“Money Creation, Public Expenditure, Tax Policies and Social Welfare” is intended as a small contribution reflecting on the difficulties being experienced by several Countries, with a specific focus on the European scenario and on a possible new analysis approach that may be useful to overcome the present economic and social crisis.

The idea at the basis of this paper, which is to be used as a guideline for its reading, rests on the observation that state entities (whether national or supranational) must be able to use, jointly and in coordination, the two main economic policy levers that are available, that is to say, the monetary lever and the tax one.

The objective is to maintain and foster economic welfare, not as an end in itself but, on the contrary, fully focused on its original and ultimate purpose, which is to meet human and social needs.

Today, the economic trends and developments occurred in the last few decades clearly show that, quite to the contrary, the growth of markets, (and of the subsequent economic relations), have been driven by financial logics and competitive trade policies, which have caused progressive social impoverishment and indebtedness of States.

The “solutions”, currently being proposed and hoped for by international bodies to overcome this crisis, rest on the so-called austerity, as the only cure and way to recovery.

However, it is only natural to wonder what recovery is meant: cuts to healthcare, education, pensions, in short cuts to the spending that is the ultimate reason for a State to exist (a State meant as the exponential product of the individuals belonging to it) cannot but end up impoverishing the social fabric, both in economic terms and in terms of human relations, and, thus, dangerously making the very reason for social cohesion and solidarity meaningless.

Austerity, (not to be confused with economic prudence and wisdom, which aim at preventing waste in public spending), seems to be imposed only or mainly in order to repay the debts generated by a deregulated financial system and by mercantilist models that are pursued taking no account of the overall true good of the Nations.

This is the reason why vesting the State (also meant as a supranational entity) with the unified power and responsibility for tax and monetary policies, as two of its essential tasks, means giving back to the State its dignity and social function that are essential for its existence; so much so that, in certain social and economic crisis scenarios, the State may even “break the debt criteria or paradigm”, in order to foster and ensure, to the maximum possible extent, a free and decent life for individuals.


Parma, Italy, August 2015

Mauro Franchi