In the aftermath of the global crisis, the distinction between private and public debt has become blurred. As Keynes pointed out in his analysis of the monetary economy of production, there are tensions between money as a public good, issued by the central bank, and money as a private good, created by banks.
After adopting austerity programs, many governments have disappointed their citizens. Indeed, future policy challenges include rising government debt and sovereign default risk. Many governments now face hard decisions to deal with the impacts of the debt overhang: less spending on social policies, low growth, besides increasing social inequalities. As a result, there are social and political tensions inherent to the management of the current crisis: the impacts on livelihood conditions and the subordination of society to the bail-out of the financial system. Besides, systemic tensions will be deepened by austerity programs. In truth, macroeconomic adjustments that privilege fiscal austerity and real wage flexibility can be costly, socially and politically.
In the European Union current scenario, for example, the attempt to achieve higher growth real income rates in the future while not renouncing to global banks’ and investors’ demands, turn out to be, indeed, a great challenge. The apprehension of this political and social reality is decisive to enhance alternative government responses that could privilege, for instance, youth issues in the formulation of investment and job creation policies. This attempt is crucial to re-focus the policy agenda toward sustainable finance and inclusive growth for future generations.
Taking into this background, the cutting question related to the policy-making process is: “Who will benefit?”, as Minsky warned. It is urgent to reflect on the idea of money as a public good to create conventions based on a new financial regulation that could cope with economic growth and social inequality. Central banks’ actions could be subordinated to this must.