Alliances Against Poverty November Conference, Brussels

1. Alliances Against PovertyNovember Conference, Brussels The Pre-Conditions for a Transformative Agenda in Social and Employment Policy Jeremy Leaman (Loughborough University, UK; EuroMemo Group; J.Leaman@lboro.ac.uk)

2. Critical Juncture in Development of the ‘social state’ • ‘European social model has already gone’ Mario Draghi (Wall Street Journal 24.2 2012). • Exaggerated but significant restatement of neo-liberal intent • Europe remains the socially and fiscally most committed region, yet its systems have been under attack since the 1970s • Delors’ vision of social dimension to cushion effects of Single Market now largely rhetoric • Welfare costs remain prime target of NL attack

3. Crisis as ‘opportunity’ • Opportunity of Keynesian renaissance thwarted by embedded NL demonisation of state debt Thus >>> • Sovereign debt ‘crisis’ became opportunity to continue the weakening of the social state through • a) The commodification of key services: • b) Privatisation, outsourcing, ‘competition’ • However: a) NL objectives not yet fully realised and • b) are causing long-term economic damage and generating strong opposition

4. Persistence of Delusion • Fatal cocktail of capital market deregulation, monetarism and neo-liberal supply-sidism has ‘deformed’ Europe (JörgHuffschmid) • ‘decoupled’ monetary from real accumulation (Altvater) • Generated boundless ‘liquidity factories (K.Philips) • Promoted an unprecedented redistribution of gross (market) income in favour of capital, thus: • Compounding need for state remedial transfers

5. Inequality in European EconomiesDistribution of National Income 1980-2005 Gross Wages Ratio Gross Profits Ratio

6. Logical Fallacy of Neo-Liberalism

7. Neo-Liberal De-Accumulation UK: Ratio of Net Assets to Annual GDP 1920-2008

8. Challenge to progressive forces • We need to Halt the ‘deformation of Europe’ through neo-liberalism • Defend and protect surviving elements of social provision • Maintain and restore the social state as badge of European civilization • Re-establish the ambition to create a pan-European architecture/ set of norms based on social justice, international solidarity and the right to secure employment

9. Preconditions for Transformative Agenda • Societal change engineered by Neo-liberalism is multi-dimensional • Reversal thus requires holistic solution • Not just choice of new technocratic policy-mix • Preconditions are thus political, economic and cultural

10. Political Preconditions • Strategic alliance of progressive forces to match interest lobbies of capital, built around commitment to the centrality of public goods to social cohesion and the ‘courageous state’ (Richard Murphy) >> Encouraging: • International Cooperation and Solidarity • A Trans-National Politics to Match transnational capital, committed to • Regulation and Harmonisation (to decent levels)

11. Economic preconditions • Prioritisation of economic recovery over fiscal consolidation, c.f. post-war debt reduction • Control of strategic gate-keepers in finance, extractive industries, retail monopsonies • Primacy of qualitative growth and full employment • Reduction of demand asymmetries in EU/ EU17, convergence through Fiscal and Clearing Union • Reduction In Disparities Of MARKET INCOME

12. Socio-cultural preconditions • New expectations of what ‘stable growth’ means • Lower expectations of rates of return: addiction of pension and investment funds to Ponzi-capitalism • Reduction in private debt as vehicle for growth > • State debt historically reactive (Figure next slide) • Cultivation of consensus concerning public goods and taxation as necessary conditions for social cohesion and civilization (Wendell Holmes, Adolph Wagner)

13. State debt is reactive, not primary

14. Fiscal Preconditions • Social policy without a coherent fiscal policy is not feasible OR • NL dismantling of public social provision is pre-programmed by weak fiscal culture • EU Fiscal Policy: an object lesson in failure in the face of Globalisation, MNCs and the MS as ‘competition states’ where: • Tax reductions are deployed as supply-side inducements to MNCs and HNWIs (high net-worth individuals)

15. History of EU Non-Harmonisation of Taxation • Acquistax harmonisation only affects VAT • No established commitment to progressive income tax • No established standards of taxable income or assets • No established minimum/ maximum rates of direct taxation . The Result is >> • Tax and regulatory arbitrage by MNCs

16. Tax Competition Accelerates after 1990 • No tax conditionalities in Copenhagen Criteria beyond VAT and some excise duties • EU ignored move to flat tax regimes in pre-accession Baltic states 1994/95 and the sharp reductions in corporation tax throughout CEE • Irish tax ‘piracy’ only began after 2000 >>

17. Corporation Tax Rates 1980-2009

18. Asymmetries • All EU countries affected by shift from direct to indirect taxation and a gradual decline in tax ratios (as % of GDP) • CEECs are characterised by both heavy reliance on indirect taxes and lower average tax ratios • RESULT: a) lower resistance to shocks and reduced ability to redistribute; b) some countries are chronically vulnerable to shocks and to pressure on social expenditure; c) capital imports

19. Lessons of Failure • Without fiscal convergence and strengthened public finances, the European (social) project is doomed • Requirements for change/ recommendations: • 1) Commitment to progressive taxation • 2) Harmonisation of scales of progression • 3) Harmonisation of PIT and CT rates • 4) Shared standards for calculating tax bases

20. Harmonisation • 5) Commitment to transparency, country-by country-reporting, formulary apportionment • 6) Bi-lateral deals with secrecy jurisdictions should be rescinded (UK, Germany with Switz) • 7) Tax-avoidance should be outlawed and Tax Havens in Europe and overseas put out of business • 8) Harmonisation of European wealth taxes

21. Harmonisation 2 • 9) Removal of the anomaly of non-taxation of aircraft fuel • 10) Tax competition and ‘tax poaching’ should be eliminated • 11) Stability and Growth Pact/ Fiscal Pact should be reformed to prioritise convergence of member states’ productivity and external balances • 12) Reform of the ECB

22. Employment Priorities • Full employment is a primary public good • End to the scourge of youth unemployment and the ‘wage scar’ • Convergence to higher participation ratios via expansion of childcare and pensionable parenthood (as public goods) • Expansion of training and re-training to establish critical mass of skill (craft skills as source self-esteem)

23. Investment Priorities • Reverse decline in Investment Ratio • Prioritise education, training and skills as ‘social capital’ • Prioritise public infrastructure • Sustainable technologies • Low carbon transport systems

24. Reduce Democratic Deficits • Establish answerability of key institutions (Commission, European Central Bank) • Empower European Parliament BUT ALSO • End the ignorance of elites through the promotion of a critical and active civil society • ‘Our ignorance is their power’ • ‘Our understanding is our power’ • Evidence of that influence: Andrew Haldane (Bank of England) honoured Occupy movement