Document elaborated by: Riccardo Cappellin – University of Rome “Tor Vergata”, Leonardo Becchetti – University of Rome “Tor Vergata”, Enrico Ciciotti – Catholic University, Piacenza, Gioacchino Garofoli – University of Insubria, Varese, Enrico Marelli – University of Brescia, Luciano Pilotti – University of Milan
The work done in recent years in economic research and the intense debate on the one hand on the new objectives of companies and on the other hand on the political objectives of the European institutions in the near future indicate that an economic policy is necessary in Italy and in Europe very different from the neoliberal and centralist policy, based solely on restrictive rules of public budgets, which cut collective investments and services, and on monetary expansion, which feeds the speculative bubble of financial markets.
We need a new economic policy, which we call a “New European Industrial Strategy”, oriented at the citizens and the territory, which raises the economic growth in Europe, which has been too low also due to the collapse of the private and public investments.
New European Industrial Strategy
The new European economic policy will bring European institutions closer to European citizens if it will be able to meet their needs for a better quality of life in cities, the need to preserve the natural environment and the urgent need to reduce social inequalities and to a greater fiscal pressure on higher incomes, which often evade taxes.
The “New Industrial Strategy” must integrate budget policy and monetary policy, which are the typical policies of the traditional neoliberal and centralist approach, which is criticized by both the new left and the new right, both in Europe and in the United States.
Monetary and fiscal policies are in fact ineffective in the short term or incapable to promote an immediate economic recovery, which requires instead to promote mutual trust, the certainty of medium-term prospects and therefore shared investment projects of different private and public actors, through the instruments of industrial, regional, labour, financial and fiscal policy, in the perspective of integrated territorial eco-systems.
Therefore, the “New Industrial Strategy” places at the centre of the political debate: a) the objective of sustainable and inclusive development from the economic and social and environmental point of view, b) the reduction of income and wealth disparities, c) the active participation of citizens and the decentralization of political decisions and d) the radical transformation of the production system in Italy and Europe through the diversification towards new industrial and tertiary productions, which enhance knowledge, professional skills and meet the needs of citizens in the territory where they live with their traditions, vocations and cultures.
20 economic policy actions
The “New European Industrial Strategy”, which the Group: “Growth, Investments and Territory” (an independent and open think-tank and cultural-political movement) proposes (Click here to join the LinkedIn group), indicates as priorities the following 20 economic policy actions:
- promote higher GDP growth rates and the decrease of the gap between Europe and the other large global regions, by stimulating the internal demand (private and public consumption and investment) and labour incomes, thus reducing the excessive European external current surplus,
- avoid excessive fiscal austerity in government budget, reduce fiscal pressure especially on labour and low incomes (including lower VAT rates on selected “merit” goods) and switch public expenditure composition to support investments and decrease current expenditure,
- promote a “New Deal for Europe” and launch an European investment plan, aimed at improving social infrastructures, the extraordinary maintenance of the environment and the territory and for the creation of new productions through regional and sectoral development projects, and to finance this European investment plan through European Investment Bank bonds to be serviced by the revenues of national governments, which will increase with a recovery of investment, employment and GDP. Therefore, according to the “golden rule” principle, these investments should be excluded from the stability pact’s indicators to show the role of the European solidarity and to represent an important step towards the construction of the common European identity,
- invert the continuous decrease of private and public capital expenditure and promote innovation, the labour productivity within the companies and also in the public administration and stimulate new opportunities for a diversification into innovative productions and the creation of new jobs,
- increase individual and collective consumption, investment in education, research, culture and public health,
- increase affordable and social housing, investments in efficient regional transport networks and improve the quality of life in cities,
- decrease the excessive inequality in income and wealth distribution and education access between the top 1% – 10% segment and the large portion of the citizens and fight the huge poverty and social exclusion,
- lead the companies to adopt a broader sense of purpose against short-termism, considering both social and environmental outcomes and not only the financial outcomes and profits. Therefore, companies should be committed to take concrete actions, which meet the needs of all stakeholders: customers, employees, suppliers, local communities, not just the shareholders. The EU should strengthen the actual European leadership in the share of the companies adopting Environmental and Social Governance (ESG by enlarging the concept of CSR) and promote the investment of companies in their respective local and regional communities,
- reorient the financial industry and large corporations to use corporate profits in capital spending rather in share buyback and dividend distribution and limit short term financial transactions, thus discourage the patrimony accumulations (shareholder value) and encourage the production, the real material and immaterial investments, the distribution of revenues and stimulate a more efficient allocation of environmental, energetic, labour and knowledge resources with the actors external to the companies. This would be beneficial over the long term for the companies themselves and also for value creation and the stock markets,
- support innovative tangible and intangible investments of private companies, also reducing taxes on these investments and creating innovation networks with other companies, developing “integrated platforms” that stimulate horizontal or intersectoral synergies, instead of just vertical ones, as in traditional production supply chains,
