Today, I’m speaking at a conference examining the impact of sovereign debt crises on public sector workers.
As UNISON members know, when a government’s response to debt is austerity, the impact is devastating. That road leads to a bonfire of public services, public servants being left on the scrap heap and further privatisation.
Around the world, we’ve seen that when a sovereign debt crisis begins, governments can become dependent on financial institutions like the World Bank and the IMF, beholden to their conditions and driven by a dogma that says the private sector is always right, good and efficient. And where the public sector is portrayed as the villain whilst countries are accused of “living beyond their means”.
The truth – including that counties often accrue debt because multinationals aren’t paying their share of tax – is far more complex.
Even where these considerations are absent the consensus view that we must lower taxes for corporations to invest and create jobs is widespread.
So-called “Labour market flexibility” is another classic remedy for governments stuck in debt spirals – except what this really means is pushing down wages.
And when some governments naturally turn to tax rises to deal with a debt crisis, it’s usually those workers who can least afford to pay higher taxes – and who are least able to afford those same taxes – who are targeted (like when VAT is increased – which hits neither wealth nor wages, but the cost of living).
Inevitably it is public service workers who bear the brunt of these approaches. Their jobs can be cut, wages legislated downwards and unlike the wealthy, public service workers are unlikely to avoid tax.
So it’s clear that public sector unions have a huge interest in sovereign debt, and that the right solutions to debt crises are when citizens interests are put first – rather than those of big business.
When that isn’t the case, the failure of austerity is exposed, whether it’s economic stagnation in Greece or repeated crises in Argentina. And as commodity prices fall and interest rates rise we can expect further such crises to come – in rich and poor countries alike.
That’s why governments need to approach debt default differently in future. Last year, the UN General Assembly adopted a resolution establishing 9 principles to guide sovereign debt restructuring processes. This was a call by the vast majority of nations in the world have to change the current creditor-led debt system that has repeatedly failed numerous countries.
And it’s a change that could have a profound impact on the lives of millions of public sector workers, transform global finance and revolutionise the way we think about government debt.