The new social contract – the master plan for building the bridge of trust

19 Tetor, 20220

Across European countries, governments are taking action to protect their citizens from the cost-of-living crisis that has already pushed many people into disillusion and poverty. The pandemic crisis, the impact of competitiveness from the countries of the region leaving no room for diversification of the export market is intertwined with the economic wounds of the pandemic. The extraordinary challenge of the pandemic led to extraordinary actions that helped unleash today’s inflation, such as: not enough-considered government stimulus in its aid to some economic activities and social groups, temporarily distorted patterns of consumer demand, and supply chain disruptions of supply caused by congestion. In a substantial change from the budgetary crisis of developed countries in the 2010s, which Albania managed to avoid due to allowing more dirty/printed money in the economy, as well as the use of state budget funds in infrastructure, over a decade later a structural growth in government spending and investment is underway.

The biggest problem that has come knocking at the door of the country’s budget is the elderly citizens, who will need more health care and bulk funds to cope with social schemes that seem no longer possible to fulfill. with current social security and health schemes. Albania will spend more on defense to counter threats from countries that are positioned against it and NATO. Energy market changes (electricity and fuels) will drive public investment in energy, from renewable infrastructure to gas terminals. Meanwhile, the contracted expenses to be carried out for at least the next 15 years in the multi-directional infrastructure are forcing the government to spend more on the policy that resembles the expression “cross the sea on foot”. However, even as investment is increasing, the aging population will increasingly weigh on the economy.

But what do you think can overcome this situation, of course not at once and with a single discussion?

The government must act now to increase basic public services and sustainability, in areas such as health care, education, sustainability of physical infrastructure and social safety nets. These additional investments should be included in the new sectoral strategies, as part of the Fiscal Macroeconomic Framework and clarified in the medium-term budget programs.
But now, due to growing discontent and the possibility of increasing economic protests, it is necessary to restore public confidence. To achieve social cohesion, it is essential that the government provides and meets the demand for basic public services and more inclusive policies. Meanwhile, the further policy of low taxes and holding the budget hostage to fiscal policies not well studied and for short-term needs of filling the treasury would undermine the confidence of the citizens. Citizen-voters may be willing to pay taxes as some of them are doing, but in exchange for a responsible commitment to Anti evasion and in exchange for those categories of public services that are provided with many deficiencies even today.

Increasingly, workers face risk when it comes to their income, how many hours they work and how they make ends meet. The balance has been tipped heavily in the direction of flexibility for employers at the expense of safety for workers. This society we live in needs to set a floor on income that no one can fall below. This can be achieved through direct cash transfer programs in their infancy, if the state budget gains the flexibility it lacks. At the very least, the current government owes it to the citizens to deliver on its promise and political program for a package of basic health care and increased pensions (not just indexation) to prevent pensioner poverty from continuing.

This means formalizing more workers in the formal sector, which means forcing employers to pay higher wages to workers by implementing one-to-one labor legislation by encouraging national dialogue on renewed labor contracts. Many risks in our society are borne by individuals, when in fact they would be more efficiently managed by others or collectively. The risks of economic shocks must be shared by employers, the budget and the private market as a whole and not placed solely on individuals. Financial security for old age can be financed through the efficient use of the second and third pillar legislation of private pension funds rather than linking it to employment as is usually the case.

It is time to talk extensively about the new social contract, which should include in its debate all that is mentioned above and below.

A new social contract is not about higher taxes or a bigger welfare state. The scheme should be reformatted in the way of benefits and the provision of schemes for social guarantees as opportunities and security that can be redistributed in society. This would increase productivity and more efficiently share the risks around childcare, health, work, and old age that cause us all so much anxiety.
Fiscal policy should now aim to tax more the things that harm us more, or the things we want less, such as: pollution, alcohol, and tobacco, and subsidize the things we want more, such as: education and a better economy, oriented towards productivity based on technology and intellectual skills. Even where the starting point is low trust in government, reallocating spending to services citizens value, such as health care and education, can help build trust.

All this modified approach of governing should aim at strengthening accountability. This means that from the moment of the formulation of the 2023 draft budget and the related fiscal policy, but also in the implementation of the 2022 budget for the remaining months, it is necessary to communicate with the public through reporting standards based on the fiscal audit, which speaks the language of financial facts and analyzes the compatibility of law enforcement with the actions of institutions. If this high-level act of governance is carried out, it gives us the message of building a bridge of trust and can assure citizens that they are getting the real value of services and investments for the taxes they pay. Credibility and effectiveness of government with a fair and transparent use of public resources is essential now, more than ever before.
This current approach where the government pretends to listen to us and continues to not be problematic with accountability, as well as pretending to implement what the citizens want. The citizens doesn’t want to show them that the crisis would have “burned” us if the government had not protected us from inflation with the “freezing” actions of energy prices, fuels and food for households, which in fact should be the starting point of self-correction and economic policies error correction, to answer what was real reason that pushed the government to act like this and freeze the free market for more than 9 months.

If a strong self-critical approach is not initiated, then what has been done for a long time now can no longer be called errors in governance, but a will corrupted and captured by personal political interests and the benefits of the moment.
If everyone is given the opportunity to use their talent, this would be worth more to the Albanian economy, but it would also reduce the need for fruitless redistributive policies in the years and decades to come.

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