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Basic Income Pilots: A Better Option Than QE
With much fanfare, Mario Draghi announced on January 22 that the European Central Bank (ECB) would be pumping €60bn a month into the financial markets until September 2016, in what is euphemistically called “quantitative easing” (QE). This amounts to 10% of Eurozone GDP and 10% of its gross public debt. Many observers guess the flow will go on for longer than the promised 19 months..
The ECB President is described as “independent”, i.e., he can do this without democratic consent. Indeed, the country whose population will be required to contribute most is vehemently opposed to the policy. Whether Germans are right or wrong does not alter the fact that it shows just how undemocratic economic policy has become in Europe.
A yawning democratic deficit is prompting people to oppose the neo-liberalisation of Europe. It is ominous that Mr Draghi, formerly employed by Goldman Sachs, is calling for more power to be handed to the ECB so that it can force countries to undertake structural reforms – a thinly coded message for curbing social policy and for allowing more insecurity for their citizenry.
When the QE scheme was announced, those in the financial markets described the plan as “bold and convincing”. They would say that, wouldn’t they! They will be the chief beneficiaries.
QE is a blunt, inefficient, inequitable instrument ostensibly intended to revive economic growth, partly by imparting a little inflation, partly by inducing currency devaluation. However, while buying government bonds reduces government debt in the short-term, it would be better to have an EU-level fiscal injection to boost growth, especially as QE is showing signs of becoming a modern form of protectionism, inducing beggar-my-neighbour currency devaluations. These will soon be factored into financial market reactions.