Cormac Staunton: The Progressive Economy Initiative has launched an interesting paper on its alternative vision for the future of Europe, including a ‘call for change’. The signatories include a range of high-profile and eminent academics including, amongst others, Noble Prize winner Joseph Stiglitz; sociologist Gøsta Epsing Anderson; economists James K. Galbraith (University of Texas), Jean-Paul Fitoussi (LUISS University, Rome), Stephany Griffith-Jones (University of Columbia USA); and epidemiologist Kate Picket, co-author of “The Spirit Level”.
The paper notes that not only has Europe drifted out of touch with the concerns of its citizens, but warns that it is increasingly seen as a source of those concerns - the number one being mass unemployment.
It criticises the European response to the crisis and notes that the policies imposed, including sharp reductions in public investment, cuts in wages and pensions, reductions in social expenditures affecting the most vulnerable, and excessive increases in taxation of wage earners, have led to rising unemployment and the destruction of core social institutions. These policies, as well as being socially unjust, have also led to reduced growth and have prolonged rather than shortened the recession in Europe. They argue that because of the nature of today’s global market system, which produces both great wealth and vast inequality, the EU needs to embrace a new and more equal system in order to regain mass support.
Though they term their proposal a “New Egalitarian Ideal for Europe” it is not just an expression of an unrealistic vision, but it is grounded in credible empirical analysis by independent economic institutes and the European Commission’s own economic services. They also recommend a number of substantive policy approaches.
On the macroeconomic side, they recommend a growth-orientated fiscal policy which includes two pillars: a more balanced approach to public finances and sufficient public investment. They suggest that problems in sovereign debt markets should be addressed via new instruments and approaches and where banks are insolvent, they should be resolved. They also call for a truly active and inclusive employment policy across member states. And they consider stabilizing the incomes and social conditions of Europe’s most vulnerable populations to be a vital economic policy measure.
Noting that rising inequality is a key problem, and one that has become a bigger problem in Europe than even in the USA, they also propose specific and detailed policy responses to rising inequality.
They recommend progressive tax systems (e.g. taxation of inheritance, taxation of property and a reduction in VAT) and increasing competitiveness through increases in productivity, rather than reductions in wages. They argue that the EU and its member states should work toward expanding social insurance at the European level (e.g. common unemployment insurance, a European pension union) and they advocate for European policies and regulatory means to be used to reduce inequalities, including those in the fields of employment and social rights. They propose a ‘vigorous’ gender equality agenda and a child equal opportunity programme. Finally, the paper recommends that the EU should set goals for the reduction of inequality within countries and the convergence of income levels across EU member states.
The full paper can be accessed here.
Cormac Staunton is TASC's Policy Analyst. Follow him on Twitter @Cormac_Staunton
Cormac Stauton is currently a policy advisor on EU and international policy in the Central Bank of Ireland. Prior to this, he was a policy analyst in TASC, and co-authored the first economic inequality report, Cherishing All Equally.