‘No’ to an economy of exclusion

During Lent, the Church invites us to reflect on our lives and our motivation as Christians. This reflection must reach all the realms of the human being and cannot be limited to a personal level. As part of the society we are invited to review our public commitment and to transform all things that cause oppression and slavery. During this time we are invited to open our hearts to the needs of the poor and reflect on why the current economic system is not adequate to get rid of poverty.

 

Pope Francis has said: “No to an economy exclusion and inequality” (Evangelii Gaudium, 53-54). The current economic system prevents increasingly more people from living a life in dignity as full part of society. The economic model is based on assumptions that economic growth and free market will lead to greater justice and inclusiveness; however, in practice inequality increases and the poor remain excluded. The Pope warned about a globalization of indifference that is taking root and that ignores the outcry of the poor and almost legitimises a selfish and individualistic economic system.

 

So how does this reflection on society and economy challenge us in our life? The current economic system is favouring whom?

 

Around the EU we observe that a many decisions are tuned to the interests of corporations disregarding the voice of the poor. The discussions around the Transatlantic Trade and Investment Partnership (TTIP) illustrate the dominance of the interests of big businesses in the policy-making process. Indeed, what is now on the negotiating table would strengthen the grip of large companies on society: large businesses will be able to sue European governments at international arbitration courts, if policies or decisions defending the rights of citizens were to go against the interest of the business. In practice this could mean that the judgment of corporate lawyers (with good connections in the corporate world) would nullify decisions made by democratically elected governments and parliaments. This would mean European citizens surrendering much of their sovereignty to corporate actors.[1] Negotiations take place behind closed doors and as such they pass under the radar of public awareness.

 

The existence of similar treaties has undermined the rights of the poor in Africa. Bilateral Investment Treaties between industrialized and African countries have tied the hands of African governments and allowed the rights of the population to evaporate. On top of that African governments are often required by donors to “create an enabling environment” for foreign investors, which in practice often leads to tax exemptions or low taxes for foreign companies. This prevents governments from acquiring tax revenues which are indispensable for services to the poor. The economy is modelled on the interests of businesses, not the people.

 

But maybe the biggest problem for providing services to the poor is the increased pressure on government budgets as a consequence of unpunished tax evasion by big business.

 

Companies benefit from the services provided by a state whether in a poor or a rich country, for example, an educated/trained work force, health care, roads, etc. However, all companies pursue tax optimization strategies, in other words to pay the lowest taxes possible on their profits. This is why they set up subsidiaries in tax havens. Companies also constantly lobby governments for lower taxes, putting government revenue under ever more pressure. What is more, after the financial crisis, government budgets in rich countries were severely reduced due to bail-outs to banks and austerity measures. These budget cuts often target public services which are the only ones accessible to the poor such as health, education and social services. In addition, budget cuts in developed countries have also reduced budgets for development cooperation. Poor countries thus receive less aid money and have to apply austerity measures themselves to effectuate debt payments.

 

For poor countries tax evasion by foreign companies operating on their territory is an even bigger problem than for rich countries, because their already limited budgets are squeezed to the maximum while their severe social problems continue. Poor countries lose three times more money as a consequence of tax evasion by foreign companies than they get from aid.[2] Consequently, poor countries remain aid-dependent. On top of that, they are robbed of their natural resources and land, the proceeds of which are exported to industrialized countries. 

 

“We incarnate the duty of hearing the cry of the poor when we are deeply moved by the suffering of others.” (Evangelii Gaudium 193) However, in the current neoliberal model, it seems that the cry of the poor is submerged in a deafening silence.

 

So why do governments allow this? Policymakers are often aware of problems. For example, the problem speculation on stock markets has been discussed for a number of years. After the crisis in 2008 there was enough public support to enforce some regulation on banks and stock markets. However, significant regulation did not materialize. Large corporations are able to keep avoiding regulation and legislation on their activities. They hire or employ lobbyists to persuade policymakers to tune legislation to their interests or to prevent regulation. Lobbyists often have intimate connections to government officials and many lobbyists have worked for government administrations and vice-versa.[3]

 

The voice of the poor is not heard in policymaking. Currently, a lack of solidarity characterizes the global economic system, concentrating resources and riches in the hands of a few corporations that seemingly have taken over governments and parliaments. In the meantime the poor continue to lose resources and livelihoods via unjust economic structures that lead to illegal exploitation of natural resources and land grabbing. At the same time, rich countries continue to marginalize the poor in their policies and to steer away from solidarity. Alternative economic models are necessary to eliminate the structural causes of poverty. 

 

 

Gino Brunswijck

Policy officer