Annexe I: Basic concepts of macroeconomics
At the national level
All the governments have a national budget which includes the amount of money it has (based on taxes and other measures) and how it plans to spend that money in a given year on goods, services, and transfer payments.
‘Transfer payments’ means the transfer of money by governments to citizens or other qualifying groups without receiving any goods or services in exchange. For example, social welfare payments, some unemployment benefits, and government subsidies for certain businesses are considered as transfer payments.
If the amount of tax the government collects is more than its expenditures on goods, services, and transfer payments in a year, there is a budget surplus.
If the government’s spending is more than the taxes it receives in a year, there is a budget deficit.
It is important to note that deficit and debt are two different things. National debt refers to the money borrowed by the government to balance budget deficits over the years. National debt can accumulate through borrowing money from domestic sources and/or borrowing from international financial institutions, e.g. the IMF.
Beginning with the late 1970s and 1980s, there was an introduction of trade liberalisation, along with widespread changes in mainstream approaches to fiscal policy and national budgets. This led to governments around the world imposing user fees for public services, either to balance the ledger or increase revenue of certain services.
Governments aimed to keep budget deficits low and interest rates high, so that they would look credible with seemingly good budgetary discipline. This would attract financial investors with the promise of high returns through high interest rates.1Çağatay, N. (2003). Gender Budgets and Beyond: feminist fiscal policy in the context of globalisation. Gender & Development, 11(1), pp. 16. However, these were promoted on economic growth, rather than redistribution of resources and dismantling of systemic inequalities. These approaches then led to growing inequalities, including gender inequality.
Since the early 2000s, we have seen increased interest in ‘gender budgeting’ (the preparation of national budgets using a gender lens) among international financial institutions and some nation-states. But in an increasingly globalised world, it does not suffice to have fiscal policies on the national scale to achieve gender equality. Alongside national policies, there needs to be a global policy framework which addresses such problems on a global scale. This includes international tax systems and debt cancellation.2Ibid. pp. 22
- 1Çağatay, N. (2003). Gender Budgets and Beyond: feminist fiscal policy in the context of globalisation. Gender & Development, 11(1), pp. 16.
- 2Ibid. pp. 22