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Economic and Monetary Union and the European Community Budget

Published online by Cambridge University Press:  26 March 2020

Sir Donald MacDougall
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Extract

In 1977 the European Commission published the report of a Study Group which it had set up, under my Chairmanship, on ‘The Role of Public Finance in European Integration’. This is sometimes called the ‘MacDougall Report’, which does scant justice to my six European colleagues, our two consultants from the United States and Australia, and our excellent Secretariat.

Type
Articles
Information
National Institute Economic Review , Volume 140 , May 1992 , pp. 64 - 68
Copyright
Copyright © 1992 National Institute of Economic and Social Research

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References

Notes

(1) As measured by the Gini coefficient.

(2) The idea of a Community Unemployment Fund was first proposed in the ‘Marjolin’ Report of the Study Group (of which I was a member) on ‘Economic and Monetary Union 1980’, Brussels, March 1975. The Fund would pay a flat money amount per day per unemployed person to national unemployment schemes which could, within certain constraints, remain quite different in accordance with national economic conditions and preferences. The payments would be financed by a uniform percentage levy on wages and salaries. Part of the contributions of individuals in work would be shown as being paid to the Community and part of the receipts of the unemployed as coming from the Community. Apart from the political attractions of bringing individual citizens into direct contact with the Community, the scheme would have significant redistributive effects between richer and poorer countries and between countries with lower and higher unemployment. It would also help to cushion temporary setbacks in particular member countries. Experience in the United States, where the proceeds of a Federal payroll tax—of a uniform percentage of wages, up to a fixed ceiling—were largely paid into State unemployment trust funds, suggested that a strong harmonisation of member state schemes would not necessarily be a prerequisite of Community participation. (See pages 389 and 493 of Volume II of the ‘MacDougall Report’.)

(3) The country would no longer have the power to stimulate domestic demand through lower interest rates; and its power to do so through fiscal policy would be limited by, among other things, the Maastricht rules on government borrowing, or by inability to borrow more than a certain amount on the markets on acceptable terms, or by unwillingness to impose further burdens on future taxpayers.

(4) Committee for the Study of Economic and Monetary Union. Report on economic and monetary policy in the Community, 1989.

(5) Page 16.

(6) See articles by Edward Balls and Martin Wolf in The Financial Times, 20 January and 24 February 1992.

(7) As measured by hourly earnings in manufacturing (see MacDougall, The World Dollar Problem, 1957, page 82); and the same is broadly true of wage costs per unit of output because productivity in manufacturing rose only marginally faster in the United States.

(8) Pages 18 and 13.

(9) Luxembourg: Office for Official Publications of the European Communities, 1991. The main authors, lain Begg and David Mayes, have drawn on the report in their article on ‘Social and economic cohesion among the regions of Europe in the 1990s’, published in the National Institute Economic Review, November 1991.