Avvenire Editorials

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Editorial – Middle Class and the Capitalism Crisis

The Cows of Finance and Us

by Luigino Bruni

published on Avvenire on 2/08/2011

Based on a perceived economic equity, impoverishing the middle class will unravel the social bond.

logo_avvenire

The agreement reached on U.S. public debt must not excuse us from deeply reflecting on excessive indebtedness of North American economy and of the capitalist system. The 2009 big bank bailouts primarily moved the private sector debt to the public sector, without removing the real causes of the problem, which find themselves in the U.S. and world middle class that is progressively impoverished and in debt. Behind the large public debt there is an inequality problem in income distribution that is becoming ‘the’ crucial question in our capitalist economic system.

[fulltext] =>

In the fall of 2008, when the crisis was about the explode, the 1% GDP share owned by the richest U.S population reached its peak, just as in 1928, at the dawn of the great Wall Street crash, as Robert Reich reminded us in his latest, valued book (Aftershock, Fazi, 2011). When the middle class is impoverished relative to the affluent class, it tends to borrow too much, also because now, unlike in 1929, the financial system proposes and promises magical recipes to maintain or increase, with debt, the levels of consumption.

In the past decades the attitude towards inequality had been ambivalent: part of the public and scholars’ opinion saw it basically as a transitional phenomenon, a price to be paid only in the early stages of the economic development. Albert Hirschman metaphorically expresses it with the image of the tunnel: when we are in a tunnel blocked in a traffic jam and if the lane next to me starts to move I can suppose that my lane will also start to move. The inequality, therefore, should have had an inverted U-shape: growth at the beginning then diminishes at the mature stage of capitalism.

The historical event of the West (certainly U.S. and Italy) tells us that in the last 25 years inequality has increasingly returned. How come? Were the forecasts of the economists wrong? In reality, a brand new factor was inserted, which is the financial nature of the last capitalism that send into crisis the same theory and ideology of the free market. In fact, when the helm of the economic system (and political) passes into the hands of speculative finance (here the adjective is important, finance is not all the same), some of the pillars of liberalism enter into crisis, including the market’s ability to ensure economic growth, for at least three reasons.

The first has to do with the kind of wealth that is created by financial speculations. The golden rule of the “normal” market economy (when funding is subsidiary to the real economy) is the mutual benefit of the parties that exchange; when, instead, we are often dealing with speculative finance the rule is of the ‘zero-sum game,’ just as poker: the winner correspond to the losses of the others.

This means that many of the latest generation of finance instead of creating new wealth moves it (especially by playing with time) from some individuals to others. Second, in many (not all) speculative finance happens systematically, without scandals and convictions. What we have recently seen with soccer bets: some players (large funds) bet on the outcome of the games (future value of securities) and then play in a way that their expectations (bets) will come true. The third reason directly deals with inequality. The financial turbo capitalism naturally produces high inequality because, thanks to labor and technology globalization, workers of average skills (laborers, employees, and care and service agents) always pay less. That is, the big part of the middle class, while strategically-pays the few hyper-specialists (technicians and managers) are able to exponentially increase the profits of finance.

But – and here lies the crucial point – an economic system that enriches too few and impoverish the middle class, the great majority of the population (to say nothing of true poverty, another crucial topic) does not grow. The social bond that is based on a perceived economic equity unravels and begins inexorably to the decline mainly due to a lack of “demand” (not just equity). In fact, an increase of middle and lower class income is immediately translated into a higher consumption and GDP, while increasing income of those who already have much produces very minor effects on consumption and growth. We are then realizing that when workers are poorer relative to other social groups, the inequality becomes a direct factor of growth (or recession). The rhetoric increase is no longer enough for the “size of the cake” before thinking about the ‘slices,’ because on one hand the increase of the cake may only be apparent, and on the other the squandering and the waste of the big cake eaters makes it indigestible even the smaller pieces of the others.

