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Presentation for the Joint Social Conference
Public budgets, taxation, debt
by Pascal Franchet
27 September 2010

Workshop: public budgets, taxation, debt

Since the early 1980s, fiscal policies have favoured a neo-liberal orientation of the economy, directly inspired by the Chicago School.

The various tax reforms have generated very significant declines in tax revenues whilst aggravating inequality, exacerbating primary balances, increasing the financing needs of States and inflating national public debts.

Social resistance, although now less acute than in previous periods, has prevented a sharp decline in public spending, which, with the notable exception of the former East European countries after the fall of the Berlin Wall and the Balkan countries after the war to dismantle Yugoslavia, have overall, stagnated in amount and volume.

The creation of the Euro and the various European Union treaties have tended towards inequality between countries, worsened by the social, economic and fiscal dumping logics they generate. Result : in a context of globalised competition between national economies, deficits have increased with a cumulative effect from one year to the next.

The masters of the productive economy have benefited, these past 30 years, from the policies of social regression applied to the developed countries to increase the part that profits take from the wealth produced by labour, decreasing the share of total wage remunerations. These profits are directed mainly towards financial investment and speculation, Rather than towards productive investment.

Tens of millions of manufacturing jobs have been destroyed, a phenomenon amplified by the global economic crisis.

However, the link between corporate profitability and financial speculation has continued. Financial capitalism has remained closely dependent on tangible production.

This policy of social regression has resulted, since the mid-1980s, in a fall in the number of public enterprises owned or controlled directly by governments, and by the destruction or transfer to the private sector many of the public functions that they previously assured.

The regulatory role of government on the economy has shrunk. The reform of administrative structures has modified budget and tax practices. Public debt management has been subjected, from the 2000s, to major changes involving the creation of management agencies and inflation-indexed bonds.

The strictly sovereign functions of states have been propelled along a regressive direction :
Army : Wars and NATO ;
Justice : enhancement of property and commercial law protection prioritized over social rights - Labour codes and civil liberties ;
Police : Frontex and internal security reinforcement.

The bank and the auto sector bailouts and recovery plans have greatly aggravated this situation. In late 2009, all the European Union countries showed negative budget balances. The recession has also led to falling tax revenues (mainly company taxes and VAT).

If the profits of non financial corporations, which fell sharply in late 2006 (just before the crisis), have recovered since early 2009 and first half 2010, it is amid rampant unemployment (around 10% officially ; United States and Europe) and an increase in the number of people living below the poverty line in the richer countries (14% according to OECD).

Responses currently implemented by governments, the European Union and the IFIs (the population pays for the crisis) only amplify social inequalities .

The redistributive function of public policies do not meet the increasing social needs of the population. Worse, the putting into question of social protection (health and retirement, children’s needs ..,), coupled with the expansion of social insecurity, condemns a growing number of people in the global North to misery and exclusion .

This approach reflects the CADTM analysis of public debts, taxation and budgets, and are the foundation of our proposals. (See four page leaflet).

These proposals are an inseparable part of the construction and development of a social movement based on unity and solidarity.

In conclusion :

Our immediate alternative proposals do not prohibit further discussions having a direct link with the theme of this workshop.

- 1) Cancel all or part of the public debt (especially any part deemed illegitimate) would help to restore equilibrium and / or generate resources in the current economic context . Our proposals provoke the putting into question of current economic logic.

- 2) However, a questioning is not an alternative program and history is rich with examples of countries which cancel all or part of their debts without challenging the structural underpinnings of the existing economic regime.

- 3) With the environmental crisis, the climatic emergency, exhaustion of raw materials, the question “What to produce, how and with what energy?”, takes on urgency. These questions may not be issues independent from other immediate demands.

- 4) The nature of existing budgets, in terms of revenue (who pays and what for) as also of expenditure (that is, for example, are military budgets socially useful?) deserve a more complete and broadly reasoned reflection.

- 5) Finally, our proposals have a profound political sense. They induce a renewed democracy, transparent, where citizen participation should be more than just a convention, but an effective control over elected representatives.

- 6) The CADTM’s position is not systematic rejection of all debt. it is conceivable that the financing of socially beneficial policies involves the use of public debt. But such a resource should be governed constitutionally and democratically controlled, as is the case today in Ecuador after the work of the CAIC.

- 7) A reflection must be engaged as to the form of economy we want, what kind of social organization and purpose for society. This reflection should highlight which forms of budget and taxation would be appropriate .

From this exchange in this workshop, we hope will begin a work of construction of the economic and social alternative that we all aspire to.

Pascal Franchet, Vice President of CADTM France

Translated into English by Mike Krolikowski

Pascal Franchet

Président du CADTM France