Saturday, October 9, 2010

After mass reaction, we need social dialogue

It was largely predictable that austerity measures would cause a mass reaction among those who are most affected by them, that is middle class workers with lower income. It started in Greece after the government decided to cut wages in the public sector and to increase taxes; now, demonstrations are taking place in several European countries, and not the least in Brussels, in the heart of Europe. Trade unions led those strikes in a responsible manner. One can expect that social dialogue takes place as it should in any democracy.
The question is whether governments confronted with huge deficits have an alternative to austerity. It is also interesting to note that most demonstrations took place in countries governed by socialist parties which belong to the so-called European periphery . It might not be a coincidence, but this is revealing of the social climate there.
We should not forget that tax payers had to bear the burden of the financial crisis to rescue the banks heavily affected by toxic assets, especially in the US, UK and Ireland, whilst many banks continued to give substantial bonuses to their managers. In all countries, tax payers are paying the price of the greed and stupidity of those bankers, because systemic risks have triggered a much wider crisis in the real economy, with devastating effects on businesses and workers. And now governments have decided savage public spending cuts  to reduce budget deficits. It is odd that the Uk government - which was elected on the issue of a fairer society- has now abolished children benefits for more than a million families, with savings of a billion a year. Instead of welfare cuts, it would have been fairer to ask bankers to pay for the crisis more than they actually do.
Welfare accounts for 30-50% of public spending in European countries, even more in Sweden. But, many governments are taking regressive measures rather than tackling effectively income inequality through changes in taxes and spending. The problem is not so much tight public finances, but the way they are utilized to sustain the economy. It is true, that, despite some redistributive measures in favour of poorer families and pensioners, income distribution in the United Kingdom was more unequal at the end of the Labour term that at the beginning.But this has more to do with the financial system than the budget priorities.
Unfair austerity measures will aggravate poverty and joblessness. We need a genuine social dialogue to ensure that budgetary measures are promoted with a sense of equity and social justice and do not affect once more the poor. If governments are scared about default, they should also care about uncontrolled mass reaction.

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