When one watches our capitalist system from afar, the first strong impression one can draw is that we have grown too much and evil: the environmental crisis says it with more eloquence, but it also says that this growing inequality is a result of over-milking the cows of finance, which today risks to kill the animals to exhaustion. The tool to rebalance the economic relationship is not called charity or philanthropy but tax system. That is why family-friendly tax proposals (like the “family factor”) is a purely economic matter before becoming an ethical proposal, because without rebalancing the social deal we will not have the energy to re-launch growth, reduce public debt and construct a better economic system. For this I must make my own the words of hope with which Reich concludes his speech: “In the United States, as in Italy, we will reverse the course that threatens our economies and democracies. We will do it so that this inversion is in everyone’s interest, even those in our societies who have enormous levels of power and wealth. … It is our challenge and our children’s. It is the biggest economic challenge we are facing.”

All of Luigino Bruni's comments on Avvenire can be found under Avvenire Editorial.

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Editorial – Middle Class and the Capitalism Crisis

The Cows of Finance and Us

by Luigino Bruni

published on Avvenire on 2/08/2011

Based on a perceived economic equity, impoverishing the middle class will unravel the social bond.

logo_avvenire

The agreement reached on U.S. public debt must not excuse us from deeply reflecting on excessive indebtedness of North American economy and of the capitalist system. The 2009 big bank bailouts primarily moved the private sector debt to the public sector, without removing the real causes of the problem, which find themselves in the U.S. and world middle class that is progressively impoverished and in debt. Behind the large public debt there is an inequality problem in income distribution that is becoming ‘the’ crucial question in our capitalist economic system.

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The Cows of Finance and Us

The Cows of Finance and Us

Editorial – Middle Class and the Capitalism Crisis The Cows of Finance and Us by Luigino Bruni published on Avvenire on 2/08/2011 Based on a perceived economic equity, impoverishing the middle class will unravel the social bond. The agreement reached on U.S. public debt must not excuse us...
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    [title] => A Jubilee for Italy
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Comments – To understand and deal with the crisis

A Jubilee for Italy

by Luigino Bruni

published on Avvenire on 24/07/2011

logo_avvenireIn these days, there have been warning signs after another of speculative attacks, alternating with that of relaxation and optimism. In reality, we must be aware that the situation is serious, and we must equip ourselves as country and as Europe to address a phase that could prove no less difficult and lengthy than that of the autumn of 2009. In fact,  the crisis that we are experiencing in these days is much more of a contagion phenomenon (of the Greek and/or Portuguese crisis): it is a structural fragility crisis of Italy and Europe. The illness is serious and yet it is neither a deadly disease nor a simple flu. It is a second mini-stroke that if it does not produce a change in lifestyle it can lead to fatal consequences.

[fulltext] =>

In the interval between the two crises Italy the “patient” has continued to behave as before, except for a few afternoon stroll or a few pills, but without any strong sign of a turnaround.

There are at least three elements to propose as diagnosis and a possible treatment. The first element for a correct diagnosis has to do with demography. We will never understand well what is happening if we do not start from a given structure and long-term period: Italy, more than other European countries, has in the recent years radically decreased the relationship between the active and the retired population, parallel to the sharp increase of life expectancy.

The entire state welfare system was based on a much lower life expectancy (and even more on youths who worked), which allowed the young generation to sustain the burden of pensions. In addition, the family, which was the true center of our state welfare (much more of the state or the market), can no longer perform its duties of care and nurturing. If we do not quickly act not only for a pension reform but a new intergenerational deal, the public debt cannot be reduced.

The public debt is, in fact, the second element of the diagnosis: speculation hits Italy because the huge public debt makes the periodic signing of government bonds indispensable, nothing less. Hence the request, in times of frailty even politically, of increasing returns of our bonds. The public debt is the real sword of Damocles of the current crisis.

The third element deals with Europe, namely the absence of a political reality behind the euro. The project of the founding fathers of Europe was primarily a political one. History tells us that a currency is strong when it is supported by (and expresses) a political power. The management uncertainties of the Greek crisis are very important signs, since they say that in addition to business interests of euros in Europe there is too little: the forces of financial markets know it and target those that are more fragile. Without a new political deal, a European constitution and strong institutions (and agile: one must reduce also the costs of European bureaucracy), the euro will not hold for long.

