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Francisco Errasti , Professor of Economics, University of Navarra.

Shall we all lower our salaries?

Thu, 29 Mar 2012 07:39:12 +0000 Published in El País

Certain measures that the Government is taking are not debatable
Rather, they are absolutely necessary initiatives

Karl Marx stated, in one of his characteristic outbursts of mysticism, that if theory does not coincide with reality, so much the worse for reality itself. It is well known that the founder of Marxism did not admit opinions contrary to those he held and as a scientist -scientific materialism, as he called his theory- he firmly believed in his failed intellectual monument.

Reality, like history, is susceptible to different interpretations and only time will put each one in its place. It is well known that the monetary and fiscal economic policies of Europe and the United States differ in their approach. In our case we are subject to the European discipline -i.e. Germany- and, therefore, the government and the autonomous communities have begun -by force, it must be said- to take painful measures in the face of a crisis which, denied at the beginning, shows the serious error of ignoring an accurate diagnosis. The crude reality - despite Marx's words - and even if it is hard to admit it, is imposing itself.

Certain measures that the Government is taking are not debatable, rather they are absolutely necessary: to suppress the non-productive expense fruit of the megalomania and unconsciousness of a few and, in general, of those who administer what is not theirs (this apparent and insignificant nuance should be taken into account and foresee some measures to avoid such excesses). Others are more debatable like the tax increase - when he said he would not do it - and some, like the decrease of 600 million for research (which are an investment and not expense as some mistakenly consider it) is a serious mistake.

But there it all ends to wonder, what is the next act? Because the labor reform, however necessary and urgent - the relations of our unions, which should live off the dues of their members, and employers are worthy of a paleontology study - alone will not create employment, let's not fool ourselves. These measures will lead to a drop in consumption, more company closures and a higher unemployment rate if, at the same time, no far-reaching measures are adopted to boost economic activity. And except for the payment to that enormous multitude of small companies with whom the autonomous governments and city councils maintain a shameful debt and to whom the government has committed to pay, I do not see anything on the horizon that allows me to be less pessimistic. On the contrary, I sense the heart of a tired organism that consumes its scarce reserves without the capacity of a serious impulse that could bring it out of its lamentable lethargy.

Our Economics suffers from a lack of productivity that makes it particularly vulnerable in a competitive environment of mature markets and high salaries (in relation to this low productivity). If there are no means that in the short term deadline can improve it, perhaps an effective measure would be to lower the salaries of all people - for example 10% and starting with our parliamentarians, executives, employees of all companies, public and private - leaving only the lowest salaries. In exchange, companies could commit themselves to create the employment equivalent to the amount of the global decrease that this 10% of salaries represents. We have not yet learned that the deterioration of our Economics has not reached the bottom, that things may get worse -I personally think they will- and that we cannot go on thinking that we are going to live as we do now, at least for many years to come. We simply have to get used to the idea that our standard of living has to go down, and in fact it has already done so for the millions of people affected by the personal income tax reform. This measure would be the equivalent of devaluing our currency by 10%, something that could be done when the euro did not exist and is now impossible. Accepting that we are poorer and that, on the whole, we will live somewhat worse (some, in spite of everything, will continue to squander with impunity) is not a disgrace, it is to accept reality and the sooner we do it the better. But above all it will be the thermometer that measures the Degree of solidarity that our society has with the millions of people who are unemployed. Is no one willing to give up some of what they have so that those who do not have can get a little?

And our poor unions can only think of organizing a general strike to impoverish the country even more. It is now that they should demonstrate their creative capacity by proposing plausible solutions, imaginative agreements that, together with redistributive approaches, would lead to a relaunching of the Economics. Sometimes you feel like moving to another country.