Only way for European socialists to catch up with time and stay ahead of things, would be to combine so called libertarian economy with “small government” and establish social security paid through either negative tax or basic income.
Libertarian economy is something we all know, even if many don’t know it by name. It is the idea of market and economic relations,which are completely liberated from governments planning and regulation, with government stepping in only to prevent threats to national security(if state is conservative) or environmental disaster (if state is progressive).
For a past 25 years this idea dominated economic thinking, was claimed by conservative part of political spectre, was never truly implemented to the max, but was nevertheless dominant across the planet, from New Zealand to Sweden.
Many traditional socialists condemned the idea on numerous occasions, but were unable to stop the pover of profit disregard; even 2008 crisis didn’t help .
Free market economy generates incredible wealth and prosperity; in fact its capacity of satisfying the demand, and hence-populations needs is unprecedented in human history.
It is especially important to mention that the prosperity happened disregard political regime in the countries who tried free market, and especially considering the repetitious collapse of any attempt to build state supported nationalized economy to satisfy peoples needs; would it be hard core communist planning, or state run agencies in a free countries.
As socialists we must admit, however that march of free market libertarian economy also caused incredible, and unfair inequality, return of brutal zero-chance poverty and eventual suffering. Even a brief unbiased look allows to see that core of the problem is not luck of regulation or state planning, problem is purely with distribution of wealth…
So called trickle down economy, idea that rich people would invest and spend money, if released from tax burden, works well with millionaires who need to re-invest to keep themselves rich. Or, in worse case scenario,who simply buy houses, limousines, jewelry for lovers, designer closes-eventually outraging public opinion, but giving jobs for thousands if not millions of designers, car manufacturers, craftsman or textile workers.
It does not work with billionaire though, with notorious “1%”. At this level money looses its pover as a tool of purchase and reward: for people who have that much capital the wealth is often a matter of sport-like a fun competition, etching ones personal pride to be at the top of Forbes list. So, eventually, big portion of wealth is simply sitting somewhere at saving accounts, un-invested and not spent.
Its our job, as social democrats, to ensure the fair and acceptable way of wealth redistribution: so while billionaire upper class would compete for a place in “Top 10 of rich peoples” rating, starving family in Greece or homeless teen in Paris would not feel like they are abandoned by society. It can go either through tax, or through government bonds or other borrowing, and ensure that it would go through proper social contract, without leaving both capital owners and welfare recipients frustrated.
It is worth mentioning, that in the situation when traditional job market and employer-worker relations are dying under pressure of outsourcing and automatisation, resurrection of small businesses, individual enterprise, gig economy, service based jobs is inevitable. So our focus should be not with collecting social security benefits from the meting iceberg of labor market, but establishing fair and efficient system of personal income tax.
Getting back to libertarian roots of my idea – I would propose to move away from the progressive tax rate, when percentage of tax was depended on income, and to tax whole population, everyone who earns income above welfare limit (and all active entities) . To set one, single, same rate, would it be 10, 20 or 25 percent. Rate will depend on who is in pover of course
This way we can move away from truly Babylonian system of tax reboots, tax heavens, tax shopping and debates about which social groups contributes more to economy. From something which even most accountants fail to understand.
Should the same, universal tax rate apply not only to all individuals in the state, but also to all EU member states? Isn’t going to happen tomorrow, but in a Dream Europe-may be.
It is worth mentioning that in the left circles, there is a belief that once collected, tax will and shell be spent for a good cause in any developed society.
The reality, however, is far less optimistic..
Currently half of budget in most developed countries is spent on wars, and another half on corporate subsidies or huge Social Security bureaucracy, who is supposed to supervise distribution of social aid, and punish those who breach the rules (say – someone painted neighbors house for a fee without declaring). And only scraps go to those in need, which does not help to solve poverty.
That’s why the idea of “small government” is vital; system which would be covering the needs of people without often grotesque planning and research-either through basic income, or preferably, through negative tax, providing tax refund to anyone who declares income below certain welfare line. The Dutch system of “housing subsidies”, and “health insurance subsides” , paid directly by tax office, which is existing for decade already, and works as a clock, can be used as wider model of such tax refund welfare.
But no real equality in Europe would be possible unless there would be income and social security equality among members of different member states. it is high time to establish pan European minimal income and social security threshold so the welfare and prosperity of EU citizens would not be depended on what passport individual holds. Situation when Romanian national has to work extra hours to earn 600 Euro , while welfare recipient in Northern Europe receives twice as much as social aid is an economic and social cancer which might rot out whole thing if not dealt with in due time…
Chinese say that thousand miles way starts with a small step, so even one step this direction will be a good start.