Money for the People: Comedian Grillo’s Populist Plan for Italy

Posted on Mar 7, 2013

ell brown (CC BY 2.0)

By Ellen Brown, Web of Debt

(Page 2)

Bank Nationalization:  China Shows What Can Be Done

Grillo’s second proposal, nationalizing the banks, has also been tested and proven elsewhere, most notably in China. In an April 2012 article in The American Conservative titled “China’s Rise, America’s Fall,” Ron Unz observes:

During the three decades to 2010, China achieved perhaps the most rapid sustained rate of economic development in the history of the human species, with its real economy growing almost 40-fold between 1978 and 2010.  In 1978, America’s economy was 15 times larger, but according to most international estimates, China is now set to surpass America’s total economic output within just another few years.

According to Eamonn Fingleton in In The Jaws of the Dragon (2009), the fountain that feeds this tide is a strong public banking sector:

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Capitalism’s triumph in China has been proclaimed in countless books in recent years. . . .  But . . . the higher reaches of its economy remain comprehensively controlled in a way that is the antithesis of everything we associate with Western capitalism.  The key to this control is the Chinese banking system . . . [which is] not only state-owned but, as in other East Asian miracle economies, functions overtly as a major tool of the central government’s industrial policy.

Guaranteed Basic Income—Not Just Welfare

Grillo’s third proposal, a guaranteed basic income, is not just an off-the-wall, utopian idea either. A national dividend has been urged by the “Social Credit” school of monetary reform for nearly a century, and the U.S. Basic Income Guarantee Network has held a dozen annual conferences.  They feel that a guaranteed basic income is the key to keeping modern, highly productive economies humming.

In Europe, the proposal is being pursued not just by Grillo’s southern European party but by the sober Swiss of the north.  An initiative to establish a new federal law for an unconditional basic income was formally introduced in Switzerland in April 2012. The idea consists of giving to all citizens a monthly income that is neither means-tested nor work-related. Under the Swiss referendum system of direct democracy, if the initiative gathers more than 100,000 signatures before October 2013, the Federal Assembly is required to look into it.

Colatrella does not say where Grillo plans to get the money for Italy’s guaranteed basic income, but in Social Credit theory, it would simply be issued outright by the government; and Grillo, who has an accounting background, evidently agrees with that approach to funding.  He said in a presentation available on YouTube:

The Bank of Italy a private join-stock company, ownership comprises 10 insurance companies, 10 foundations, and 10 banks, that are all joint-stock companies . . .  They issue the money out of thin air and lend it to us.  It’s the State who is supposed to issue it.  We need money to work.  The State should say: “There’s scarcity of money?  I’ll issue some and put it into circulation.  Money is plentiful?  I’ll withdraw and burn some of it.” . . . Money is needed to keep prices stable and to let us work.

The Key to a Thriving Economy

Major C.H. Douglas, the thought leader of the Social Credit movement, argued that the economy routinely produces more goods and services than consumers have the money to purchase, because workers collectively do not get paid enough to cover the cost of the things they make.  This is true because of external costs such as interest paid to banks, and because some portion of the national income is stashed in savings accounts, investment accounts, and under mattresses rather than spent on the GDP.

To fill what Social Crediters call “the gap,” so that “demand” rises to meet “supply,” additional money needs to be gotten into the circulating money supply. Douglas recommended doing it with a national dividend for everyone, an entitlement by “grace” rather than “works,” something that was necessary just to raise purchasing power enough to cover the products on the market.

In the 1930s and 1940s, critics of Social Credit called it “funny money” and said it would merely inflate the money supply. The critics prevailed, and the Social Credit solution has not had much chance to be tested. But the possibilities were demonstrated in New Zealand during the Great Depression, when a state housing project was funded with credit issued by the Reserve Bank of New Zealand, the nationalized central bank. According to New Zealand commentator Kerry Bolton, this one measure was sufficient to resolve 75% of unemployment in the midst of the Great Depression.

Bolton notes that this was achieved without causing inflation.  When new money is used to create new goods and services, supply rises along with demand and prices remain stable; but the “demand” has to come first. No business owner will invest in more capacity or production without first seeing a demand. No demand, no new jobs and no economic expansion.

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