being, is now groping in the void. Here it is animal spirits by Keynes they feel alone, disoriented, abandoned by the most resistant ideology of the century, liberalism, which in its most extreme forms theorizes the self-sufficiency of the market, the almost miraculous ability to produce wealth and full employment, that paradise on earth for everyone which communism promised and that no one has seen, except the happy few, the lucky few.

The much-maligned state, therefore, is making a comeback. On the contrary, he has already returned, but perhaps not yet enough. So much so that the Mill, the magazine directed by Mario Ricciardi, asks the question directly: Do we need more State?. The answer entrusted to a series of interventions, which in a naturally complex and varied way, all seem to tend towards the s.
To understand each other, it is necessary to make a brief summary of how it went in the last century. The nineteenth century had been characterized by the neoclassical paradigm, inspired by Adam Smith, who was not interested in distribution and equity, because equilibrium and growth seemed intrinsically ensured by the market.

The Great Depression and Keynes

In the 30s the first heavy crisis arrives, the Great Depression with the collapse of Wall Street, which stops the triumphal march of the market. John Maynard Keynes, with his general theory of employment, interest and money, theorizes the essential role of public intervention and budgetary policy to get out of the recessionary spiral. Roosevelt’s New Deal also originates from here.
As Floriana Cerniglia recounts, for three decades, after the Second World War and thanks to Keynesian recipes, we are witnessing a period of growth, supported by technical progress, development of international trade and above all by huge state investments not only for public goods and infrastructures but also for the construction of special protection systems. From 1950 to 1985, public spending doubles on GDP (from 25 to 50 percent). Tax rates on the highest incomes are significantly increasing which, together with the welfare state, reduce economic and social inequalities.

The neoliberal counter-reform

In the early 80’s, the story changes direction. What happens? Oil crises, stagflation (stagnation + inflation), technological stagnation. Keynes goes out of fashion, on the contrary, he ends up on the accused’s bench. The neoliberal counter-reform once again postulates the efficiency of the market and its ability to absorb the crisis. And the State, having become cumbersome, is kindly invited to step aside: its task must be only to fight monopolies, proceed with liberalization and privatisation, reforms of the labor market and reduction of tax burdens. In short, remove laces and laces to the economy, freeing the market from the yoke of rules and corrective measures.

Thatcher & Reagan

The English Iron Lady Margaret Thatcher natural leader of the movementrepresses the riots and incites the downsizing of the public with a famous phrase: Push back the borders of the state. Reaganism(translated by us into Reagan hedonism) even feels annoyed by the intrusiveness of politics on the markets, as can be deduced from the cowboy president’s phrase: The government is not our solution to the problem, the government the problem.

The Third Way

But also the third way of Tony Blair and Bill Clinton follows suit when he talks about the end of big government. The state remains only to finance the arms race against the Soviet Union or in its ideological apparatuses to repress protests and guarantee public order (the jailer state, the sociologist Loc Wacquant called it). A reduction in public spending is called for: the new mantra is the reduction of the deficit and debt in relation to GDP.
At this point, something starts to go wrong. Because years of failed economic planning, industrial policy and infrastructure investments are starting to make themselves felt. There are speculative bubbles, debt, balance of payments imbalances. Inequality grows and bad, not only for the unequal: it reduces consumption, penalizes the middle class, stops growth. The market, then, despite the efforts, less and less free.

Double shock: the 2008 crisis and the pandemic

Then comes another crisis, actually two. The financial one of 2007-2009 (or 2008). And the one caused by the pandemic. Shocks from which the economy cannot recover by itself. The market can’t handle it. Need anything else. We need a budgetary policy. Because transformations add up to crises, which require reactions: there are (hyper)globalization (which is accompanied by financialization), digital transformation, the environmental issue with the climate crisis, geopolitical changes (last, the war in Ukraine ) and demographic imbalances. The laissez faireunder these conditions, would be insane.

The rescue of banks and state enterprises

And indeed everything changes. It begins with the bailout of the banks: the Silicon Valley Bank in the United States and Credit Suisse in 2023, after those of Lehman and Royal Bank of Scotland, in 2008. We need to govern the climate transition, and therefore redesign the transport and electricity production system. To counter globalisation, comes the nationalization of strategic companies. AND the SOE are once again decisive (State-owned enterprises, companies owned by the State, in Italy there were Iri and Enel). Strategy implemented above all by China, which created a body, the Sasac, to coordinate the 97 most important. Among them ChemChina (against which Pirelli requested and obtained golden power), Sinopec (oil and gas refining), Crrc (trains) and Baowu (steel). But France is also a protagonist with Edf, Air France, Engie, Orange, Renault, Sncf. Here too there is a public agency, the Ape, which manages the assets of the 83 main state holdings.
But let’s get back to us. The new interventionist climate can be seen at every level. Also the Next Generation EU in this logic. Certain excesses of austerity (see Greece) and rigorous policies for budgets and restrictions on state aid are eased. State aid is also arriving in the United States, such as for Biden’s Inflation Reduction Act and the Chip and Science Act (which supports the semiconductor sector).
Public spending increases: in France, between 2008 and 2018, by 20 percent, in Germany by 10. And in Italy? Falls (result: stagnation).

Which state?

And here we are at the question: need more state? Need even more? And which state? The answer, we said, tends to be positive. But with many distinctions. Laura Pennacchi invites us to consider that, in certain cases, the return of state authority is bent on the predatory service of capital and private powers. Then there is the need to seek consensus. Let’s take the environmental question: interventionism here risks becoming penalizing for the poorest classes and is ridden by the right. This is why Obama’s adviser, Cass Sunstein, theorized the nudge, the gentle push. Floriana Cerniglia sees the risk of financing oligopolies and proposes a European tax system capable of financing the great European public goods. Simone Gasperin even proposes to create a new Iri.
Paolo Gerbaudo distinguishes two types of interventionism: the welfarist one which concentrates on the distribution front and the productive one which concentrates on industrial and commercial policy. In the first place is the Spanish action with the minister Yolanda Daz who during the pandemic created a sort of redundancy fund, increased the minimum wage three times and completed a labor market reform that drastically reduced contracts fixed-term contracts and precariousness.

The return to Keynesianism, however, is not taken for granted, says Antonella Stirati. The temptation to return to austerity is strong. And inflation containment policies by raising interest rates, at the cost of slowing down the economy and causing unemployment, do not bode well. Keynes’s theories, he says, are the only ones analytically sound and with solid empirical evidence: unemployment caused by a lack of demand and the need for public intervention, with fiscal policy: monetary policy is not enough. But, Stirati adds, the goal of full employment is not shared by all: There are those who take advantage of the contractual weakness of workers, favored by unemployment, and by the progressive withdrawal of the State from areas such as health, education, social security , where private business can be extremely profitable.
We all have in mind the centralizing, bureaucratic, liberticidal statepatronage, party politics and welfare that raged in Italy in the 70s and 80s. But times have changed. Gerbaudo concludes: There is no need for a state ATM. Rather necessary to recover an active and planning vision of the State. The State not only as the representative of the citizens’ democratic mandate but also as the bearer of that vision of the system and of the country’s project that our entrepreneurial class has unfortunately not been able to formulate.

This article was originally published in the Corriere della Sera Press Review. Click here to register now.

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