IREF - Institute for Research in Economic and Fiscal issues
Fiscal competition and economic freedom
The 2012 Summer University of the New Economics (33rd edition) in Aix-en-Provence ended on August 29. Concluding the event provided the opportunity to restate the participants’ firm commitment to the defense of liberty as a tenet of human dignity.
Free trade and free exchange more generally are not only a prerequisite of wealth creation and economic progress but includes a more fundamental human dimension of discovery, harmony and hope.
As stated by the participants, the absence of free trade means that human beings are wards of the State, subject to taxation, regulations and restrictions on human action as their situation depends more or less directly on government authorizations and handouts.
Speakers included French economic historian prof. Philippe Nemo and prof. Pierre Garello who explained why the French political class seems set on refusing free-market reforms, and why others, such as Germany, Bulgaria and Georgia, have managed the leap.
The wider topic of free trade vs. protectionism was covered by professors Victoria Curzon-Price and Jean-Philippe Feldman. The practical implications of globalization was dealt with by entrepreneur Axel Arnoux, detailing why a worldwide demand (only a global market may reduce production costs) and a global supply (shared production between a large number of producers in different countries) contribute to outsourcing.
The globalization of markets offers tremendous opportunities for free movement of people, ideas, goods and services across borders that were once closed. The economy is no longer “geonomic” as remarked by François Perroux, since people are no longer tied to their territory through agriculture or natural resources. Today 70 per cent of the world’s trade occurs in services.
But the discovery of new frontiers requires governments to refrain from taxing away their citizens. As globalization spreads, voting with one’s feet away from excessive state intervention becomes a real option for an increasing number of people. Witness the growth in medical tourism allowing for average-income people to find at decent costs in far-away countries the high-quality medical care that their national systems can no longer provide.
The benefits of free trade reside not primarily within the division of labour, but in the spontaneous spread of knowledge and ideas. As shown by Carlo Lottieri (University of Siena) this is also the ultimate restriction on government power, as only the states capable of providing a competitive offer of public services at low tax rates will eventually retain their citizens’ trust and thus their tax base. As argued by prof. Enrico Colombatto (University of Turin) the current efforts of the EU to “harmonize” taxes, currencies and regulations are thus useless and dangerous.
Alain Mathieu (French Taxpayers’ Association) and Jean-Philippe Delsol (IREF) also discussed this issue in their presentations, as well as the impact on competitiveness of compulsory social security institutions.
Two French MPs (Hervé Mariton and Christian Kert, UMP) were also invited to consider their potential input and perspectives for a free-market voice within the new opposition. No doubt their work is cut out for them.
As the late Jean-Marc Varaut said: “Let’s work towards freedom, and freedom will work out the rest.”
(Article based on a summary by Jacques Garello)