Today, the therapy that everyone suggests is the revival of the economic growth. It should be remembered that the insufficient economic growth is also a consequence of the first two elements, namely a country’s aged debt who cannot find the resources to grow. Economic growth requires many ingredients, all very essential: public investments (especially in education and research), creativity, innovation and, above all, enthusiasm and passion for the people. Today Italy certainly lacks resources for public investments but lacks even more the enthusiasm and the desire for life. To understand what this enthusiasm is, it is enough to a tour Asia, the Middle East or Africa. On my last trip to Kenya, more than the material poverty, it struck me to see young people studying in the evening under the street lights: it is this hunger for life and future that tomorrow can defeat the hunger for food and give life to development and prosperity. If today Italy and Europe do not find this enthusiasm, no finance can revive the growth because our politicians and public opinion systematically forget the greatest lesson of social sciences of the twentieth century: the growth and development of a country does not depend mainly on the action of the government but by the daily behaviors of millions of citizens, each of which has, and he alone, that piece of information and knowledge relevant to social and economic action.

Of course, among these economic agents there are also the government and institutions (which can and must do their co-essential part), but have much less power than they tell us every day (even to justify their presence and related costs). The solution to the economic crisis can be found outside the economic sphere: one can find it in the civilian life, the desires and the passion of the people, which are springs that feed also the economic life. One does not go to work every morning to reduce public debt, but to pursue projects and dreams. We are also able to make great sacrifices only if we catch a glimpse of a bigger collective project, capable of moving the heart and actions to rekindle enthusiasm. We have been able to do them many times in the past, even recently, why not now? However, each one of us should use well that piece of knowledge and power on the reality of which it is related to, use the talents well, undertake more and better. But for this game to function there is a need of rite and public liturgies, symbols of force, art, beauty, solemn and collective acts. In particular, I am convinced that today there is an dire need of a sort of jubilee, in the biblical meaning of the term: a season of mutual forgiveness, of reconciliation and of peace, to forget all the malice and poisoning of each other of which we are capable of in these twenty years both in the political class in the country and to look forward together. Today Italy is in a state of welfare very similar to “war of everyone against everyone” of which Hobbes talks about. We do not have to get out of it and continue the civic and economic decline; we can get out of it creating a Leviathan, the monstrous crocodile that is also part of the history and the DNA of the Italians. But we can get out of this poverty and economic trap by re-launching a new era of civic virtue and a new deal, the only ground that has generated and generates creativity, enthusiasm and love of life, from which the economic growth will flourish.

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see a comment of Pierluigi Porta

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Comments – To understand and deal with the crisis

A Jubilee for Italy

by Luigino Bruni

published on Avvenire on 24/07/2011

logo_avvenireIn these days, there have been warning signs after another of speculative attacks, alternating with that of relaxation and optimism. In reality, we must be aware that the situation is serious, and we must equip ourselves as country and as Europe to address a phase that could prove no less difficult and lengthy than that of the autumn of 2009. In fact,  the crisis that we are experiencing in these days is much more of a contagion phenomenon (of the Greek and/or Portuguese crisis): it is a structural fragility crisis of Italy and Europe. The illness is serious and yet it is neither a deadly disease nor a simple flu. It is a second mini-stroke that if it does not produce a change in lifestyle it can lead to fatal consequences.

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A Jubilee for Italy

A Jubilee for Italy

Comments – To understand and deal with the crisis A Jubilee for Italy by Luigino Bruni published on Avvenire on 24/07/2011 In these days, there have been warning signs after another of speculative attacks, alternating with that of relaxation and optimism. In reality, we must be aware that the situa...
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    [title] => But gratuitousness can live together with the market
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Editorial

By Luigino Bruni

Published on Avvenire on 23/09/2010 

The topic of gratuitousness is (finally!) being talked about again, even in public debate, in politics – and even in economy and economic science.

