Alternatives to austerity

The inevitable "structural reforms" Italy faces won't drag the eurozone's third-largest economy out

Silvio Berlusconi's last few days as Prime Minister find him overseeing the introduction of extraordinary austerity measures, passed through the Italian Parliament yesterday on the back of wheedling promises made to EU leaders. Berlusconi's exit will doubtless come as a blessed relief to many millions of Italians. The clown is to be replaced - without, naturally, recourse to elections - by a European Commissioner, Mario Monti, hastily sworn in as senator-for-life. A new government of technocrats will oversee implementation of austerity, assisted by the IMF officials now taking up residence in Italy's finance ministry. Those austerity measures, in turn, will be backed up by the usual demands for "structural reforms" - deregulation and privatisation chief amongst them.

This will not end the crisis in Italy - and, with that failure, the prospect of a global slump is opened. Austerity across Europe has already driven economies deeper into the mire, Ireland and Greece chief amongst them. The mechanism is widely known: as government spending falls, it drags demand down still further. As demand falls, firms cut wages and make redundancies. A vicious circle kicks in. With Italian consumers and businesses keeping their wallets closed, and no real hope of a recovery in export markets, it is spending by government that could sustain economic activity. Yet the scorched-earth economics of austerity are now being forced onto Italy.

Deregulation and the loosening up of labour markets are the second leg of the EU and IMF plans. The hope is that by freeing capital to operate as it sees fit, it will recover its dynamism. But "structural reforms" have taken place in Italy over the last decade or more. On OECD measures, Italy's product and labour markets are now as deregulated as Germany. In conditions of stagnant demand, the chances of further assaults on employment and consumer protection prompting growth are slim.

Italy's economic malaise runs deeper. The rot set in decades ago. A post-war miracle, with growth rates averaging over 5 per cent from 1951-73, halted with sharp recession in the early 1970s. Growth never truly recovered, and for the last 15 years has averaged less than one per cent a year. Businesses and government acted in concert to casualise labour, promoting labour-intensive export industries at the expense of capital investment. Economic activity became increasingly concentrated in the centre and the north, leaving the south lagging still further. Rising public debt initially helped cover the costs of wider stagnation.

Recent governments have targeted that debt, at the expense of public spending - and those without Berlusconi at the helm most successfully. The burden fell from 120 per cent of GDP in 1996 to around 100 per cent by 2007. But the financial crisis of 2007-8 led to a sharp rebound. A decade of debt reduction was wiped out in two years. The combination of a seriously weak economy and sharply rising indebtedness is what has now panicked markets into pushing Italy's current borrowing costs above 7 per cent.

If there is a hope of recovery in the eurozone's third-largest economy, it cannot come through the standard IMF package of austerity measures and market-led reforms. Nor will it come through the erosion of democracy. Quite the opposite is required: supporting public expenditure to sustain demand; industrial transformation, led by public intervention; and an expansion of democracy against the rule of finance - including, ultimately, a recognition that odious and unpayable sovereign debts need not be honoured.

James Meadway is a senior economist at the New Economics Foundation

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How the Lib Dems learned to love all-women shortlists

Yes, the sitting Lib Dem MPs are mostly white, middle-aged middle class men. But the party's not taking any chances. 

I can’t tell you who’ll be the Lib Dem candidate in Southport on 8 June, but I do know one thing about them. As they’re replacing a sitting Lib Dem (John Pugh is retiring) - they’ll be female.

The same is true in many of our top 20 target seats, including places like Lewes (Kelly-Marie Blundell), Yeovil (Daisy Benson), Thornbury and Yate (Clare Young), and Sutton and Cheam (Amna Ahmad). There was air punching in Lib Dem offices all over the country on Tuesday when it was announced Jo Swinson was standing again in East Dunbartonshire.

And while every current Lib Dem constituency MP will get showered with love and attention in the campaign, one will get rather more attention than most - it’s no coincidence that Tim Farron’s first stop of the campaign was in Richmond Park, standing side by side with Sarah Olney.

How so?

Because the party membership took a long look at itself after the 2015 election - and a rather longer look at the eight white, middle-aged middle class men (sorry chaps) who now formed the Parliamentary party and said - "we’ve really got to sort this out".

And so after decades of prevarication, we put a policy in place to deliberately increase the diversity of candidates.

Quietly, over the last two years, the Liberal Democrats have been putting candidates into place in key target constituencies . There were more than 300 in total before this week’s general election call, and many of them have been there for a year or more. And they’ve been selected under new procedures adopted at Lib Dem Spring Conference in 2016, designed to deliberately promote the diversity of candidates in winnable seats

This includes mandating all-women shortlists when selecting candidates who are replacing sitting MPs, similar rules in our strongest electoral regions. In our top 10 per cent of constituencies, there is a requirement that at least two candidates are shortlisted from underrepresented groups on every list. We became the first party to reserve spaces on the shortlists of winnable seats for underrepresented candidates including women, BAME, LGBT+ and disabled candidates

It’s not going to be perfect - the hugely welcome return of Lib Dem grandees like Vince Cable, Ed Davey and Julian Huppert to their old stomping grounds will strengthen the party but not our gender imbalance. But excluding those former MPs coming back to the fray, every top 20 target constituency bar one has to date selected a female candidate.

Equality (together with liberty and community) is one of the three key values framed in the preamble to the Lib Dem constitution. It’s a relief that after this election, the Liberal Democratic party in the Commons will reflect that aspiration rather better than it has done in the past.

Richard Morris blogs at A View From Ham Common, which was named Best New Blog at the 2011 Lib Dem Conference

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