Opinion Sur
The economic troubles in several European countries are addressed, once again, with formulas that seek to “calm down” financial markets. They are aimed at putting public accounts back in shape and reducing over-borrowing. The result, however, are unequal, recessive adjustments. Is this the only possible “exit”, or are there other choices?Once again, the European countries are faced with pressures from the financial markets to implement an unequal, recessive adjustment. Its problems are not insignificant and, no doubt, call for corrective intervention. They include the mismanagement of their public accounts, strong social inequality, reduced competitiveness, poor capital formation at the base of the production system, regression in the education levels of its population, to mention but a few of their major areas of concern. Although with particular patterns in each country, the situation does not differ substantially all across that continent.
The fault for having reached such a vulnerable point as the one they are at now has to do with a public governance that repeats formulas without assessing their ultimate consequences, in a context of national and European rules that speed up economic concentration and social inequality, cold-shoulders the productive mobilization of its majorities, and leaves room for financial speculation which imposes conditions and profits from the crisis it has helped fuel. It may then be concluded that there is a certain complicity, or at least negligence, among those who set the continental rules of the game without considering defense lines against the unwanted results now surfacing, and those who, at country level, accepted to maintain a course and a way of functioning that concentrates wealth and income, worsens social segmentation, weakens entrepreneurial creativity and innovation, undermines the competitiveness of its production system, encourages irresponsible consumerism, damages its environment, and threatens social cohesion.
The same recipe
The present situation brings another “threat” from financial markets and, once again, the same recipe intended to appease them emerges: reducing public spending no matter what it takes (in practice, it involves cutting down social spending and public investment) and crunching liquidity via reducing salaries and shrinking credit by charging higher rates. The declared aim is to improve public accounting and reduce over-borrowing, but they do so through drastic recessions involving business closedowns and loss of jobs. This makes it easier to “tame” organized labor and reinforces the role of financial creditors who make sure they are repaid their credits and receive greater compensations: as other funding sources get drained, speculators line their pockets by refinancing debts at higher rates and purchasing troubled assets at outrageously low prices. The end of this well-known story is a huge re-distribution of wealth in favor of privileged sectors, and a hard reinforcement of the economic concentration process. “Specialists” claim that this is the price that must be paid to fix the mess that has been created.
In truth, these “specialists” favor the interests of those who supply their income, which, in many, yet not in all, cases are ─surprise!─ financial markets. With their intervention, they enshrine the tyranny of an ever mightier, more globalized financial market. The financial market subjects economic activity, social wellbeing and environmental care to the obtainment of the greatest possible profit by the owners of financial capital, as well as their related players: managers, advisors, brokers, who are indifferent to the social and environmental effects caused by their behavior. “Specialists”, who are sponsored by strategic thinking think-tanks and major mass media, endorse “exit” strategies that end up mercilessly punishing majorities, and rewarding a handful with extraordinary profits.
Are there no other choices?
Those who profit from crises sell these “exits” as the only possible ways out, which, indeed, is far from being true. There are other ways out that also can put the house back in order without destroying social and entrepreneurial energy, without becoming exposed to huge doses of vulnerability in the face of ravens and speculators. Ways out that do not destroy businesses, jobs and other national and local assets (including our social capital) or hit disproportionately small and medium-sized producers by cutting salaries and leaving a trail of unemployed.
Getting out of the crisis towards fair and sustainable development calls for a series of measures to be taken, starting by adjusting public spending productivity, i.e., not cutting down on budgetary allocations intended to build economic and social infrastructure for the bottom of the pyramid but, instead, on those budgetary items that end up benefiting sectors that can, per se, afford such investments. One of the key transformations required to be made in both affluent and southern hemisphere countries is the productive mobilization of the huge base of their production systems. Instead of concentrating efforts only on already consolidated sectors, the most promising transformation consists in democratizing the economy by mobilizing its huge base of small producers and unemployed individuals. This measure contributes to reducing outrageous inequality ─and the destabilizing effects stemming from it─ by integrating, in one same act, production improvements and income distribution.
Yet, a sustainable development-oriented transformation further requires that actions be taken within “social budgetary items” to ensure the greatest possible efficacy of this spending by avoiding its misuse, waste, and unwanted leaks. Improving public spending productivity involves aligning it with the productive mobilization of majorities but also to do so with efficacy by resorting to best solutions available. Generally speaking, this is not the case, because poverty and unemployment reduction-oriented initiatives are usually poorly designed, as they are based on residual, scrap knowledge rather than on state-of-the-art business engineering.
In addition, a sustainable way out of the crisis requires the elimination of the regressiveness that characterizes almost all our tax systems, as well as huge capital flights secured through tax havens and international triangulations. Today, the largest weight of public revenue is afforded by the least privileged, while the most affluent ones contribute a smaller share and find easy ways to evade a good portion of their tax burden.
Neither will it suffice to only realign macroeconomic policies with the interests of large population masses who are today punished and see their capacity to contribute solutions ignored. It will also be necessary to work with productive chain leading firms so that, with the supports that they manage to mobilize, each one of them may ensure viability and compensatory prices for their entire production network (suppliers, distributors and buyers of their products). In other words, they will be required to fully exercise their mesoeconomic responsibility not only in their favor but also in favor of their economic and social environment.
