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The Problem in Europe Right Now Is a Lack of Aggregate Demand: Conversation with Ronald Janssen

Thursday, May 22, 2014

Ronald Janssen is an Economic Advisor to the European Trade Union Confederation and participated in yesterday’s panel on the Economic Crisis, which caused such interest on social media. We sat down for a chat about what the EU is doing wrong in its economic policy and what it needs to do to start getting things right.


The problem in Europe right now, according to Ronald, is what Keynes would call a lack of aggregate demand. People have little purchasing power, depressing demand which has a knock on effect on production and therefore causes unemployment. This is a downward spiral that markets can’t break on their own.  Yet we have a European Commission and a European Central Bank which is doing little to get this motor of consumer demand running again. Instead they are obsessed with lower debt by cutting public spending, no matter the consequences.


But there is a change of emphasis isn’t there, we asked Ronald. We spoke to David Hall yesterday about his report that we’ve just published, where he said that the intellectual debate against austerity is being won. Ronald admits that parts of the Commission are starting to put out a more nuanced message, but that the real power lies with the ECB and the Germany Government, which is implacable in its pursuit of austerity. Their model doesn’t allow for private money to save social Europe, their sole preoccupations are debt and inflation and then let the market free reign.


The two issues that came up most on social media during the panel were tax and precarious work. Ronald was in no doubt that there is significant room to increase taxes on corporations and capital gains.


 The US has a corporate tax rate of something like 40%, which is higher than any European country. And who’s going to say that the US is uncompetitive? The European Commission seems to want to shift the tax base more towards taxes on consumption, but this only serves to further harm demand. We need to call for a more progressive tax system, not only lower VAT but less tax on workers’ wages and higher taxes on high incomes and corporate profits.


Precarious work can be a bit of an amorphous concept, but it is clear that across Europe young workers particularly are stuck in insecure, low-paid jobs, whether that is zero-hour contracts in the UK or bogus self-employment in central Europe. To stop this, the existing EU directives and social clauses firstly need to be enforced on the ground, these are very comprehensive on things like the abuse of agency workers. But in many European countries agency workers are still being paid 50% less than their permanent counterparts. 

Watch a video interview with Ronald Janssen on YouTube.

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Interview with Larry Brown on Canada, Trade Deals and the Threat to Our Public Services

Wednesday, May 21, 2014

The next ‘interviewee’ in our series of conversations is Larry Brown, National Secretary-Treasurer of the Canadian National Union of Public and General Employees (NUPGE), and chair of Public Services International’s (PSI) Public Sector Working Group. He is giving Wednesday’s keynote speech on trade, so we wanted to pick his brains about the raft of international trade agreements that are currently under negotiation.


But first we started by asking him a little about Canada, which has had a right-wing government over the last eight years that has viciously attacked public services and public-sector employees. Larry explained how NUPGE has used many avenues to resist these attacks, from political pressure and public education, to going as far as legal challenges in the courts. The Canadian government has been pushing the same neo-liberal, austerity agenda as we are facing in Europe, and NUPGE-s strategy has been to shift focus from solely on collective bargaining and wage agreements to  the ‘bigger economic picture.’ They have run a highly successful education campaign, ‘All Together,’ which has trained union members to discuss wider economic issues around austerity and cuts. The result is a kind of cascade effect, with members spreading the message that the fault for the crisis doesn’t lie with the public sector and that an alternative economic policy is not only possible but necessary.


Canada has been something of a laboratory for this new breed of ‘trade agreements.’ It was exposed to the ravaging effects of NAFTA, which caused the loss of 650,000 manufacturing jobs in Canada alone, and is now part of a new agreement (CETA)  in the late stages of negotiation with the EU. Larry thinks that a better name for them would be ‘corporate constitutions,’ because these treaties have very little to do with trade and an awful lot to do with the granting of corporate rights at the expense of governments’ right to regulate.


The Investor-State Dispute Settlement (ISDS) mechanism, that is widely expected to be in CETA (though we can’t be sure because the text is still secret) allows foreign companies to sue states for loss of earnings, in supra-national tribunals, when government regulation might negatively impact the private company. The right of governments to legislate to protect the environment, to expand services or to remunicipalise public utilities is thus severely threatened. There has even been a case in Canada of a Canadian company registering in the US in order to challenge the Quebecois government through NAFTA, despite the fact that this facility is technically only available to US corporations. But ISDS is not the only problem with CETA, or for that matter with the Trans-Atlantic Trade deal (the infamous TTIP) currently under negotiation.


