Europe must change after the crisis

Yesterday, in his speech at Versailles, once a symbol of the monarchy, N.Sarkozy said "The crisis is not over. We don't know when it will end...."Thinking of the crisis as brackets that will soon be closed ... would be a fatal mistake. Nothing will be the same ever again. A crisis of this magnitude always calls for profound questioning. We cannot witness such a catastrophe without questioning the ideas, the values, the decisions that led to such a result". He went on saying: "Europe must change too. It will not be able to function after the crisis as it did before ... Europe must give itself the means to participate in the transformation of the world".

Nothing will be the same anymore. G.Bush said also that after 9.11 and his father after the Gulf war when he spoke about a new world order. I think Sarkozy is perfectly right, but some statements are too general. What does this mean concretely, in particular for Europe? I could not find one concrete proposal, apart from a borrowing initiative which reminds what many French finance ministers did in the past, from Pinay to Balladur.

Conversely, the former Belgian PM Verhofstadt* made a series of concrete proposals in his recent book. Europe is part of the solution, not the problem. Instead, it is not with a mere collection of 27 stimulus plans that we will find the way out of the crisis. The European Commission can steer this process through a set of coordinated actions and achieve better complementarity and synergies between member States policies as well as with EU policies in some key areas such as regional development, research and climate change.

We need to work all together for the common good, which means that it is in the interest of everyone to find ways to get out from the mess. But will is not enough, we should have the right ambition and the necessary means to achieve that.

*Sortir de crise : Comment l'Europe peut sauver le monde, Actes Sud/André Versaille Éditeur, coll. « Essais Sciences humaines », Arles/Bruxelles, 2009, 252 p.

The danger of unemployment

Rising mass unemployment in Europe is putting social cohesion at risk. Every single unemployed is a threat to democracy. Just look at the low turnout figures of the recent elections for the European Parliament. It is not because the issue was Europe. There was hardly any debate about Europe in the campaigns, not only in Britain. This was rather a test for national governments: the rejection of traditional parties has been quite massive.

The Economist (20 June) writes: 'So far this recession has not been all bad for Europe. Above all, the past few months have looked good for the European concept of 'flexicurity'... Europeans will tolerate more flexible markets so long they have the security of generous social assistance of things go wrong".

It is true that most European governments have undertaken labour market reforms. They have asked their citizens to accept more flexible labour laws and wages. But were they really effective in securing more jobs? Spain was considered as a success but the only result was to produce a generation of young, precarious workers (called 'mileuristas', those who earn about a thousand euros) who cannot make plans for the future due to the uncertainty on the renewal of their temporary contracts. The country has now an unemployment rate close to 20% and the social assistance received by the unemployed is rather limited.

The issue is that inequalities in labour market access create a divide in our societies and render them vulnerable to any form of extremism. European governments are aware of the danger as shows the recent speech of N. Sarkozy at the ILO in Geneva. So what to do with the many millions of workers who will lose their jobs?

The response is far from being easy. One way is to encourage early retirement schemes which have a lower cost (also political) than mass lay-offs- and this will not be reflected in the rise of unemployment. Another more cautious solution (in fact preferred by most governments as being more socially acceptable) is to raise the retirement age to 67 to safeguard the pension systems. But this will not guarantee the economic future of Europe. Human capital is not fully valued - many young skilled workers accept unskilled jobs on temporary contracts or leave their own origin country.

Most politicians are scared by mass unemployment as they understand the moral and social consequences. But this does not mean that they will develop a vision for the future. We need a real debate on employment and education, as they are intrisincally related and also because they are the key to cohesiveness.

Global governance: a new economic order?

Global governance is the key word today. In most people minds, it is ascertained that governance is not government. It is not the ideal of the 'world government' praised by St Simon, that is being revived. In his book on 'Global governance' (1995), Desai tries to clarify what this could mean: 'It is the provision of the Rule of Law, a symmetric framework in which the weak as well as the strong are subject to the same rules". Can we at the present juncture envisage the possibility of even a minimal framework?

The Bretton woods system had worked at least for two consecutive decades in the post war period until its disruption when the gold standard was replaced by the dollar. But when it failed, it was not immediately obvious what would replace it. The floating exchange rates prevailed, particularly for major currencies, dollar, yen and D-mark. Then came a long period of low inflation and steady growth because of the growth of India and China which created a supply shock to put dowward pressure on prices. Deflationary tensions were avoided temporarily by a loose monetary policy that encouraged asset bubbles which eventually led to the current financial crisis.

Some Western governments (in particular britain and the US) have huge trade as well as budget deficits and will have to pay a price in terms of higher taxes to meet the interest of the debt and the claims of foreign creditors. The Economist (14 May) writes: 'Creditor nations tend to set the rules and the new global monetary system will be unable to operate without the approval of China, a creditor country that controls and a managed currency. It has been assumed that China will have to move towards the western model. But why not the other way round?

It is perhaps premature to say that a new global order is coming into existence, but this will not happen without China, and possibly India, Russia and Brazil, which are trying to increase their influence over the so-called 'Western world'. The significance of this major shift in the balance of power is that there has been a process of correction in which the powerful nations are not anymore in a position to set the rules for the rest of the world.

