By Vincent Navarro
The ruling Conservative and liberal parties, both in Spain and in most European Union countries, including the Eurozone, are implementing policies that result in: 1) labour reforms that reduce wages and increase unemployment, 2) the shrinking of the labour force, 3) reduction of social protection, 4) social spending cuts, 5) the privatization of public services and the welfare state, 6 ) the reduction of labour and social rights; 7) cuts to, and privatization of state pensions, and 8) the weakening of collective bargaining and unions.
These policies have been implemented most fully in the ‘peripheral’ eurozone countries, and particularly Greece, Portugal and Spain. It is no coincidence that these three countries are the countries where conservative forces have been more powerful and influential in their states during the twentieth and early twenty-first century. All of them have had fascist or fascist dictatorships for a long period of their history and even during the democratic period, when they have been governed by center-left parties, the policies of these governments have been severely constrained by such conservative forces.
Such conservative dominance explains that these states have the following characteristics:
1) being very poor (state revenues represent only 34% of GDP in Spain, 37% in Greece and 39% in Portugal, much lower than the 44% average of the EU-15 (EU member countries prior to the accession of ten candidate countries on 1 May 2004), and much, much lower than the 54% in Sweden, the country where the Left has ruled the longest during the last fifty years,
2) little attention to social issues, with their welfare states (transfers, pensions and public services such as health, education and social services) starved of resources. State social spending as a percentage of GDP is 22% in Spain, 25% in Greece and 24% in Portugal, again lower than the 27% average of the EU-15 and much, much lower than the 30% in Sweden
3) the scarcity of public resources, including low employment levels in the welfare state- in health, education, schools, kindergartens, residential services for the elderly and infirm, social services, among others. Only one in ten adults work in such services in Spain, compared with one in four in Sweden – if Spain reached Swedish public employment levels five million jobs would be created, eliminating unemployment
4) public policies that are more regressive and less redistributive than the EU-15. State policies -both central and regional- reduced poverty in Spain by only 4 points, from 24% of the population to 20%, a rate of reduction that is the lowest-along with Greece and Portugal – in the EU-15. The average fall in the EU-15 is 9 points, and in Sweden it is 14 points. Consequently, Spain, Greece and Portugal are the countries with the highest percentage of the population who are poor
5 ) A more regressive and unfair tax system. A manufacturing worker in Spain pays 74% more in taxes than his counterpart pays in Sweden. On the other hand, the Spain’s super rich, the top 1% of the income scale, pay only 10% of what the super rich pay in Sweden,
6) The highest level of tax fraud in the EU-15, with the tax fraud more concentrated among those in higher income brackets and income from capital. In Spain 74% of the €44 billion tax fraud was down to those with huge personal wealth, large companies with an annual turnover of over €150 million (which represents 0.12% of all companies) and banking. It is a somewhat similar situation in Greece and Portugal.
In all these countries a very small percentage of the population (the financial, economic and media elite) has a huge influence, having designed unrepresentative electoral systems. This is particularly marked in Spain, where the ‘transition’ from dictatorship to democracy occurred on terms that were very favourable to the conservative forces who controlled the state apparatus and the vast majority of the media. Hence the electoral system has little that is proportional and representative about it.
The consequences of this conservative dominance
Declining real wages have reduced the purchasing power of the population. This forced families into debt, benefiting the banks, which, at the same time speculated on housing, creating the real estate bubble that was also fuelled with money from German banks (among others) from which they made extraordinary profits. During the economic boom, artificially created by this speculative bubble, conservative forces introduced fiscal reforms, lowering taxes on high incomes and income from capital (by €20 billion in Spain). This benefited the wealthiest sectors of society while creating a hole in the public finances, which appeared later when the bubble burst and the government deficit appeared in all its dimensions.
In response, the Spanish state (as well as Greek and Portuguese) attempted to reduce this deficit, not by the reversal of tax cuts implemented during the period of false prosperity, but by cutting public spending and and welfare. So pensions were frozen in order to raise €2 billion, when they could have obtained €2.1 billion keeping the wealth tax or €2.6 billion reversing the lowering of inheritance taxes. And more recently, the same conservative forces have cut €6 billion from the Spanish health system when they could have generated €5.3 billion by canceling the tax cuts for large financial companies. Today the Spanish state has supported the banks with sums equivalent to 10% of GDP while cutting services and welfare benefits left and right. Daily more than 500 families are thrown out of their homes because they cannot pay their mortgage, while banks are being assisted with everyone’s money. And they are imposing huge sacrifices, and others to come, to pay the banks, both Spanish and German (among others), money that like usury, is being obtained through immoral, unfair and undemocratic practices.
I say undemocratic because all these policies are being carried out without any popular mandate. None of them were in the electoral programmes that got these governments elected. Hence the need for these countries to protest and denounce these measures against the vast majority of its population.
What we are seeing in each of these countries is a minority government in favour of a minority against a majority. The right-wing in each of the countries, is now, under the false argument that there is no alternative, trying to get what they always wanted: the reduction of wages and social protection and the elimination of the welfare state. And for our democratic health, we can’t afford to let this happen. Thus general strikes and / or protests have been called for November 14 to protest and halt these policies. The very existence of democracy is in danger.
Vincent Navarro is Professor of Public Policy at the Pompeu Fabra University, Spain and The Johns Hopkins University, USA.
Translation by Revolting Europe