Christian Felber: “Cuts in times of crisis are fatal”

Can you define ECG in a few words?

The essence of this model is the resolution of the contradiction between negative market values —selfishness, thoughtlessness, avidity, greed and irresponsibility— and the values which enable to flourish human and ecological relations. The second ones are universal and part of our constitutions: dignity, solidarity, justice and democracy. On the contrary, economic values are not constitutional. ECG solves this contradiction by turning the main two legal rules that guide economic actorsʼ behaviour —profit motive and competitiveness— into two different ones: common welfare contribution and cooperation.

In this model, economic success is not measured in monetary indicators (money is only the means), but by considering objectives: the common welfare. Gross Domestic Product (GDP) is substituted by Common Good Product (CGP) at national economic level, and financial balance by Common Good balance at business level. The more cooperative, caring, ecological and democratic companiesʼ actions are, the more success they will have. Ethical companies will be the most successful ones, whereas thoughtless ones will fail. By this way, market laws will finally agree society values.

In your new book, Salvemos el Euro (Saving the Euro), you explain that reserve currency crisis can endanger, in the last resort, social peace and democracy in European Economic Community countries.

It is completely obvious. To save and cut in recession times is fatal for the economy. We do not achieve deficit and debt reduction, but a hasty increase. Cuts in public spending increase unemployment rate in public and private sectors. Therefore, the cost of unemployment benefit, deficit and debt are increased. An increase of debt increases also its cost, so new cuts are made… It is a vicious circle, a downwards spiral.

If austerity measures and cuts continue, instead of going for placing taxes on vast fortunes as a way to pay public debt and promote investment, crisis and social tenseness will be deeper. First disturbances in Greece, Portugal or Spain have already taken place.
 

Cyprusʼ financial system has been destroyed, Spanish economy will shrink by 1,4 %, and Italyʼs public debt is on 130.4 % of its national income. Do we have reasons to be optimistic?

We do not have many so far. I forecast that the European Stability Mechanism (ESM) will be soon used up and it will be doubled. But this wonʼt be enough. Letʼs have a look to Spainʼs situation. Credit default rate is reaching 12 %. In 2007, in ʻpeace timesʼ it was 1 %. If recession continues for some more years, it will reach 20 % or even 30 %, and that will be translated into more than € 500,000 million. If this amount of credit fails, the Fund for Orderly Bank Restructuring (FOBR) will be broken down, and the same will happen with ESM. In addition, ESM duplication will not be politically justified in creditor countries. And it wonʼt be enough: it is too late.

It will be much fairer to declare the insolvency of states, but it is impossible due to the existence of systemic bank. Imagine: Spain adds 500,000 million to its public debt and it gets into insolvency. It will be necessary a debit relief of at least 50 %, about 750,000 million euros. That will destroy all European systemic banks: it will lead to a financial merger.

Nevertheless, there are some options. Private richness exceeds five times public debt in euro area. By placing a 2 % tax on these fortunes we will be able to go out of the crisis: 1 % to re-pay public debt and reduce it to the half in 10 years; and 1 % to foster public investment and create employment. Personally, I propose to add four more taxes at a community level: on capital income, on companiesʼ benefit, on financial transactions, and on personal income tax top rate. States can completely maintain their financial autonomy on the rest of taxes. An uncoordinated on those taxes where there is tax competition is like playing football allowing fouls.
 

You agree that a solution is to establish a financial transaction tax. Several attempts have been done in order to pass the so-called Tobin tax, but they have not been successful enough. Why is it a taboo issue?

The organisation Attac, I co-founded it in Austria, began to demand this tax in 1998. At the beginning, we were branded as mad and utopian, as always. But this year, eleven countries have decided to implement this tax, what is a represents a remarkable success for us. However, the proposal of the European Commission does not arrive to fulfil the half of our demands. Calculations made by the two most prestigious Viennaʼs institutes of economic research state that a tax implemented on all the UE would enable public found to deposit about 300,000 million euros every year. With this amount of money, crisis can be stopped by re-paying debt and creating employment.

The main resistance against this tax comes from London and United Kingdomʼs government. I would do the following: to link free capital movement to tax cooperation. If London decides to not cooperate in tax terms, common market must be ended with this country. If there is a common space, common rules must exist too. If European neighbours shared these values, United Kingdom would not think it twice and would cooperate; because it has much more to lose than others: the free access to international financial markets. It must be understood that free capital movement is a political instrument that should be granted considering the degree of tax cooperation. At the end, it is a question of trust between countries.
 

You state that ECG is a movement that must be spread “from bottom to top”. Western societies are going through a crisis of political systems and parties legitimacy. How can citizens recover their leading role?

It can be recovered by aspiring to real democracy and sovereignty. The Latin root of sovereign means ʻabove everythingʼ. Popular sovereignty must be above the government, the parliament and the Constitution. Popular sovereignty must ʻwriteʼ the Constitution which establishes the rules of the game. Representatives must obey these rules. In each moment, citizenship must have the right to stop, correct and complement its representatives. Citizens must have the right of passing a law through direct democracy. They must also have the right to choose an economic or monetary assembly to create the most suitable economic and monetary system for them, which answers its interests, needs and values. I think that a second wave of Enlightenment is arriving which will improve democratic mechanisms. The first wave made us taste what a real democracy might be. But the main dish has not been cooked yet. And the cooks must be us.
 

What synergies can be established between the ECG and the University of Barcelona?

Many: first, the UB can promote ECG on research, teaching, application and public dissemination. 'Application' can mean to implement common good like other education institutions are already doing.

Second, it can build a cooperation network with other Spanish universities to join forces and establish synergies.

And, third, it can participate in international cooperative projects. Every day we contact more universities, such as the universities of Mannheim or Salzburg. It would be interesting to develop CGP to substitute GDP as an indicator of national economic success. Other worthy projects may be the cross-curricular study of the capitalist human being, Homo oeconomicus. We can think about how much underdeveloped potential of Homo reciprocans (ecological, intuitive and spiritual), do we have in us.
 

How can higher education contribute to build ECG social option?

It can contribute in many ways: through teaching activities, as some universities are doing, through research, etc. But it can also contribute by funding common and public goods. As we have observed, richness is plentiful: instead of cutting and worsen public services, countries must fund a free access and high quality education system. Is there any other field to invest than in education?

Education institutions can also collaborate by applying ECG to their own centre.

Moreover, higher education plays a major role in taking part in democracy, by demanding an education convention. Those involved —students, teaching staff, and parents— would be able to design in a cooperative way the most suitable education system, which includes funding. I am sure that the result will be better than when government establishes everything.

That will foster citizenʼs movements for democracy; their ultimate goal can be a bottom-up constitutional process. A constitution developed by people will have the right to call different assemblies: economy, monetary system, education or media. By this way, education system, and especially higher education, will get profit from the democratic spirit incited by it.

If we all adopt a democracy, self-determination and freedom spirit, we will be able to create an economic system appropriate to our values and needs.

Link to the conference on the economy for the common good that Christian Felber gave on 11th April at the Paranymph Hall of the UB.