If we succeed in excluding ISDS from CETA  it’ll still be a bad deal, but it´ll be 25% less bad. The problem is the ratchet effect: the level of liberalisation included in these deals only goes one way. The last treaty is the starting point for the negotiations of the next. So if you’re worried about TTIP, you should be worried about what’s in CETA, because everything in CETA will definitely be included in TTIP.

You can watch a short interview with Larry on YouTube by clicking here.

Also watch the interview with Nick Crook from British union, UNISON, who gives specific examples of the threats the TTIP and TISA trade deals pose to public services.

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Two-Page Spread in La Dépêche du Midi on EPSU Congress

Wednesday, May 21, 2014

We love to see public services in the news. We also love to see trade unions in the news. So we really love when Dépêche du Midi puts a headline on its front page about EPSU Congress, accompanied by a two-page spread on the inside of the paper. There is even an interview with our very own Mathias Maucher.

Read the headline article here in French, and see the accompanying articles linked at the bottom.

 

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The Five Best-Kept Secrets of Economics - Discussion with David Hall

Tuesday, May 20, 2014

This afternoon, we were lucky enough to sit down and have a chat with David Hall, of the Public Services International Research Unit (PSIRU), and author of a brilliant, evidence-based report being launched at the congress. To give us some background to this document (which is a must-read), he explained to us what he calls the ‘five best-kept secrets of economy reality.’

1. The first is maybe the only that has gained some public traction over the past few years, and that is that austerity does not lead to growth, but rather the opposite. All historical evidence shows that austerity only leads to economic contraction. Here, we are starting to win the argument: even the IMF has now published research that shows that austerity is not working.

2. Maybe not so well known. It has to do with something called Wagner’s law (no relation to the composer) which states that over the last 140 years all economic growth has been coupled with an expansion of public spending above the level of GDP growth. This is because public spending is vital to  providing for the needs of the private sector. Think infrastructure, a healthy and educated workforce and greater consumer demand.

3. Definitely the most surprising. Repeated studies, usually carried out by people that expect to find the opposite, consistently show that the private sector is no more cost-efficient than the public (and often more costly). Yet the public sector is much more effective in achieving better outcomes; the discussion on healthcare in the report puts this into sharp focus.

4. Most people might expect that spending on social security makes for a more equal society, redistributing wealth from the top to the bottom. What may be more of a surprise is that spending on public services (particularly housing and health, as well as education) is even more effective in reducing inequality. The reason for this is two-fold: these services help to close the gap in the quality of life between the richest and the poorest and, secondly,  public-sector employment pays better, boosting consumer spending amongst the lowest paid.

5. So far so good. ‘But we can’t afford it!’ you hear them cry. “You paint a rosy picture but where does the money come from?” The answer comes from an unlikely source, the IMF. It estimates that there is room for greater tax on corporate profits, high incomes and wealth and property of 11% of GDP. Think of what 11% of Europe’s GDP could do for our public services.

David explained that on the basis of these five ‘secrets’ it is obvious that the arguments for austerity are erroneous. Yet those making them are a powerful group of right-wing governments and corporate interests who seem to want to steam ahead, no matter what the consequence.

We finished off this fascinating conversation by asking David whether he thought, with books like “The Spirit Level” and the insatiable growth of Picketty-mania (see Thomas Picketty, author), whether we are starting to win the argument for public services. “In terms of the intellectual debate,” he said, “it is already being won. I noticed that the OECD has put together a high-level panel on equality, which includes Picketty, Stiglitz and Krugman. So these arguments are starting to have an impact at a very high level. Trade unions have a massive role in pushing this shift in economic thinking and fighting for a kind of economy that works builds public services and works for all citizens.”

You can download the full report 'Why we Need Public Spending' in English and in French.
 

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EPSU Congress 2014 About to Get Underway!

Tuesday, May 20, 2014

Music and street performers welcome delegates as they arrive to EPSU Congress in Toulouse.

We are t-minus 30 minutes until the start of the opening ceremony and the start of EPSU's 2014 Congress.

You can follow everything that's going on and get background information on EPSU's work about specific issues that are being discussed, on this blog, by following us on Twitter @EPSUnions and on Facebook, click here or search for "European Public Service Unions".

You can also keep up with what other people are saying on the #EPSUCongress hashtag and using the comments on the blog articles.

There's also plenty of short and sweet articles on the Pre-Congress Blog about the EPSU's activities and publications over the last five years.

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