· The United States and Europe together to overcome the crisis ·
We are living in a momentous financial and economic situation: our grandchildren will study it in their history books, and not only the economic situation. We find ourselves facing a new world economic order caused by the decrease in births in the West and by accelerating globalization that has delocalized too much production to Asia, splitting the world into consumer and non-producer countries and producer but not yet consumer countries. The new contemporary scenario is essentially due to consumer growth with an unsustainable debt in the western world.
Given the recent reactions of many countries it would even seem that in these conditions “making Europe” in order to solve the crisis is a limited project. It would therefore be necessary to reflect on whether it is worth “making the West”, in a union between the United States and Europe, in order to overcome the current difficulties.
The economic cycle that generated the crisis came into being on the other side of the ocean. The recent problem of the liquidity crisis on the financial markets is deteriorating, especially with the placement of the sovereign American debt. But it is the entire West that must rediscover a competitive position if it is to create employment, without competing on the domestic front, and without people pecking at each other like Renzo's capons in Manzoni's book [ The Betrothed ]. To reach this goal cooperation and global agreements are necessary, given that the European ones do not suffice. Just think that the average European productivity is less than 25 per cent of the American. The growth necessary to absorb the debt must therefore be coordinated within a great economic system that is comparable to the Asiatic system seen in perspective. This great economic system is the West – the United States and Europe together – which still today is worth more than 50 per cent of the world GDP and has a total of a billion inhabitants. It is not increasing, that is true, but it is nevertheless enormous and for the time being has not been surpassed. Together the United States and Europe are “worth” more than 25 billion Euros whereas China has not yet topped 4,500.
Yet, within the western economic sector a selfish rivalry may be observed: the respective countries are competing to put on the markets their own sovereign, that is, State debts, which have increased in the past 15 years by more than 50 per cent. To finance the increase in debt in the same period, every nation has made use of the debt as a lever, albeit in a different way.
The countries that by tradition support the social State have used the debt directly. Others have employed the lever of the private debt, especially the debt of families. Yet others have driven businesses or banks into debt. The debt of a system is constituted by four debts that are different until they are paid, but in the case of bankruptcy become State debts. Should families or businesses fail to pay, it is in fact banks that suffer for it and the State intervenes to rescue them. In this way the State nationalizes the debt. However, there is not an unlimited demand for sovereign debts: if their offer increases by 50 per cent in a brief period, it will not be easy to endorse, competition will be created in the placement and certain countries, classified as riskier, will not succeed in financing themselves. Thus it will be necessary to increase rates of interest, causing the situation to deteriorate. The paradox lies in the fact that interest rates considered high and unsustainable today are not so in fact, since they are only remunerative: they seem high after a long period of rates kept artificially low in order to sustain the debt contracted, excluding the hypothesis of inflation.
The deflation of the debt in this competitive system of placement which causes interest to increase becomes difficult, if not risky, because it stimulates the temptation of what seems a solution – and in the short term: to cause the rates to increase.
Instead, to reduce the debt of the Western world authentic economic growth is necessary, which requires a resumption of productive competition. It is therefore necessary to produce at home and to import less, or even to invert the import and export flows.
But the world has changed. Today Asia is a supplier, and the West a consumer no longer with income and savings, and it is employment that is suffering the effects. The equilibrium of the world must therefore be restored: for global rather than selfish interests. And to rediscover competition, a less expensive, more efficient system is required, less spoilt by excessive charitable assistance. Europe must draw close to the United States, and, in brief, put its hand to the necessary reforms. To succeed in a short time will be far from easy. For this reason a common vision based on true solidarity among nations will be indispensable.
St. Peter’s Square
Dec. 12, 2019
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