- limit the excessive fiscal competition between the EU countries and promote the harmonization of the fiscal regulations on corporate incomes and the decrease of loopholes in the corporate tax code and the profit manipulation towards offshore low tax jurisdictions,
- promote competition, break up too large companies (e.g. Google, Amazon, Facebook, Tencent) and limit monopolies and rents in digital markets with hard antitrust regulations in the interest of the consumers,
- increase business confidence, enhance the collaboration with the consumers and savers or investors and the other local and regional stakeholders, in order to decrease the economic uncertainty, promote joint development projects in selected distressed areas and in new industrial and service productions based on knowledge and multi-functional and multi-sectoral competencies,
- promote the innovation in top tech companies (“unicorns”) and in large companies, but also in the small and medium size companies and in services in order to diversify their traditional productions and improve their performance and networking with other companies at the local and the European scale,
- promote the education and skills, hiring and retaining of qualified workers, raise wages (also by adopting a minimum wage), create attractive job opportunities and decrease the emigration of young people, reduce working hours and insure more free time to workers according to their age and gender and to specific needs and increase the time devoted by workers to collaborative creative work aimed at innovation in partnership with schools and universities at the local and national scale,
- create a liveable urban environment in congested or distressed areas, by promoting investments through urban/territorial integrated projects in the following new productions, which jointly determine the citizen’s living conditions: a) food; b) housing; c) mobility and logistics; d) culture, lesure and media; e) health, social assistance and education; f) environment, energy saving and spatial planning, which lead to a diversification of the national and local production system towards related innovative industrial activities and also allow to promote the energetic and waste recycle.
- improve the well-being of the European citizens, promote environmental quality and energy saving and prevent the damages of “natural” catastrophes (earthquakes and great floods), through integrated programs within the territory and not only through measures in individual industrial sectors for reducing carbon emissions.
- in an organizational and normative perspective, there is the need to, first of all, concentrate the policy interventions in selected specific urban and quasi-urban and rural problem areas in the European territory. Secondly, in order to foster a higher economic growth of the EU by promoting, both at the European and national scale, there is the need to identify and enhance new strategic and innovative productions, which should be highly integrated among them within the specific regions and local areas of intervention and respond to the needs of the citizens of these areas. Thirdly, it is necessary to differentiate the investment strategies and the policy instruments which are most suitable in order to promote, from one hand, the creation and growth of new high tech companies (“unicorn”), the horizontal diversification and internationalization of the large companies which are strategic national champions, from the other, a greater vertical integration of the dynamic medium size and small industrial and service companies and, finally, the restructuring of the many problematic companies and their respective local areas.
- promote international cooperation between the European Union and the United States and other major world economies, negotiating and reducing economic, environmental, energy and geopolitical conflicts and realigning trade policies and promoting international regulations that counter property theft intellectual and forced technology transfers,
- strengthen the European culture, values, thrust, reciprocity and the European common identity and institutions, also by promoting an higher GDP growth and a greater interregional cohesion in the European Union, reducing income disparities, aiming at a better wellbeing for the European citizens and a more sustainable environment.
More democratic and participatory European policy
In conclusion, the crisis of the National States, both too small in globalization and distant from the problems and daily needs of citizens in Europe, is not resolved with the “sovereignism”, but through a new, more democratic and participatory European policy, which contrasts the distrust of the citizens towards the State and the European Union.
European economic policy must promote autonomy and federalism, also with cross-border networks, within an institutional architecture of the European Union defined on a triple territorial, national and continental level. The European identity must not be based only on the consensus on the importance of the four freedoms of movement of: goods, capital services and people, but also on the common awareness of the importance of promoting interactive processes of innovation and the creation of new knowledge and new models of collective and sustainable consumption by citizens. Thirdly, European identity must be based on the common will to promote the exercise of active citizenship and the process of informed participation in the deliberative process of citizens, forcing individual States to greater political and administrative decentralization.
Therefore, the economic policy of the European Union must exploit, through appropriate regulations, public-private entrepreneurial initiatives organized from below and the participation of citizens and their associations in the design of services and infrastructures, which generate new jobs and modern productions capable of responding to the needs of citizens.
In summary, the “New Industrial Strategy” aimed at citizens and the territory proposes a new economic policy agenda to the Governments, the world of politics and the world of work and business, which aims to promote investment and innovation, which stimulate GDP growth on both the demand and supply side.
In fact, an increase in GDP reduces the Deficit or Public Debt ratio with respect to GDP and determines an increase in tax revenues and therefore would allow a reduction in taxes and even a redistribution of incomes in favour of the poorest citizens. Therefore, in the case of Italy for example, the “New Industrial Strategy” would allow to achieve the following operative and linked together objectives of a new national economic policy:
• 40 billion more private and public investments,
• 2% growth rate and
• 10 billion lower taxes.