In English Voices From Spain

Fiscal nationalism and the social democrat discourse

Originally published in Spanish. Luis Abenza. Politikon.

As the conflict with Catalonia advances and solutions come into view, if there are any to come, it will be important that the debate stops revolving around abstract realities, such as the right to decide, and begins to be focused on concrete solutions like what kind of self-government can satisfy them. In this sense, the proposal of way-out of the conflict by PSC [Socialist Catalan Party] leader, Miquel Iceta, who appeared yesterday in the New York Times, should be appreciated, and I would like to discuss it to take a step forward in this (really necessary) debate.


The ordinal principle in the economic funding

An interesting point of Iceta’s article is that of regional funding. Iceta suggests that for self-government to be guaranteed, it is important that there are adequate resources; no objections so far. But he goes a little further and proposes the application of the ordinal principle.

The ordinal principle is a way of organizing the relationship between the central government and the regions which assumes that the ranking in the fiscal balances (that is, the difference between what a region receives, and what it contributes) cannot be altered after the transferences. In Iceta’s words: so that those who contribute the most do not end up receiving less resources per capita for the provision of public services. This principle does not exclude all kind of redistribution policies among regions, but is does impose a restriction to redistribution.

Let’s suppose that we only have two regions: Catalonia and Andalusia. Let’s suppose that, given our tax collection system (the VAT, PIT, etc.), Catalonia contributes 100 to the central government, and Andalusia contributes 50. The ordinal principle would imply that the maximum quantity of resources that Andalusia could receive from the state would be 75 (the half), and the minimum quantity that Catalonia could receive would also be 75: the ranking of both regions cannot be modified after the redistribution.


The economic dimension of nationalism

As I explained yesterday, in my view, the logic of nationalist claims cannot be understood without its redistributive dimension. What we see is a claim by a group of people who want to set a limit to redistribution and pay less taxes. This logic is not something necessarily linked to nationalism (Germany, with its federal system, has recognized this ordinal principle), but it is hard to imagine any effort to justify this which is not appealing to some sort of liberal logic of defending private property, in this case the private property of the resources of an (alleged) nation –something which is more or less explicitly attached in the rationale.


The geographic lottery behind the veil of ignorance

The way I often think about this is using the veil of ignorance, which is an intuitive form of thinking about equality (I talked about this here, talking about feminist theories).

An egalitarian philosopher would wonder: if different people were not born yet, in which type of society would they be willing to agree on living? The argument is that we all would prefer to maximize the control over our lives, and, as a result, establish a redistributive system which would minimize the impact of non-chosen circumstances on our vital trajectories: the family we are born in, the place, the sex that is assigned to us when we are born.

This does not delete all types of inequality: those inequalities derived from our personal choices (such as to devote more time to work or to go on holiday) are legitimate; those which are not are determined inequalities. In other words: it is a rationalization of the intuitively attractive idea of equal opportunity. [1]

If we think using this egalitarian perspective, it is important to realize that one of the most random (less chosen) things is the place where we are born. Imagine two people, who know that each of them will be born one in Andalusia and the other one in Catalonia. Before being born, these two people have to agree on the quantity of unemployment benefits that they will collectively fund.

These two people could agree on the following: if one of them ends up being unemployed while the other one is working, the latter would have to give to the first one a part of his/her salary. The two people will be born, and given that the unemployment rate in Andalusia is 25% and in Catalonia 13%, on average, the Catalan will be unemployed half of the time when compared with the Andalusian. However, if both of them respect their previous agreement, this will mean that the ranking of what they give and what they receive will always be altered as long as both of them are not in the same situation (either employed or unemployed). The effect of having an the ordinal principle in the transferences is, consequently, to make it impossible for these two people to achieve a redistributive arrangement.

Real life is far more complex than this example, but the essence remains the same: the ordinal principle is a limit to redistribution based on something so random like the place where each of us is born. And as long as the place of birth in a concrete territory (or another one) is random, it constitutes an obstacle to the achievement of equal opportunity.


The reason behind the territorial transferences: redistribution

A constant in the Catalonia case is the idea that this territory is treated in an unfair way. Is there any kind of discrimination towards Catalonia, because of the fact that they are Catalans? Is it a region politically mistreated?

My impression is that, even after all the alleged fiscal plundering, to be born in Catalonia is, on average, a privileged position: the number of persons on risk of poverty in Catalonia is around 13%, while in Extremadura, Castilia or Andalusia it ranges between 30% and 35%. This difference remains the same if we look at any other indicator of living conditions (income, unemployment, etc.). Intuitively, it does not seem ridiculous that the government concentrates its spending efforts in regions where the material conditions are worse.

This is what Manuel Alejandro Hidalgo Pérez and Jorge Díaz Lanchas show in a very convincing way [english]: that territorial redistribution is a natural effect of redistribution.


The left and the redistribution

The type of ideas defended by Miquel Iceta are nowadays common currency among many leftists. One will say, with good reason, that the situation in the Basque Country is by definition far more unfair; that, in any case, Spanish institutions do not redistribute much, and that, finally, the effect of this ordinal principal would have an impact that will not transform the state of things deeply. It is possible that there is no other choice to get things back on track. It is possible.

But independently of all of this, there is an important symbolic dimension in the capacity of the left to claim radical redistribution policies. I understand that saying it just like this can be uncomfortable, but if we are looking to satisfy the preferences of a group who does not want to pay taxes, be it because of individual or collective selfishness, or because of the perception that Andalusian unemployed are lazy, no matter if these people are fiscally amnestied or demonstrators with flags, then it is possible that there is no other choice than accepting it, because of the balance of power. But it is crucial to understand that this is NOT an expression of egalitarian or social democrat values: it is a concession.

Some of us would like to open a more or less serious debate in the future about public policies to fight poverty and discuss minimal income. This (unlike other) is a really important debate that affects the material life conditions of a lot of people, and it will increasingly do so. And I personally would like that this solidarity contract has the biggest possible scope, because I find it hard to accept the idea that Catalans have less obligations to contribute to the guarantee of Andalusian income in comparison with the rest of Andalusians.

[1] As a remark, I would like to point out that I am not a liberal, and that I think that this way of thinking about equality is unnecessarily restrictive regarding redistribution. But it is an idea which intuitively works to systematically think about redistribution. 


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