13 August 2013

Martin Schulz: Did we really learn the lessons of the crisis?

Writing for New Europe, the EP President says that sometimes it takes a crisis to make possible what is normally politically impossible. He feels however that we may be squandering this chance by adopting only half-hearted solutions that might condemn us to repeating crises in the future.

The crisis highlighted the failure of this world. But have we really learned any lessons? I have my doubts.

We re-regulated finances somewhat, strengthening the requirements for banks and boosting the powers of Governments to monitor and liquidate financial institution. Bailouts have been offered to companies and whole countries. Better protection has been offered to deposit-holders and other customers. In Europe, we rightly capped bonuses for financiers to root out attitudes of "après moi le deluge".

Is all this enough to ensure a sustained recovery? Are we closer to the world of social justice where tax payers will not have to save banks while their former bosses are drowning in money? There is a long way to go, it seems.

In Germany, my native country where social security provisions are much more generous than in the United States, the net assets of private households more than doubled from €4.6 to €10 trillion between 1992 and 2012. In the last crisis-hit years alone, there has been a €1.4 trillion increase. Yet, more than half of those assets are owned by the top 10 per cent of the population. Only 1 per cent of private assets are owned by the bottom 50 per cent of households.

In France, where unemployment has grown to well above 10 per cent and the government struggles to make ends meet, 82 per cent of big companies have met or beat earning forecasts so far this year.

In my eyes, if the crisis' lesson is to be learned, we need a radically more progressive redistribution of wealth that would broaden economic and educational opportunities for people. Strong, sustained economic growth in the aftermath of the World War II happened precisely because purchasing power strengthened across the whole society, fuelling mass consumption. Fairer redistribution of wealth now would boost private demand, paving the way for long-term growth. At the same time, financial institutions should be made to serve the real economy, financing the production of goods and services rather than serving themselves.

Europe should steer away from unilateral austerity, which instead of improving the fiscal situation of troubled countries, is boosting their debt as their economies shrink. Europe needs an ambitious long-term investment programme in innovation, education, research and development and infrastructure.

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