by Enzo Valentini
The Great Recession, as with the Great Depression, is proving to be a structural crisis, which only a Euro-Keynesian
There are good reasons to think that the more developed countries are going through a long structural crisis. In this sense, the various financial crises—of the ‘new economy’ in the early 2000s and of property and derivatives in 2007-08—should be seen as cathartic moments in which far deeper problems, exacerbated by deregulation of financial markets, explode.
Domenico Delli Gatti and colleagues
This could have happened in the transition from agriculture to manufacturing in the early 20th century (hence, the financial crisis of 1929) and from manufacturing to services in recent decades.
As a consequence, expansionary Keynesian policies may be appropriate—for the short run in sustaining aggregate demand and for the long run if they are oriented to facilitate the migration of workers. For instance, public investment in education is crucial. Public demand can also be very important
Winners and losers
With colleagues, I have shown that not only is the speed of the transition important; so also is its quality: Knowledge-intensive services (KIS) pay high wages, while less-knowledge-intensive services (LKIS) pay low wages. This explains why some economies which have endured a minor financial crisis are still in crisis (Italy, Greece), while others perform better (US, UK): the former are experiencing a transition towards LKIS, the latter towards KIS.
Germany is meanwhile maintaining high-tech manufacturing—paying high wages without exposure to competition from developed countries. At least for now.
A problem arises: in Europe, the countries which most require a shock of public investment are those with the highest public debt. We need more Europe: a eurozone budget and revenues, and a unique common public debt. In the euro area as a
The advance of the robots
Data from the International Federation of Robotics show that
Technology and robots are a threat if not directed. But they are an opportunity if appropriately oriented through public policies. Probably, there will be less
More generally, there may be a need to boost new sectors and/or create ‘new markets’ through public investment. It is possible to think of
Bear in mind that in many advanced countries private investment is low, despite
(Enzo Valentini is an associate professor of economic policy at the University of Macerata.)