In the first half of the 800th century, after the Napoleonic Wars, the government of His Britannic Majesty, George III of Hanover (the first to be born in England and to speak English as his mother tongue), introduced the necessary measures to lower prices to restore the real value of the pound and satisfy the holders of the titles issued by the crown, the bondholders. Of course, those who sat on the benches of Westminster were the same bonholders, who were also predominantly landowners. Thanks to the prolonged austerity, the weight of the public debt to GDP fell from nearly 220% of GDP in 1815 to around 40% at the end of the 19th century.
It happened that Italian economic historians cited that case as an example that the reduction of the Italian public debt, as the Doctor Frankenstein, in the legendary Mel Brooks film. The icing on the cake: the tax burden halved from 15% to 7% of GDP. Music to the ears of many Italian politicians and citizens today.
Of course it was a whole other world and those policies were not without very heavy social costs. Both are well told in David Copperfield by Charles Dickens. Writers often have a perception of the economic reality superior to that of economists, who not by chance were not and are not very popular. In that same world, to give an example, there was the terrible Famine in Ireland, which was part of the UK: one million people died and another million and a half emigrated. The policy of austerity and the defense of the interests of landowners prevented the adoption of the most effective measures to feed the people. In fact, in Parliament there were those who stated that it was better to "abandon Ireland to the action of "natural causes", so as not to incite an indolent people to live on public charity". A cliché, that of indolent people who live off the community, which frequently resonates in current debates on social assistance.
Echoes of that strange vision of the functioning of the economic system, which Keynes labelled as Treasury view, can be found today in some very peculiar comments by Italian economists who, evidently, care only about the reduction of the Italian public debt. To have a sample of this, just read the recent interventions by Giampaolo Galli on More and the interview with Carlo Cottarelli on The printThe first proposes a distribution of the military spending as a function of fiscal space (a term of Anglo-Saxon origin: in Italian it is public budget space), as if the defense were not a common good of all Europe that Italians benefit from. Why should other European citizens take less responsibility for Italy's security than Italians themselves would, if Galli's idea were implemented? Galli is well aware of this and recognizes that "in these matters there is nothing easy". However, we allow ourselves to observe that the reduction of public debt ceases to be a priority when freedom is endangered by military threats. And Titus Livius comes to mind: "Dum Romae consulitur, Saguntum expugnatur".
Cottarelli even dresses up as Wolfgang Schäuble, the more than rigorist Finance Minister of the Merkel Government, and would like to put Germany behind the blackboard because it is incapable of respecting the Stability Pact, a straitjacket of the same budget policy for everyone, and not only for undisciplined countries like Italy. For those interested in understanding the German disease of budgetary rigor, similar to the English one of the 800th century and poorly suited to managing an economy in the contemporary era, please refer to Ceresio Investors' Newsletter XXIX.
Neither Cottarelli nor Galli have government responsibilities and are free from constraints in the elaboration and expression of their thoughts. But, if the reduction of the burden of public debt is certainly an objective to be pursued, the main road is the highest economic growth. All the more reason, therefore, We should all be rooting for the revival of German domestic demand.
