The limit of austerity politics and the future of fiscal democracy

In this article Garret Fitzgerald maintains that our economic collapse is the result of fiscal indiscipline. This is not the case. Our economic collapse was the result of reckless behaviour by business actors in the private market and a tax base that was overly reliant upon pro-cyclical taxes. Irish government revenue as a percentage of GDP and GNP has been and continues to be one of the lowest in the European Union. The total tax take to the Irish exchequer is equivalent to that of Romania, Estonia and Lithuania. This is simply not sustainable in a democratic society where citizens expect high quality public services. A constitutional provision to guarantee budgetary discipline will make no difference to this. It simply assumes expenditure rather than revenue is the problem. This is similar to the assumptions governing the EMU growth and stability pact. Both ignore the real cause of our crisis – the mismanagement of private capital by private market actors.

Neither the EMU or legal mechanisms for fiscal discipline are designed to tackle unsustainable growth strategies or the structural composition of tax revenue. They simply assume that government expenditure in itself is the problem. This is premised on the politics of austerity and ignores the importance of fiscal democracy. Tax and spend policies by public institutions leverage societal investment and a neccessary framwork for all democratic polities. Ireland must operate within the constraints of free global capital flows and strict monetary exchange rates. The state utilises fiscal, social and labour market policy to mitigate the worst effects of market capitalism. The current crisis of the market is being displaced into the state and taxpayers are paying for the cost. To isolate this expenditure as a solution to the crisis simply ignores the problem.

2 responses to “The limit of austerity politics and the future of fiscal democracy

  1. Is there a link missing in the first line?

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