This renewed interest by the economy should not surprise people if we remember that the Latin word charitas (note the letter “h”, as it was written in the first Christian codes) – which was chosen by Christians to translate the Greek word agape, gratuitous love – had economic origins and uses. It means that which was expensive, that which costs on the market. This renewed interest, however, is accompanied by usage which is not always attentive and faithful to the great philosophical, spiritual and especially human reflection (only humans know about it) on gratuitousness. In my opinion, there are two errors that frequently appear when people talk about gratuitousness. First of all, they identify it with free, as in free of charge, a price of zero. “Frank works gratuitously”, meaning he works for free, therefore, his stipend is zero.  Instead, from the great Franciscan tradition, we know that gratuitousness in a certain way means to have infinite value.

[fulltext] =>

When Francis sent friars to give the Gospel, he told them to not accept money in exchange for their preaching. But why? The tradition goes that, “If they had to pay you, it would take all the gold in the world.” And therefore, accepting sums of money less than “all the gold in the world” would mean underselling gratuitousness – relational and spiritual dumping. That is where the Franciscan tradition to accept gifts as an answer to reciprocity originates. Today, when we identify gratuitousness with “free”, we risk cancelling out this fundamental truth, and we twist the meaning of gratuitousness (underselling and undervaluing it) and market. Why does it also twist the meaning of market?

This is where we come to the second error.

Identifying gratuitousness with free (price of zero) has and is leading people more and more to associate the market, contracts and mercantile exchange to non-gratuitousness. If gratuitousness is free, then everything that deals with prices and money  has nothing to do with gratuitousness – that is, if we use gratuitous to mean discount, freebee, which would be gratuitousness present in the market (in reality, these meanings are a “vaccine” against real gratuitousness). Or, it can come “after” the market, when entrepreneurs as private citizens make donations or institute foundations to finally be able to live that gratuitousness so foreign to economic action and business. There would be much to say about the birth of the American philanthropic model, which, even as a reaction to the excessive interweaving of gratuitousness (charis) and market (indulgence), has built a dichotomic economic system, where business is business and gift is something totally private and separate from it. (We have to say that in the USA, there is not even an equivalent word for the Italian gratuitá, or as we are using, gratuitousness. Gratuity is only the tip that one gives to the bellhop). In reality, the true cultural challenge of gratuitousness is to think about it as a founding dimension of every human experience, from family to business, from politics to contract, as is in line with Caritas in veritate. Many examples of microcredit, from the Franciscans during the Middle Ages to Yunus, have lived extraordinary experiences of gratuitousness which frees millions of people from misery and exclusion, without a gift or “free” services, but with contracts, with conditioning rules – with gratuitousness accompanied by what is right and proper. The kind of gratuitousness that is required today of the banking system is not primarily that of sponsors and banking foundations, but the kind that informs (or not) the normalness of banking, from responsibility to transparency. The kind of gratuitousness that truly counts is not the 2% of one’s profits, but the other 98%. Otherwise, we reduce gratuitousness to a kind of limoncello during a lunch (limoncello is a sweet Italian lemon-based liquor) – something that fills holes, and even more, something that should not be offered at that time, immediately becoming unnecessary and superfluous.

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Editorial

By Luigino Bruni

Published on Avvenire on 23/09/2010 

The topic of gratuitousness is (finally!) being talked about again, even in public debate, in politics – and even in economy and economic science.

This renewed interest by the economy should not surprise people if we remember that the Latin word charitas (note the letter “h”, as it was written in the first Christian codes) – which was chosen by Christians to translate the Greek word agape, gratuitous love – had economic origins and uses. It means that which was expensive, that which costs on the market. This renewed interest, however, is accompanied by usage which is not always attentive and faithful to the great philosophical, spiritual and especially human reflection (only humans know about it) on gratuitousness. In my opinion, there are two errors that frequently appear when people talk about gratuitousness. First of all, they identify it with free, as in free of charge, a price of zero. “Frank works gratuitously”, meaning he works for free, therefore, his stipend is zero.  Instead, from the great Franciscan tradition, we know that gratuitousness in a certain way means to have infinite value.

