An ECB banker wants to change the European social model

Michel Barnier, Member of the EC, Jonathan Faull, Director General of the DG "Internal Market and Services" of the EC, and Benoît Cœuré, Member of the Executive Board of the European Central Bank (ECB) (from left to right). (EC Audiovisual Services).

Michel Barnier, Member of the EC, Jonathan Faull, Director General of the DG “Internal Market and Services” of the EC, and Benoît Cœuré, Member of the Executive Board of the European Central Bank (ECB) (from left to right). Conference on “Financial Stability and the Single Market-The Keys to Growth in Europe (EC Audiovisual Services).

A banker, member of the European Central Bank’s executive board, in the brief time of half an hour, during which he delivered a speech on Saturday 2 March, in the context of the European Conference at Harvard, wanted not only to ‘correct’ the Europe’s social contract but also to demolish John Maynard Keynes’s contribution to economics. The hopeful social reformer of course has nothing to do with politics. It’s someone, going under the name of Benoît Cœuré, appointed by France in the office he currently holds. Alas nobody is infallible, not even the well-structured French public administration that takes care of such appointments. But let’s turn to what actually said this ‘mountain’ of wisdom.

He started by saying: {At the heart of the crisis, there is the challenge of redefining the social contract to safeguard the sustainability of Europe’s social economy model. This model, set out in the Maastricht Treaty, notably aims to promote “social justice”, “solidarity between generations” and “solidarity among Member States”…. As I will strive to show, a redefinition of the social contract in Europe is essential if we are to restore the sustainability of public policies as well as trust in the state’s ability to positively influence economic outcomes}.

Nowadays all the newly minted ‘long term’ economists declare they are not happy with the way our European social model works. This French one discovered all by himself that Europe needs a good socio-economic reshaping and of course a political reshuffle. He aspires that us Europeans after reading his speech we will be convinced, he is the chosen, to reveal to us why we need a good revisiting of our way of life and how to do it; Obviously we are not convinced.

The ‘tools’

As we all know ‘long-term’ economist love ‘tools’. But in order to convince us that Europe needs those ‘tools’ to be happy in the long run, Benoît had first to demolish Keynes, because this great economist detested the long-term theories. The ECB member tried to bring down Keynes with three lines as it follows: {John Maynard Keynes famously said: “The long run is a misleading guide to current affairs. In the long run we are all dead”. And yet societies live in the long run”}.

There goes Keynes in the dustbin and Benoît introduces Thomas Hobbes, who remarked in his “Leviathan” that {“sovereign states are established to regulate social interactions and avoid the “war of all against all” that would prevail without the rule of law}. No wonder why Benoît loves Hobbs. This last one did not recognise any other role for the sovereign authority than the one of ‘gendarme’, no social care no nothing. It’s not only that. Hobbs is renounced for his anti-democratic ideas. For one thing he explicitly rejected the idea of Separation of Powers. According to Wikipedia, {Part 6 is perhaps an under-emphasised feature of Hobbes’s argument: his is explicitly in favour of censorship of the press and restrictions on the rights of free speech should they be considered desirable by the sovereign in order to promote order}. Those are probably the best ‘tools’ in the mind of this banker who wants to reshape Europe, .

The problem is however, that modern governments are cashing in almost half the Gross Domestic Product in taxes. Benoît says nothing about how governments should use their tax incomes, if they stop spending much of it on social policies. Obviously this ‘long term’ French economist has in mind that the part of taxes the government is not using for social policies can be directed to protect the banks. He says that indirectly in the following quote:” The basic premise of the new social contract between euro area countries, then, is that countries have to abide by the rules of the community, and when they do, they become eligible for mutual support. Euro area governments have earmarked €700 billion for countries that get into difficulty, a sum which can be lent against strong conditionality”.

The truth is however that those €700 billion from taxpayers’ money and much more from ECB’s printed money, also ultimately to be paid by taxpayers, is currently used to recapitalise the banks and support their liquidity. This is the ‘good use’ of people’s money according to Benoît, the little French economist turned in half an hour into social philosopher – transformer of Europe. In reality what he wants is that governments stop spending money on people and hand it to bankers.

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