link: Festival of Economics - Trento, May 26/June 5, 2011
The Great Recession has left us many middle earths, many poorly defined borders between private and public initiatives. The financial crisis was followed by that of sovereign debt and governments have been forced to take emergency measures. Fiscal consolidation plans often make provision for cuts to spending programmes rather than any rise in taxes. The new Stability and Growth Pact does not only look at countries’ balances but also calls explicitly for cuts in public spending. In this way fiscal consolidation tends to redraw the boundaries of state intervention, arresting the almost unstoppable advance of the public Leviathan since the second world war, when public expenditure as a share of GDP doubled in many countries. The questions being asked by politicians and economists concern not only what to cut, but also how. There are those who, like Chancellor Merkel, have called on the euro-area governments to introduce into their constitutions, therefore into laws that are difficult to change later on, the obligation of achieving a balanced public budget. This would mean depriving them of the possibility of conducting anti-cyclical policies, to mitigate the effects of the recession. The English government has proposed reducing the role of the State in social protection, by involving the third sector directly and moving from the “Welfare State” to what they now call “Welfare Society” or “Big Society”. The choice is a difficult one because globalization has brought with it an increase in the demand for social protection. In Italy, the State continues to rely on the family as a social shock absorber. Almost everywhere in the advanced countries, an aging population is pushing up pension outlays and demand for health services. Unless we want the State to get even bigger, it is inevitable that there will be an even bigger involvement of the private sector in the provision of these services. How can we distinguish between the duties of the public and private in social welfare, health and even education?
