Faced with an economic emergency

It is useless, in this emergency, to attempt to assign responsibility for errors committed; it is  better to use creative resources in a productive way.  It is useless, for example, to insist that the situation in the United States is one of a nation in decline or struck to the core. The United States remains the most technologically advanced country in the world, with the highest GDP, surpassing one and a half times that of Europe, four times that of China, and ten times that of Italy. The fact that it has been declassified does not flatten it to the ground, but probably will cause it to be more humble and open to collaborating with Europe.

Nor is it useful to over-emphasize the economic role of China. The great Asian nation has a GDP not much higher than that of Germany alone and must confront a series of not-easy problems: absorbing severely reduced exportation, internal growth in consumption and the consequent rise of production costs, reduced competitiveness, risk of inflation. Further, China has played a not-indifferent role in the increase in debt of the United States, financing American acquisition of its own exports, a fact which has allowed it to become a real power.

The great world economies should stop looking for individual solutions which contrast with each other, as they have been doing since the start of the crisis. A summit is needed, with a precise agenda, where rules for recovery can finally be discussed. It is especially necessary to reach a common consensus on the fact that only a period of austerity, managed in a integral way, can be the real key for returning to growth.

There are no longer countries that are exempt from the crisis or immune from the temptation of increasing public debt in order to resolve their problems. But attempts at individual solutions can aggravate the communal situation and favor speculation. Not only are they no longer opportune, but they would be harmful: speculative bubbles, inflationary schemes to deflate debt and uncertainty in rescuing nearby nations from default.

Strategies for growth exist and are especially valid for countries that can count on economic values such as savings of families, an efficient system of small-medium size business and strong banks in the territory. These countries, instead of allowing themselves to be tempted by apparently easy solutions such as using money from families to reduce public debt, should find ways to channel part of available liquid savings into reinforcement of medium-sized business, without penalizing the savings itself.

This is a solution which would truly permit growth and jobs. For example, channeling around ten percent of the family savings of a country into healthy medium-sized businesses – through an instrument of ten-year convertible bonds with a tax which covers inflation, placed by banks and possibly on the basis of suggestions made by local industrial associations – could put enormous capital at the disposition of some tens of thousands of businesses.

This strategy would guarantee new resources for investments which today banks and funds are not able to obtain; it would produce more aggressive programs of growth, reinforce employment and even offer greater guarantees to the banks for their financing. It could also become the basis for attracting and gathering other risk capital, including internationally.

With regard to the public debt, State holdings, especially strategic ones (like energy, defense, infrastructure) instead of being ceded, could be placed as a real guarantee of the debt itself, making it less onerous and more attractive to international underwriters. Faced with serious emergencies, a percentage of public debt – and certainly not that in the hands of families – could also be frozen for an acceptable period at a rate which preserves it only from inflation. In many countries, there are plenty of competent academics and industrialists who could collaborate with the government. Perhaps the moment has come to institute permanent  advisory boards.