by Anthony Kefalas

The pandemic has exposed the long-simmering problems of casino capitalism: the neglect of public investment, the disinvestment in the welfare state, the rise of oligopolistic structures, the upending of the notion of value creation in favor of value extraction. Most of all it has highlighted the huge rise in inequality – of all sorts and across economic lines and social structures.

The list goes on. Central banks have lost power as finance ministries have taken over the printing presses, and governments have become lenders of last resort, when their mission –as Mariana Mazzucato writes– should be the one of investors of the first resort. Instead of dealing with the problems proactively, they act after they arise. Public institutions have been allowed to weaken, markets have been allowed a free hand, globalized finance has been given a free reign.

Next steps

Helicopter money is a proposed unconventional monetary policy, sometimes suggested as an alternative to quantitative easing (QE) when the economy is in a liquidity trap.

As of now, with the pandemic in full force and uncertainty prevailing, economists walk hand-in-hand with the world economy in unchartered territory. If the post-2007/8 crisis saw the use of “helicopter money”, the pandemic has led to the use of “B-52 money”. With an aggregate world GDP at about $180 trillion, the liquidity injected into the system comes close to 8% – and the end is not in sight.

One thing is clear though: the huge rise in national inequality has undermined society’s belief in the system of liberal capitalism and given rise to the allure of authoritarian capitalism. If the Western Liberal Order is to survive, it needs to adapt. It needs to deal with the excesses of the casino capitalism of the period 1990–2020 by putting an end to its activities and rebuilding the welfare state.

Yet, liberal capitalism is at war – with itself and with authoritarianism. So war actions are imperative. Judging by the recent increase in bond prices, this is indeed the case.

There is always plenty of talk about moral hazard. Yet, the western world cannot afford at this stage the luxury of a gradual adjustment to the accumulated stock of debt. Time is of essence because people are suffering, and democracy is in retreat. In the absence of action the ghost of the K-shaped recovery will acquire flesh and blood.

The necessary condition for a return to the compassionate capitalism of the first 30 years after the end of world War II, is to do away with the public debt through the issue of perpetual bonds carrying zero or very low fixed interest rate, or of really long-term bonds, say of 50-year bonds.

Anthony Kefalas writes about the option of debt restructuring or debt write-off for public debt, possible solutions for private debt relief, the necessary steps to stop “casino capitalism” from re-emerging and what is ultimately at stake: economic survival, humanism and democracy. The article is published in the March/April 2021 issue of Greek Business File, available here.