Siri, Obama and Keynes legacy

A few weeks ago, during an interview on EconomyUp, I was asked how Italy could get out from this crisis. That’s an easy question to ask but a very difficult one to answer. It’s impossible to answer without knowing the Italian political and economic context very well. Not being very familiar with politics, I tried not to answer directly and I just mentioned what other countries did in order to face similar, or even bigger, economic crises in different times. Like, for instance, the United States in 1929.
This fairly obvious example may offer a clue. Let’s think about what America is doing nowadays. In her book The Entrepreneurial State, Mariana Mazzucato, highlights the importance of the state in the innovation of a country and its companies. Let’s think of Keynes and his idea of ​​a state as an innovator that «does not just do what people are already doing and do a little ‘better or a little’ worse than them, but to do something that no one at the moment is doing». This idea of ​​State-Entrepreneur, in particular in countries crippled by bureaucracy, might seem pretty unreal (an example is Italy where, according to a survey published on Time in April 2014, 96% of Italians consider the government more as an obstacle in doing business rather than as a support), nevertheless this is not the only direction in which each institution should go, but it is also what is happening (or has already happened) in some countries.
In 1983, the Canadian government granted $ 1.2 million to the, then twenty-three year old, Guy Laliberté, who used this money to turn his Club des talons hauts into the worldwide success Cirque Du Soleil. Many of the technologies behind the success of products like the iPhone have been subsidized by the State of California. SIRI itself has developed thanks to technologies funded by the State. In the United States, in the field of biotechnology, nanotechnology and the internet, venture capital firms arrived 15-20 years later than the public sector.
In this perspective, I still don’t know what politicians could do to deal with the crisis but I’m pretty sure that the answer is not austerity. That’s the same mistake Herbert Hoover did (at the beginning) during the 1929 crisis when he opted for a reform based on cuts. But then the US government followed the Keynesian doctrines which gave a boost to the economy. It did this by investing, by giving credit to American companies that in turn started an innovative drive that led the United States to be the most powerful economy in the world. This culture still exists today. Let’s think about the economic policy encouraged by Obama, or the Modern Monetary Theory, or the Californian model, or all the investments the United States keeps giving to companies like Google and Apple. That’s why America has recovered much faster than Europe.
Almost a century ago, John Maynard Keynes taught us that we can get out from the crisis only if the public demand replaces the private demand. If the State invests (in the right direction …) in order to boost the economy when it is stagnating. And nowadays this lesson is more relevant than ever. It’s always the same old story. While the classical liberalism triumphs during the upswing of the economy where everyone wants to have the freedom to borrow and spend without limits. On the other hand, whenever the freedom of the individual, the laissez-faire, has led to a crisis of which we all pay the consequences (not just the elite who created it), the Keynesian model comes back.