April 7, 2021
From The Public Source (Lebanon)

Oxfam is calling for “a decade of hope not austerity in the Middle East and North Africa.” Knowing that the mechanisms you explained earlier are deeply entrenched within the governing political systems in the region, what would you say are some of the urgent economic measures and political transformations that governments in the region and Lebanon in particular ought to prioritize?

 Austerity has played a role in the region. Governments and institutions like the IMF use the collapse of public revenues or endemic structural issues to justify it, supposedly to reach “sustainable” debt levels in the Global South, including the region. Revenues need to be raised, first to make debt sustainable and possible to pay back, then so the economy becomes larger than the debt accrued. In other words, austerity is essentially a set of policies based on cutting government spending and increasing public revenues to repay creditors. One of these policies concerns the taxation system. It’s important to look at taxes because they paint the best picture of a country’s political economy and allow us to see clearly the underlying power dynamics: who is losing, who is benefiting, and who is in charge. Taxes are decided by the central government, so they are decided in the domain of political economy. It is not just the market. Debt and tax decisions are made centrally by political parties and by power relations, and this is the crux of the issue in the region — taxes engineer economies. Through taxation, the government signals which sectors are unwanted, which should be contributing to economic development, and how redistribution occurs, especially through social spending to fund basic services. In response to austerity, governments in the region could have taxed wealth and implemented progressive taxation on corporations as an alternative source of revenue. But because of the prevailing political economy and the power dynamics within it, governments failed to push progressive tax reforms and instead focused on increasing indirect taxation such as VAT, decreased public spending on key sectors, such as education and health, and slashed subsidies. 

“We have a significant amount of extremely wealthy people in Lebanon, and yet the government has always tried to squeeze water from a stone.”

Second, governments should have provided universal social protection. Instead, through the IMF and the WB’s loan programs, they have been moving toward targeted social safety nets, which splits people into two categories: the poor and the non-poor. The assumption is the poor “deserve” social services and the non-poor can pay for what they need, as if there’s nothing in between. But it’s not about class; the IMF and WB have no class analysis in mind and don’t see the world as constituted of the bourgeoisie and the proletariat. In reality, however, there are the rich and the non-rich, not the poor and the non-poor, and the pandemic has really put in full view the importance of having universal social protection. In Lebanon, where you have a dual system of healthcare, privatized and public, you will always have a difference in quality. But when healthcare is public or nationalized that difference does not exist. So it’s a question of quality and equality. Third, debt is necessary to tackle because it can be extremely detrimental. This doesn’t apply to Lebanon only but everywhere else in the region. The fall of public revenues due to the lockdowns and the policies implemented during the pandemic is leading to a debt crisis. Governments should not generate revenue from people, even if it were only from the rich, to pay debt, which is what happened in Lebanon. We need the money raised for infrastructure and social services. In-and-of-itself, debt is not the issue because governments are the only agents in the economy who can spend more than they have to boost the economy. However, we are now in a situation where debt is being paid and repaid through austerity measures with the money of the people. This is regressive. There needs to be concerted action on debt to be able to move out of the austerity trap we are in. Fourth, there is the question of labor rights, freedom of association, and the right to organize. We already know that health and tax reforms are necessary but how will they be implemented if we cannot shift the power dynamics through organizing and collective action?

Source: Thepublicsource.org