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But gratuitousness can live together with the market

But gratuitousness can live together with the market

Editorial By Luigino Bruni Published on Avvenire on 23/09/2010  The topic of gratuitousness is (finally!) being talked about again, even in public debate, in politics – and even in economy and economic science. This renewed interest by the economy should not surprise people if we remember that ...
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Editorial

By Luigino Bruni

Published on "Agorà", a column in Avvenire, on 5/02/2010

"Italy built at home" (Mondadori), by economists Alberto Alesina e Andrea Ichino, is a book full of important data, on which it would be good to reflect, perhaps to reach "policy" conclusions which are different than those proposed by the authors. The book´s thesis is that the underdevelopment of the Italian economy is mainly cultural underdevelopment. They attribute this to our tradition of family, which causes a great percentage of women to carry out domestic work, and so, work too little "outsite of the home", in the market.

This said, here´s their recipe: reduce taxes on income of working females in order to create incentives so that women will work more. It cannot be denied that today, in Italy, the assymetry of professional development opportunities is significant between men and women. It is also true that legislative, economic and social intervention that facilitate female workers to enter the market, and that therefore help balance out the weight they carry at home, are not only opportune. They are necessary and urgent. From this point of view, then, this book can play an important role in nourishing a debate about civilization that has never been more relevant. But this implies a cultural vision that sees strong ties, especially in the family and in the community, as the main social burden of Italy and Mediterranean culture compared to the more economically and civilly developed Nordic countries.

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There are also affirmations that tend to tone down this radical thesis, but in general, the pitch of the paper remains coherent to its main idea: if we are capable of abandoning the model of the Italian family and imitating Norwegian and Danish social models, we´ll finally become a post-modern, democratic, richer, and perhaps happier country. This thesis is not convincing, not only because this great "Nordic" happiness does not exist, but most of all because it lacks an idea of family as a collective subject. For the authors, family is essentially the sum of separate individuals. They don´t see relationships but individuals. That´s the origin of their critique of the proposed "quoziente familiare" (literally, family quotient), which will not tax couples as individuals but as part of a family unit and while keeping in mind the number of children they have. "If we hold that the participation of women in the workplace is an important objective for our country, it is evident that the method of the family quotient distances us from this objective, and separatetaxation would be preferable". Separate taxation sees a couple as an unjoined man and woman; but family is above all a pact that makes two unjoined people a collective subject, in which decisions are discussed and then taken together, including working decisions. Raising and educating a child, especially in his or her first years of life, is not the private business of the parents or of the mother. It´s not a "good" like transportation or housekeeping that can be bought and sold efficiently only by asking for it or offering it. Today, the best economic theory recognizes this, when it considers the family as producer not only of services but also of "relational goods" (which are goods, but not merchandise), and when it shows (as does Nobel winner Heckman) that the first years of life are those on which the even the economic success of people are most based. Before any kind of economic and fiscal reform on the Italian family, the family must be recognized as a great resource and civil patrimony, and only then can its problems be addressed.

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Editorial

By Luigino Bruni

Published on "Agorà", a column in Avvenire, on 5/02/2010

"Italy built at home" (Mondadori), by economists Alberto Alesina e Andrea Ichino, is a book full of important data, on which it would be good to reflect, perhaps to reach "policy" conclusions which are different than those proposed by the authors. The book´s thesis is that the underdevelopment of the Italian economy is mainly cultural underdevelopment. They attribute this to our tradition of family, which causes a great percentage of women to carry out domestic work, and so, work too little "outsite of the home", in the market.

This said, here´s their recipe: reduce taxes on income of working females in order to create incentives so that women will work more. It cannot be denied that today, in Italy, the assymetry of professional development opportunities is significant between men and women. It is also true that legislative, economic and social intervention that facilitate female workers to enter the market, and that therefore help balance out the weight they carry at home, are not only opportune. They are necessary and urgent. From this point of view, then, this book can play an important role in nourishing a debate about civilization that has never been more relevant. But this implies a cultural vision that sees strong ties, especially in the family and in the community, as the main social burden of Italy and Mediterranean culture compared to the more economically and civilly developed Nordic countries.

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The Family? It´s not a stumbling block to development

The Family? It´s not a stumbling block to development

Editorial By Luigino Bruni Published on "Agorà", a column in Avvenire, on 5/02/2010 "Italy built at home" (Mondadori), by economists Alberto Alesina e Andrea Ichino, is a book full of important data, on which it would be good to reflect, perhaps to reach "policy" conclusions which are different than...