French economist Thomas Piketty analyses it in an article for the newspaper The World the report that Mario Draghi, former president of the European Central Bank, presented this Monday to the European Commission. Draghi’s plan, whose objective is that the European Union is not left behind by the superior economic development of China and the United States, proposes to the 27 a “massive injection” of funds into the organization: an increase of 800 billion euros per year in investment, which represents approximately between 4.4% and 4.7% of the bloc’s GDP.
In this way, the EU would return to investment levels not seen since the 1960s and 1970s. The former ECB president insists on the need to allocate these funds to research, the development of new technologies and green infrastructure, and to finance them he suggests resorting to the issue of European debt, as has already been done with the recovery plan after the pandemic. “Let’s be clear from the beginning,” Piketty says of the proposal, “this is a step in the right direction.”
The French professor and economist, who specializes in economic inequality, welcomes the fact that Draghi has proposed a policy that “has the immense merit of putting an end to the dogma of budgetary austerity,” an approach that, according to what he says in the column published in The Worldhas unnecessarily harmed European economies.
Piketty points out that some sectors, notably in Germany and France, have defended austerity, 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 expenditures.”
“In reality, this austere dogma is based on economic absurdities,” he says. “First, because real interest rates have fallen to historically low levels in Europe and the United States over the last twenty years: less than 1% or 2%, or even negative levels in some cases. This reflects a situation in which there is a huge windfall of underused or misused savings in Europe and the world, ready to be poured into Western financial systems with little return. It is up to the public authorities to mobilize these sums and invest them in training, health, research and new technologies, major energy and transport infrastructures, thermal renovation of buildings, etc.,” adds the French economist, in line with Draghi’s proposals.
He also defends the European debt strategy proposed by Draghi: “As for the level of public debt, it is indeed very high, but not unprecedented.” He nevertheless stresses: “What history shows, however, is that such high levels of debt cannot be treated by ordinary methods: exceptional measures are necessary, such as levies on the highest private assets.”
A “fairly traditional technophile, mercantile and consumerist approach”
Piketty has consistently criticized some fundamental aspects of the Italian report. While he welcomes the proposal for a higher level of investment, he accuses it of adopting a “rather traditional technophile, commercial 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 advantage of the opportunity to develop other modes of governance and avoid giving, once again, full powers to large private capitalist groups to manage our data, our energy sources or our transport networks,” they criticize.
Regarding investment in research and higher education, Piketty agrees with Draghi that the European Research Council should directly fund universities, but says the plan is generally “too elitist and restrictive.” The Italian proposes to focus only on a few centers of excellence in large cities, which Piketty considers “economically dangerous and politically unacceptable,” leaving out economically less advantaged regions. “Public health and hospitals are almost completely absent from the report,” he adds.
“If France, Germany, Italy and Spain, which represent three quarters of the population and GDP of the eurozone, manage to agree on a balanced and socially and territorially inclusive commitment, it will be possible to move forward without waiting for unanimity and without relying on a core of countries (as foreseen in the Draghi report). This is the debate in which Europe must engage now,” concludes the French economist.
