When?• THE IMMEDIATE CAUSE OR TRIGGER OF THE CRISISWAS THE BURSTING OF THE UNITED STATESHOUSING BUBBLE WHICH PEAKED IN 2005–2006.• HIGH DEFAULT RATES, RELATED TO "SUBPRIME"AND ADJUSTABLE RATE MORTGAGES, BEGAN TOINCREASE QUICKLY THEREAFTER AND,EVENTUALLY, THE SUBPRIME CRISIS EXPLODED IN2007, SPREADING WORLDWIDE.
Consequences• Failure of many Banks and Financial Institutes• Bear Sterns, Lehman Brothers and AIG (and many other Financial Institutes) saved by the Us Government• Contagion to the rest of the world
Step 2: Financial Contagion and Real Economy1) Crisis of Banks and Financial Institutes in America and in Europe
Consequences on Real Economy Crisis of European Financial Institutes and Banks Crisis of the Financial Markets Increase of failure rate in business sector Increase of unemployment and discharges Reduction of private consumption Reduction of private investments Reduction of saving rate and increase of private debt
… and finallyReduction of GDP growth rates all over the world
Step 3: European Sovereign-Debt CrisisFROM LATE 2009, FEARS OF AN EUROPEAN SOVEREIGN- DEBT CRISIS DEVELOPED AMONG THE INVESTORS WHY?• RISE OF PRIVATE AND GOVERNMENT DEBT LEVELS• A WAVE OF DOWNGRADING OF GOVERNMENT DEBTS IN SOME EUROPEAN COUNTRIES
IRELAND• THE IRISH SOVEREIGN DEBT CRISIS WAS BASED ON THE STATEGUARANTEEING THE SIX MAIN IRISH-BASED BANKS WHO HAD FINANCEDA PROPERTY BUBBLE• THE ECONOMY COLLAPSED DURING 2008 AND IRELAND WAS FORCE TORECEIVE A LOAN FROM INTERNATIONAL MONETARY FUND (IMF) TO SAVE ITSBANK SYSTEM AND ITS ECONOMY.
PORTUGAL IN THE FIRST HALF OF 2011, PORTUGAL REQUESTED A €78 BILLION IMF-EU BAILOUT PACKAGE IN A BID TO STABILIZE ITS PUBLIC FINANCES
GREECEUNSUSTAINABLE PUBLIC SPENDING, PUBLIC SECTOR WAGES AND PENSIONCOMMITMENTS DROVE THE DEBT INCREASE AND PUT GREECE INTO ONE OF ITSDEEPEST CRISIS EVER
GREECE RECEIVED A SIGNIFICANT LOAN TO SAVE ITSELF FROM DEFAULT. ON THE OTHER SIDE, IT WAS FORCED BY IMF, EUROPEAN COMMISSIONAND EUROPEAN CENTRAL BANK TO ADOPT A SEVERE AUSTERITYPROGRAM THAT HAS PUT GREECE INTO A DRAMATIC ECONOMIC ANDSOCIAL SITUATION
SPAIN AND ITALYSPECULATION HAS BEGUN TO ATTACK EVEN BIG ECONOMIES AS SPAIN AND ITALY
CRISIS OF EURO SYSTEM• THE STRUCTURE OF THE EUROZONE AS A MONETARY UNION WITHOUT FISCALUNION CONTRIBUTED TO THE CRISIS.• THE CRISIS IS MENACING EURO SYSTEM FROM ITS FOUNDATIONS
EU EMERGENCY MEASURES1) EUROPEAN FINANCIAL STABILITY FACILITY3) EUROPEAN FINANCIAL STABILIZATION MECHANISM5) EUROPEAN CENTRAL BANK MEASURES7) EUROPEAN STABILITY MECHANISM (ESM)9) EUROPEAN FISCAL COMPACT11) ANTI-SPREAD SCHIELD
PROPOSED LONG-TERM SOLUTION EUROPEAN FISCAL UNION EUROBONDS AND PROJECT BONDS EUROPEAN MONETARY FUND
Crisis Let’s not pretend that things will change if we keep doing the same things. A crisis can be a real blessing to any person, to any nation. For all crises bring progress. Creativity is born from anguish, just like the day is born form the dark night. It’sin crisis that inventive is born,as well as discoveries, and big strategies. Who overcomes crisis, overcomes himself, without getting overcome. (Albert Einstein)
De-growth Social movements Decroissance (France)Decrescita (Italy)
1st Conference on Economic Degrowthfor Ecological Sustainability and Social Equity, Paris April 2008
2° Conference on Economic Degrowth for EcologicalSustainabiliy – Barcellona 2010 3° Conferenza Internazionale su Decrescita e Sostenibilità Ecologica ed Equità Sociale – Venezia, Settembre 2012
Inequality, concentration of income Conflict for resources
Political program:• Taxes on transport• Taxes on global financial transaction• support of peasant agricolture• reduction of working time with a redefinitionof work that will make jobs available to all• investment on the production of relationalgoods• heavy penalties on spending for advertising
Slow movement Downshifting Swapping Self-production Time bank
The Easterlin Paradox suggests that asocietys economic development andits average level of happiness are not linked. It affirms the absence of a significant relationship between the improvement in happiness and the long term rate of growth of GDP per capita.
The Wellbeing & The Quality of lifeA Comparison between 2 economic approaches
FULLFILL HUMAN NEEDS GOODS COMMODITIES • Material and • material meansimmaterial means
Traditional Economic theory• ECONOMIC SYSTEM & APPROACH TO POVERTY1) Production People--Commodities2) Consumption People-Commodities
Traditional theoryGross Domestic Product = Commodity or Service * its Price • WEALTHY = WELLBEING (INCOME,GDP) = (STANDARD OF LIVING)
A question for you• A teacher pay a housemaid for cleaning his house This service enter into the count of the GDP BUTwhat happens in the economy if the teacher get marry with his housemaid and she continues to clean the house?
A service made for free (offered by the wife in the cleaning of the house ) is not taken into account in the count of GDP. --- GDP decreases It is equal to say WELLBEING decreases!!!!!
New Economic Theories CRITICIncome or wealth is an inadequate proxy of the wellbeingIn the traditional count of the wellbeing of a Country we leave out everything that is not reducible to commodity
• How these services should be valued?social and affective relationsCares for children by parentsCares for elder people by relativesThere is NO PRICE for this fundamental services
Review the concept of well being • Shift the attention on PEOPLE• Focus the attention on the importance of the TYPE OF LIFE that people are able to lead. Ex. 2 people Having Same income One is healthy, one is ill
Amartya Sen - Capability Approach • WEALTHY ------------ WELLBEINGMultidimensional nature of the quality of life Everyone has own characteristics
Amartya Sen - Capability approach• “Beings and Doings” (Stati di Essere e di Fare) Ex. of achievment To be /Not to be well- fed To be /Not to be learned To be/ Not to be in good health
EXAMPLES CNEL - ISTAT CITY OF BRISTOL• 12 wellbeing dimensions • Annual survey• 134 statistical indicators • “Quality of life in your neighbourhood”
Faculty of Economics at Roma3• Research Project “The wellbeing and the quality of life in the city halls of Rome”• Multidimensional analysis• Bottom up method : Focus group