In favorable macro and meso-economic contexts, direct support to the base of the production system (micro, small and medium-sized producers, as well as those who are unemployed today), will be more effective and significant. These large majorities possess tremendous energy and creativity that has been almost ignored and, what is even worse, many times attacked. Sustainable development finds one of its strongest pillars in this promising, large productive mobilization founded on the values of efficacy, cooperation, and social and environmental responsibility.
Inclusive ventures
Individual efforts by low-income sectors will continue to be important but their productive scale should be upgraded for them to be ensured access to better management practices and higher business opportunity thresholds. Today, there is availability of state-of-the-art business engineering that may be used to ensure the creation of inclusive ventures by bringing together small producers with strategic partners that may contribute knowledge of excellence, effective management, good contacts, market and finance access. These engineering modalities include, among others, franchise systems, cooperative clusters, trading, and eventually export, consortia, locomotive agribusinesses.
If markets failed to develop this type of economic units, then national and local public sector, development agencies, social and entrepreneurial organizations, universities and civil society as a whole should coordinate efforts to establish inclusive venture developers[[ See characterists of [inclusive ventures and of inclusive venture developers->http://www.opinionsur.org.ar/Desenvolvedoras-de-empreendimentos?lang=pt].]] These new promotion instruments may contribute to the establishment of dynamic economic players at the bottom of the social pyramid by assisting them in identifying and taken advantage of sustainable development opportunities.
Falseness of a single thinking and the true challenge
Hence, the claim that there are no ways out of the crisis but those proclaimed by financial market-related specialists is false. There are
[[Several publications are available for consultation in this respect, including previous Opinión Sur articles and the book [Adjusting the Course: Getting out of the crisis towards sustainable development->http://opinionsur.org.ar/INTRODUCTORY-OFFER-Adjusting-the ].]] other exits and they can be implemented, certainly, not without effort and determination. But they take an effort that is much different from the sacrifice being asked today, the results of which favor only a few.
The most critical challenge is ─let us not deceive ourselves─ essentially political and, therefore, forces will have to be mobilized to make a change in course possible. Interests as powerful as those defended by financial speculators cannot be affected without meeting enormous resistance; nobody relinquishes its privileges gratuitously. They have plenty of resources to buy political wills and co-opt supports, both through the payment of juicy fees to sophisticated legal, accounting and public relations consultants, and the distribution of perks to some politicians and media.
Since financial speculators cannot defend their interests explicitly out in the open, they seek ways to camouflage them with a view to obtaining the support of manipulated or ill-informed individuals whose aspirations are objectively different. Being a minority, financial speculation needs that social, economic and political camouflage to prevail. That is why it is so important to educate and warn those players who are not a part of the “hardcore” privilege. These hardcore speculators are the real problem; hence, they must be identified and prevented from hiding behind a web of small and mid-sized interests they seek to recruit by instilling fear of chaos and possible persecution. These deceits need to be dismounted and the transformation focused on big speculators, who are the ones that are capable of destabilizing any government determined to face them.
With such powerful enemies, it would be absurd and counterproductive to create a commotion among other population segments whose interests are not aligned with those of big speculators; such political short-sightedness would render the transformation process unmanageable, and might undermine the support of those who would benefit from a change in the present course. In this sense, it is critical to avoid getting caught up in permanent conflicts that create atmospheres that are not favorable for the fair and equitable alignment of such diverse interests. Conversely, a sound political management that paves the way for the adoption of sustainable development strategies can liberate enormous, peaceful and fecund social energy.
Institutional traps and democratic governance
Political science and non-superficial observation indicate that the institutions that coordinate social life and rule us do not emerge from a natural logic but from decision-makers in our societies. Thus, contemporary institutions have emerged from correlations of past times’ social, political, economic, religious, and military forces, and evolved with time until taking their present forms and dynamics. These forms and dynamics will continue to change according to the new force correlations appearing in sync with political development and the changing circumstances in our realities.
It should be noted that it makes no sense to arbitrarily change the current institutions that express and enforce the rules of the game of social life at the local, national or global levels: they establish punishments and rewards, how results are distributed, what differences in standards of living are socially acceptable, degrees and levels of participation in decision-making, use of public force, among many others. Yet, there are moments in the evolution of nations when the ruling institutions are not able to constructively channel the social power that has developed, and neither are they capable of continuing to repress it [[See the state of turmoil prevailing today in most Arab countries.]]. At these inflection points we are faced with from time to time is where the courses that we choose for our future are decided, understanding that there are certain restrictions and conditioning factors that are impossible to ignore, but also that, in these spaces, it is possible to exert greater or lesser degrees of determination, creativity and innovation to shape other more efficient and responsible ways of functioning.
It is around these options within the European and global juncture that we should deploy our conditioned free choice, instead of following as a herd a course and a way of functioning that impoverishes nature, generates violence and hurts us physically and spiritually. The situation European countries are at is problematic and must be addressed. The course needs to be adjusted; but this means choosing a transformative adjustment rather than a restorative adjustment that reproduces the same dynamic that led to the crisis. There are many nuances and specificities that would be dangerous to ignore: one fundamentalism cannot be replaced by another one. But there is a great divide from which the specific can be built: either transformations are created that may allow us to constructively channel the huge social energy being dammed up, or that energy will end up overflowing fiercely with unpredictable consequences.
