In many universities around the world, after the election of a professor to an important chair, the term begins with an inaugural public lecture. This is seen as an opportunity to outline key aspects of their research and how they see their new role, the priorities and directions to be pursued.
If this is important for a new professor, consider how important it would be to establish this practice for a new finance minister. Especially when he assumes his duties in such a difficult economic situation, both internationally and and in Greece. We have had fifteen years of crises; but even before 2009 many of neoliberalism’s predictions had not been fulfilled– growth rates, productivity growth, investment levels, wages could not impress even the most ardent neoliberal devotees. On the contrary, we have witnessed an alternation between periods of crisis and stagnation that has fueled political instability – not just Trump, Brexit, Meloni, etc., but also the difficulty that governmental incumbents of political parties of all stripes have in maintaining their popularity.
President Trump’s return to U.S. leadership in January 2025 marks the beginning of a new turbulent period in the global financial system. The peculiarity of this new plot lies in the fact that the crisis did not start from any turmoil in the markets or from some exogenous factor (e.g. the pandemic) but from the conscious decisions of the US leadership. Decisions that, regardless of what one thinks about their effectiveness, are a reaction to the stagnation we described above.
In this sense, it only seems fair to question the government over its thoughts with respect to recent economic history. In particular, it is important to know if anything has been learnt, if the government thinks that some of its economic beliefs need to be revised, or whether on the contrary, the whole turbulent economic history of recent years can be explained with the same tools with little need for any redirection of economic policies.
For this reason, it is appropriate to put five questions to the new Minister of National Economy and Finance, Mr. Pierrakakis, so that we can have a better understanding of his worldview and priorities. Even better would be to elicit an “inaugural” speech on what he has learned from recent history and how he intends continue.
Firstly, whether he believes that the finances of the state should be treated like the finances of a family. For example, experience has shown that if during a recession, the private sector spends less and the public sector proceeds likewise, then the recession intensifies – what in economics is known as the paradox of thrift. The government loves to lecture people on the absence of money-trees. It needs to explain, from an economic point of view, why money can be found for the pandemic or for the ReArm Europe project, but not for social spending. And one last thing about the new finance minister’s beliefs: when a government borrows to upgrade schools or hospitals, or to create public social housing, has the wealth of the economy increased or not?
Secondly, whether Mr. Pierrakakis believes in trickle-down economics, according to which the reduction of taxes will boost investments, which will increase productivity, increase wages and ultimately benefit the entire society. Does he have any evidence that this theory has worked in the past? Because there is precious little empirical support for this hypothesis in the economics literature. Moreover, in Greece a significant share of foreign direct investment is in real estate or in the purchase of bad loans – that is to say, not in the production of new value, but the transfer of existing value to private companies. Finally, if Mr. Pierrakakis still believes in trickle-down economics, then how does he explain the inequalities of our age and the resultant levels of political instability?
The third question concerns the tendency of the public sector to subcontract areas of government to the private sector, from the drafting of proposed legislation to the collection of social security debt. Marianna Mazzucato has severely criticized this tendency in her book “The Big Con”, saying that this strategy leads to an infantilization of the state. Referring to this particular book, Mr. Pierrakakis during his address to the Economic Affairs Committee, said that her argument “has to do with how specific projects are assigned to specific companies and this book mentions some misconceived subcontracts”. However, Mazzucato’s book has a very different argument: over a prolonged period, we have witnessed the infantilization of the state whereby public servants have been losing the skills, training, and power to negotiate with the private sector. The New Democracy government has been in the forefront of this movement. On the one hand, it has weakened the state, and on the other hand, it claims that free markets can be regulated without the necessary personnel.
The fourth question arises from the argument made by Mr. Pierrakakis that basically the government incorporates some of Mazzucato’s approach – in her book entitled The Mission Economy – in that it seeks to bring the public and private sectors together to find and implement the best solutions for important missions (as in the response to the pandemic). Therefore, we are entitled to ask the extent to which the government embraces four central arguments that underpin Mazzucato’s books:
- The state creates value, but unfortunately this has declined in recent years as a consequence of the prevailing view that the state should not be involved in the productive activities.
- The relationship between the state and the private sector has become one-sided. Mazzucato does not endorse the notion that the state should “facilitate” the private sector or just “fill some gap” that it leaves. This “business-friendly” approach merely maintains the imbalance in the relationship and leads to the phenomenon of the socialization of losses and the appropriation of profits by the private sector.
- State support to the private sector should be provided only on conditional terms. In other words, the opposite of what the government has repeatedly done, providing tax cuts or incentives without requiring a pro quid quo (for instance a requirement to invest in green technologies or provide better working conditions).
- The problem in the era of neoliberalism is not only that the state has been infantalized, but that there has been a reluctance to use its tools – tax and other incentives, public procurement, state development banks, etc.
Fifth, whether he believes that military spending – which is on an upward trajectory across Europe due to the war in Ukraine and the changes in the US – will give a growth boost, if such investments diffuse technology to other sectors of the economy, if they are capable of giving new momentum to the economy. The Left certainly does not believe in ReArm Europe.
I think we are entitled to know the minister’s answers to such questions. I am afraid that there will be no response. And the reason is that the government does not want a discussion about the general framework of its economic choices. On the contrary, the government will continue to call on all other political forces to submit their proposals, taking as a given the framework of neoliberalism and trickle-down economics. In other words, its approach is exactly what Horkheimer and Adorno long ago delineated as a dominant element of the ideology of the ruling class: to pressurize political opponents to remain on the terrain of “realistic” proposals in an attempt to downplay the importance of the framework, the rules and the limitations within which they operate.
The role of the Left is to offer policy proposals but at the same time to question the framework in which the economy operates. In other words, to submit proposals that will arise from the logic of an alternative framework.