The pandemic and the need to ensure coverage of essential needs for the majority of the population led developed states to invest massive amounts of resources. With the start of the radical confinements, in the spring of 2020, they assumed the bulk of the bill that involved stopping economic activity and stopping the spread of the virus with more health spending. And public debt skyrocketed.
In some areas, especially on the left, it was considered that that moment marked the beginning of a radical turn in the conception of the role of the State in the economy. That it definitively buried the neoliberal order that had dominated economic management in recent decades and that would have sung the swan song with the austericidal reaction to the great financial crisis of 2008.
This well-documented story can be reviewed in Gary Gerstle's book The Rise and Fall of the Neoliberal Order (Ediciones Península). The author also concludes the neoliberal order that the Republican Ronald Reagan, in the US, and the Conservative Margaret Thatcher, in the United Kingdom, promoted in the early eighties of the last century and that the Democrat Bill Clinton would end up propping up. , in close association with Wall Street, in the 1990s.
Now, instead of cuts and social drama, they have opted for more public spending to prop up inclusion and avoid the social crisis. A change that would be the consequence of the lessons of the unfortunate experience of the harsh years of austerity applied from 2008 to beyond 2012. An imitation of Roosevelt's new deal, a new order.
After that momentous turning point, the economy was subjected to new additional tests, such as the supply chain crisis and especially the runaway inflation still present and generating new headaches due to the increase in the cost of basic products and debt. , public and private. Here, again, the states have maintained the same or a similar line, subsidizing the shopping basket, gasoline or the energy bill, also reducing consumption taxes, among other measures.
The programs now in force to promote activity, productivity growth and the transition towards a green economy would be of the same nature. Total coincidence between the EU, with its Next Generation European fund programs and especially the US, which under the presidency of Joe Biden, has launched two large economic investment and social protection plans that together exceed 3 trillion dollars .
An economic architecture that was originally supported on three large pillars. The first, negative interest rates, which reduced the cost of debt to finance it to zero. Second, greater economic growth as a result of the structural and productivity improvements that massive investment in infrastructure and public services would bring. And third, a policy of increasing public revenue thanks to growth and the selective increase in taxes.
The first and third pillar are beginning to weaken. each in their own way. The first, as a result of the interest rate hikes by Jerome Powell's Fed and Christine Lagarde's ECB.
That of taxes, due to the political reaction that is beginning to arouse. Europe is sensitive terrain for this type of situation. Within the institutions of the eurozone, the dance has already begun. Germany, and a large group of countries from the North, have opened fire demanding a return to the policy of containing spending and reducing deficits. The South, led by France, and conveniently supported by Spain and Italy, proposes to moderate this return to the past.
In all countries, the reaction against tax pressure is mobilizing large sectors of the middle classes who believe they have been plundered by their states, encouraged by the populist far-right platforms to the traditional right, which include promises of tax cuts in their government programs . The other side of the coin of the recovery of the European fiscal rules.
The big question is how long Chancellor Olaf Scholz's Germany will be able to combine that old orthodoxy to which it seems to want to return but in a completely new and different world. Until now, Berlin had focused on promoting its exports by containing its wage costs, the demand, at home. Also in those that, like Spain, had integrated their industry into supply chains. But what is insinuated on the horizon is an external demand that could evaporate, due to the conflict with China, its main market, and due to the change in the world economy's product needs. It will therefore have to pay more attention to its own internal demand, which will become vital.
While things are clearing up, in Spain that battle has so far had its preferred field of expression in the autonomous governments. As the PP controls them, first alone, now with Vox, wealth, inheritance and donation taxes, among others, are abolished. A fence on the communities that still maintain them and that will end up being unsustainable. In the Catalan case, moreover, now it will be neighboring Valencia the one that will put on the face of a tax haven.
Once the elections on 23-J are held, the debate will go up a few steps. If the new government is formed by Alberto Núñez Feijóo, that fiscal line will gain strength, in Spain, and in the position that the country will hold in the European debate. It is true that budgetary policy in the EU is very marked by the European Commission. But it is no less so than this, in turn, is a reflection of the correlation of political forces between the different countries that are part of the Union.
