Unions, it’s time to talk fiscal policy
Mention ‘fiscal policy’ in a crowded room and it will soon be empty. Fiscal space, structural balance, output gap, expenditure benchmarks – this is not the stuff of every day conversation.
However, in the last crisis trade unionists were divided over policy responses, undermining our ability to influence the public agenda.
We cannot let that happen again, especially as the economic conversation is moving back into austerity terrain – spending cuts, tax rises, deficits, debt, etc.
In its recent assessment the Fiscal Council raised legitimate concerns regarding the country’s finances, especially given the uncertainty over a hard Brexit, over-reliance on corporate tax revenue, Trump’s tariff threats and climate breakdown.
The prospect of higher deficits and rising debt is very real. And so is the inevitable public debate.
Would you cut spending or raise taxes? What would you cut? What tax would you raise? It’s as if we learned nothing from the previous crisis. Already growth is slowing down from its post-recession/austerity bounce.
Spending cuts and tax increases will only exacerbate this slowdown.
A real problem is that we do not have a definitive measure of our public finances. Just as we know that GDP is not a reliable indicator of the economy, the Fiscal Rules throw up contradictory projections.
Do we scope for more spending increases? Is the economy over- heating? Ultimately, we can’t say for certain. Imagine a business or your own household facing such uncertainty over what should be a straight-forward measurement.
Professor John Fitzgerald, formerly of the ESRI, suggests we rely on ‘common sense’. If so, common sense tells us that if we enter a slow-down with a housing crisis it is going to cost a lot more to repair when the economy picks up again.
More than 40% of us are unable to meet an unexpected expense (one of the highest levels in the EU), and common sense tells us this figure will only increase in the event of a slowdown.
Common sense tells us that the cost of meeting the challenge of climate breakdown will go north if the economy goes south.
Common sense also tells us that collective bargaining at the sectoral level is the best way to protect workers’ incomes and jobs in the event of a downturn. In this respect, we should argue that collective bargaining is an important fiscal tool, not just an industrial relations one.
Similarly, in a downturn the private sector reduces investment. Therefore, the state needs to increase productive investment.
It also needs to spread public owner- ship into the market economy through business start-ups and rescues – especially in cash-starved regions and districts where there is no incentive for private capital.
And if we want to talk about more productive public services (the word ‘reform’ will be thrown out again but, like the last crisis, it will just be code for cuts), then let’s introduce an innovation process guided by the people who know best, the people who actually deliver them: the public service.
The trade union movement needs to start a dialogue on fiscal policy on our own terms, drawing up new starting points – the participation of workers in the decision-making process through comprehensive collective bargaining in the private sector and employee-driven innovation in the public service.
We need to grow public investment and public enterprise at local, regional and national level.
In short, we need to start with workers and public activity, the work and ideas of people who produce the goods and services. That would be a far better fiscal policy than anything the right-wing parties and employers are already cooking up.