PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network, and welcome to this week’s edition of The Bill Black Financial and Fraud Report with Bill Black.
Bill’s an associate professor of economics and law at the University of Missouriâ€“Kansas City, a white-collar criminologist, a former financial regulator, and author of the book The Best Way to Rob a Bank Is to Own One. Thanks for joining us, Bill.
BILL BLACK, ASSOC. PROF. ECONOMICS AND LAW, UMKC: Thank you.
JAY: So what do you got this week?
BLACK: Well, I just got back from Reggio diÂ Calabria in Italy, which is that toe part that looks like it’s kicking Sicily, and a conference on modern monetary theory. I have a prop on all of this. And we were talking about austerity, Italian style, and some remarkable things.
The first, while we concentrated on Spain and Greece and their Great Depression levels of unemployment, unemployment is very high and rising in Italy. But the real story is among young adults. And the unemployment rate among young adults is surging, and it’s already in theâ€”closely approaching 40Â percent, which is to say, it’s nearly at the levels of young adult unemployment in Spain, and in Greece as well.
And so you have this paradox of Italy, where, you know, in the variant of the old joke that there are three things that are important in terms of real estate, location, location, location, there are three things important to Italians, it’s always said: family, family, family. But Italians areâ€”first, they don’t have a lot of kids. Their fertility rate is 1.3, so way below replacement rate. And second, they are increasingly causing their kids to emigrate, because there is absolutely no prospect of a good job in Italy for younger people. And, you know, in the old days, this was typically peasants who were leaving, but nowadays it’s their most educated folks. You get your university degreeâ€”which you’re going to essentially do for free, still, in Italy, minus some feesâ€”and then you have to emigrate because there are no positions. And those problems that I talked about are vastly worse in the south of Italy. These are where the really poor places were.
So we were talking about that and the insanity of an austerity principle that is tearing Italy apart and destroying family, left right and center. I mean, nowadays the only good news is with modern technology you might be able to talk to your kids more cheaply when they’re 5,000Â miles away.
JAY: How much of this is recent, in the sense these new austerity measures that have kicked in over the last couple of years?
BLACK: Well, it’s not entirely recent. In other words, it’s a trend that’s gotten much worse. But that trend had existed for much of this century, because Italy was simply not producing new high-tech jobs very well.
But for us the craziness was that we were talking with Italian professors of economics, you know, perfectly intelligent people, but often big believers in austerity, even though they said, yes, austerity is causing greater unemployment, yes, it’s causing the kids to emigrate, yes, we have no answer other than austerity, right, there is no alternative, which is precisely what we then went down to sayâ€”well, in fact, there are excellent alternatives; you shouldn’t be doing this.
JAY: And Mario Monte, the prime minister who was sort of a technocratâ€”kind of almost appointed, in some ways, when they dumped Berlusconi, by European finance. But even he a few months agoâ€”I saw a quote where he said, we’ve done everything you asked us to do in terms of austerity measures and otherâ€”and all we’ve gotten in return is high unemployment.
BLACK: Yeah, they’ve gotten zero, in essence, in return from the European Central Bank, and it’s been a disaster for Italy. It actually is likely to make the deficit larger, not smaller, because it’s thrown Italy back into a severe recession.
And you’re quite right. Berlusconi, of course, was a really terrible leader, but he was in essence forced out in a fiscal coup by big finance, and Monti was put in without any real democratic process, in terms of the voters ever being asked. And Monti is saying he’ll rule again, you know, but as long as he doesn’t have to stand for any election. So (A) this is a completely nondemocratic process, and (B), you know, the word technocrat is supposed to mean you have technical skills, and so when your technical skill is I can create mass unemployment among the youth of Italy, that’s not something we usually recognize as a technical skill.
JAY: But my point, though, was even Monti was complaining that I implemented all the things you told me to implement, and instead of seeing growth, we’re seeing recession, so what’s the point of this. Their own technocrat was saying that.
BLACK: Well, I understand that, but he’s not changing anything, either. What he’s saying, simply, politically, is you’ve got to give me something in return if you want me to go even further down the austerity road, or people will basically, you know, push me out of office almost immediately. And the reaction of the European Central Bank is, well, toughâ€”which, by the way, is run by another Italian, Draghi, who is also described as a technocrat, even though his skill set is also largely unemploying people of Europe.
So for us the strange thing was to see Italian economists admit that austerity had this effect, but say, you know, we have to continue it, because if we spent money through the government, we’d make things worse. You know. And this was so crazy to many of us.
Like, you know, my wife’s side of the family is Italian entirely, relatives who came over in 1896, the Saracenos. I have a recent piece on this that you probably have on your site or will very quickly have on your site. And this was a illiterate peasant family which is now in the United States with the opportunity for people to actually work and educate and live real lives, done spectacular things, which are just plain normal in the United States or Canada or Australia or any of the places that Italians have come to. So, you know, nowâ€”that was when we were getting illiterate peasants that in three generations we were turning into some of the top researchers in the world. If you send us now your most educated university graduates, we won’t have to wait three generations. You’ll enrich all of the rest of the world while further impoverishing Italy.
JAY: So when you’re at a conference like this and you get into a discussion/argument with someone who’s defending these austerity measures, what is their argument? I don’t get it, in the sense that it seems obvious they’re heading Europe and maybe (who knows?) the rest of us into years of recession.
BLACK: Their argument is government bad, private sector good. Anything that reduces the government must be good, even though they then concede that they’ve been running this experiment and it has produced massive unemployment, massive loss of productivity, and bigger budget deficits, right? So it’s a completely insane policy. My metaphor that I used while presenting there was this is the equivalent of bloodletting, right, when you bled a patient to make him better, and then, of course, he didn’t get better, so you bled him more, and when he got sicker, well, you had to bleed them more. This is what passes for a technocrat, right? This is not science. This is not technology. This is really extreme religious dogma that has the faux appearance of economics.
JAY: But it also has a payoff: lower wages, less money on social safety net.
BLACK: Yeah, it is a payoff, but actually [crosstalk]
JAY: If you’re rich it has a payoff.
BLACK: Yeah, but even for most people who are wealthy this is a terrible strategy that makes them weaker as well. I grant you, there is the 1Â percent, but it is literally only about the 1Â percent that benefits from these policies. Even the rich people, you know, the 2 through 20 of the top percentiles, would be better off if there were more Italians employed, buying more things from, you know, their auto dealership, and all those good types of things. So this is a demonstration of just how much power the absolute plutocrats have in a place like Italy.
JAY: Thanks for joining us, Bill.
BLACK: Thank you.
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