Our hope is that these corrective forces - with the rise of globalisation and new economic powers- will contribute (paradoxally) to establish a more democratic international order. Along with this, we need stronger international institutions to set new economic rules to promote well being, high employment and sustainable growth. But also a new political framework, including rules to enforce respect of human rights, especially for citizens from weaker states (asylum, refugees, migrations,..). It's all about the future of mankind, not only the interests of the strong.

Why Religion matters

After decades of secularism, the world has seen a surge of spirituality. The current surge is different, however, because it has assumed a global context. Spirituality is the living heart of all the great world religions. It is not a mere return to biblical and historical roots.

Some argue that religion is the cause of our worst divisions, and a threat to democracy and civilization. The truth is more broadly and deeply rooted in the human psyche and spirit. The great religious traditions have survived across millennia because they express insights that human beings have repeatedly found to be true. But they are containers for those insights—fashioned and carried forward by human beings, and therefore prone to every passion and fragility of the human condition. Religions become entangled with human identity, and there is nothing more intimate and volatile than that. Our sacred traditions should help us live more thoughtfully, generously, and hopefully with the tensions of our age. But to grasp that, we must look at the very nature of faith.

Huston Smith*, one of the most respected authorities on religion provides a reflection on the urgent need to restore the role of religion as the primary humanizing force for individuals and society. Bringing together insights from comparative religions, theology, philosophy, science, and history, along with examples drawn from current events and his own personal experience, Smith gives both a convincing historical and social critique and a profound expression of hope for the spiritual condition of humanity.

It is true that religious leaders seek to increase their influence over the course of action on the grounds of morality and ethics. How can religion and faith make a contribution to resolve our current problems?

All religions contain an idea of what is common good and offer some guiding principles to achieve it. In fact, the influence of religion in economic life is far from being irrelevant. In western societies, the catholic church has contributed in many ways to reducing the influence of the market and has shaped a third sector made of voluntary organizations, charities and so on. It provides a social safety net for many disadvantaged people, e.g. immigrants that regular social systems cannot assist directly. Islamic faith has also shaped many aspects of economic life, for instance with the zakat , which is a form of charity as every muslim has to give a small share of its wealth to the poor. Judaism is also based on righteousness and social justice.

All men, whether they believe in their faith have to live according to their moral and ethical principles. Develop a consciousness - Above all human rights are sacred and social justice - which is linked to common good- should prevail over the search for profit.

But we also need a dialogue and mutual understanding between the great religions. This dialogue should be revived with various initiatives led by courageous organizations like Sant'Egidio, despite of continuous tensions and misunderstandings, often the product of ignorance.

*Why Religion Matters: The Fate of the Human Spirit in an Age of Disbelief- paperback- January 2002

The economic crisis and the ethics of capitalism

In recent times, Ethics has become a new paradigm which extends from trade to finance and business. Yet capitalism is in troubled waters; 'love of money' has led to extreme situations: high wages for the rich, huge financial profits, intollerable poverty, extreme inequality in income, environmental degradation,... The resurgence of Ethics seems to be a reaction to the moral and social consequences of a world dominated by an endless search for wealth.

Keynes expressed his views in his famous essay 'Economic Possibilities for our Grandchildren'(1930): "All kinds of social customs and economic practices, affecting the distribution of wealth and economic rewards and penalties, which we now maintain at all costs, however distasteful and unjust they maybe in themselves, because they are tremendously useful in promoting the accumulation of capital, we shall then be free, at last to discard". He also wrote: 'When the accumulation of wealth is no longer of high social importance, there will be great changes in the code of morals".

There can't be any dissociation between Economics and Ethics - which goes back at least to Aristotle in Nichomachean Ethics, where he related economics to human ends. Adam Smith's theory, - he was a professor of Moral Philosophy at the university of Glasgow- , was wrongly assimilated to pure free market. We owe to Amartya Sen* his critique of mainstream economics on ethical grounds. The self-interest view based on rational behaviour involves a rejection of ethics and leads to very abstract theoretical models on the functioning of the economy.

Capitalism is not a timeless system; it is a historical form of economic organisation which is not based on self-regulating markets, but embedded in the fabric of society (K.Polanyi). Its future is not written in marble.

The absence of ethical motivations in economic behaviours might be considered a fundamental cause of the global crisis. The development of financial markets as a product of the deregulation of the 80s has led to excessive risk taking and speculation which has turned to be detrimental to 'real' employment and economic activity. Nobody has ever asked whether hedge funds had any ethical purpose. This was not the issue.

The scandal of widespread poverty, even in richer countries, is another feature of unregulated capitalism. Inequality has become unbearable in our democratic societies, but this is hardly a topic for public debate.

To restore sound economic conditions , we need a radical break with the past system which is responsible for the meltdown in which we are all now. Stronger regulation and supervision in financial markets are needed along with more effective redistributive policies to protect the most vulnerable categories of the population.

Our citizens ask for full employment and more equity in income distribution, the two aspects that Keynes has strongly emphasised in his General Theory. It's time now to act, not just words or good intentions.

* Amartya Sen, Rational Fools: A Critique of the Behavioral Foundations of Economic

Theory in Philosophy and Public Affairs, Vol. 6, No. 4 (Summer, 1977), 317-344.