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How big is the Greek public sector, really?

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Employment in General Government as a Percentage of the Labour Force (2000 and 2008)

In the media you always read about the Greek “bloated and corrupt” public sector full of useless slags.  Now I have been unable to find actual data that can back up this claim. OECD data (picture above) indicate on the contrary that the Greek public sector is actually much smaller than elsewhere.

1) Are the numbers wrong? 2) Latest reported year is 2008. Have PASOK engaged in a recruitment orgy when they came to power? 3) Do comfortable stereotypes replace actual facts? 4) Other ideas?

The Size of Austerity

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Cumulative size of austerity packages as a % of GDP, 2010-2013

The data come from Andrew Watt’s and Sotiria Theodoropoulou’s ETUI report, (p. 14) based on a survey of country experts. Some data, from Italy and Spain most notably, are missing. This is partly based on 2011 estimates, and as we know forecasts have been all but reliable. There is more data on this on the Washington Post’s wonkblog and the Guardian writes this about the UK.

What the Guardian doesn’t explain is whether the coalition wants to “shrink the state” through (1) net cuts in spending or (2) by keeping its progression lower than economic growth. From the data it seems that it’s been (1) until now and it should be (2) from now on. Of course, (2) depends on the return of growth, but since it’s still waiting for the confidence fairy, we may be stuck with (1).

Portugal’s Political Crisis, or the Ordeal of Junior Coalition Partners

On Monday, the Portuguese Finance Minister Vitor Gaspar resigned. Gaspar was the main architect of  Portugal’s austerity drive since its bailout two years ago. His political charisma was akin to a flat bike tyre, but he was considered a major guarantee of credibility for the Troika and Portugal’s creditors. Apparently, he had already asked to resign last year after the constitutional court invalidated a number of the austerity measures contained in his budget for 2013. However, his resignation was then denied by the Prime Minister Pedro Passos Coelho.

Yesterday, the Minister for Foreign Affairs and leader of the minority coalition partner CDS-PP, Paulo Portas also asked to resign to protest against the nomination of Gaspar’s replacement, Maria Luis Albuquerque. Earlier this year, he had already expressed his disagreement with some of the austerity measures carried out by his own government, notably an increase in the taxation of pensions. This would badly hurt his traditional electorate of pensioners, but he acquiesced because it was a condition imposed by the Troika.  Since he is the leader of the minority coalition partner, it would have been difficult to imagine his party staying in the coalition, and early elections were probably the most likely outcome. However, once again, Pedro Passos Coelho refused Portas’s resignation, saying it was premature. Passos Coelho said he wouldn’t resign either despite the unpopularity of his government. We don’t really know what’s going to happen now. Passos Coelho said he would talk to the CDS-PP to maintain a majority, but all its ministers seem to have their resignation letter ready. Nobody knows what’s happening next, but Portuguese bond yields have soared, making another bailout quite likely.

There are two conclusions that can be drawn from this.

First, excessive employment protection may indeed really be a problem in these PIGS countries. Two ministers want to quit (perhaps to do something more productive, like pet food taster or nude cruise worker), and they simply won’t let them. However, this may only apply to ministers, because liberalising the labour market doesn’t seem to improve things for everybody else.

Second, this shows the dilemma of small parties like the CDS-PP when they coalesce with conservative parties that implement austerity. Even if there is no real populist radical right party  (PRRPs) in Portugal, the electorate of the CDS-PP is pretty similar to that of PRRPs elsewhere in Europe: pensioners, farmers and other groups that often depend on government transfers. These parties have electorates that are attached to the welfare state, but they can only coalesce with right-wing parties that are likely to retrench it. As a consequence, they take the blame for policies that they don’t really want in the first place. Something very similar happened with the Austrian FPÖ when they were in a coalition with the conservative ÖVP between 1999 and 2006. They supported a number of retrenchment policies which hurt their own electorate, and the party collapsed in 2002, giving birth to a splinter group, the BZÖ. More recently, in the Netherlands, Geert Wilders’s PVV agreed to support the first (minority) right-wing cabinet of Mark Rutte (VVD) without formally taking part in government. The government engaged  in harsh austerity measures in the aftermath of the financial crisis, and Wilders eventually withdrew his support because of disagreements about the size of austerity measures, notably about pensions, causing the cabinet to fall. In the following elections, the PVV lost a third of its votes. Similarly, even if their electorate is different, the electoral prospects of the Liberal Democrats in the United Kingdom look fairly grim after they had to betray a number of their electoral promises, notably not to raise tuition fees. For these parties, it seems really difficult to hold office and keep voters at the same time.

I have met Pre-distribution. It Wears Clogs, Eats Chocolate, and Works Part-Time.

Predistribution” is Labour’s new policy buzzword. It’s been all over the news. Policy Network has events and publications about it, the BBC talks about it, Ed Milliband talks about it, David Cameron ridicules it. Predistribution is supposed to be the new silver bullet for the centre-left, the agenda that will both create social justice and appeal to voters. But how would it work in the real world?

The traditional tool advocated by the left to ensure more equality has been re-distribution. Basically, you let the market do its thing, tax it, and use cash transfers to redistribute the revenues to the poor. The problem with redistribution is that it can never fully compensate for the externalities that the market creates. Moreover, it is increasingly difficult to sell politically, especially in countries like the United Kingdom. In the UK, the middle class doesn’t really have an interest in redistribution because most social schemes are means-tested, and benefits are mainly targeted at the poor only. If you lose your job, you’ll be entitled to Jobseekers’ allowance (56£ or 71£ a week) independently of your previous income. In fact, the drop between unemployment benefits and middle class incomes is so big that the middle class cannot really count on the welfare state as a safety net. They pay for it but don’t get much in return, which tends to create a hostile attitude towards it despite its residual features. As a result, even left-wing politicians are not so keen on it. For instance, Ed Milliband recently said that he would stick to the welfare cap introduced by the coalition. This is what Swedish sociologists Korpi and Palme called the paradox of redistribution: the more you target benefits at the poor to reduce inequalities, the less you actually reduce them.

Pre-distribution, by contrast, seeks to reduce inequalities within the market, in order to lower the need for redistribution. Because “mopping up” after the market through taxes and transfers is subject to political backlash, you need to get the market to distribute wealth more equally in the first place. The policies needed to make pre-distribution possible, however, are not very clear. Hacker emphasises “getting the macro-economy right”, ensuring “quality public services”, and “discovering a new set of countervailing powers in the market”. As far as one can tell, pre-distribution is a project whose policies still need to be invented. But does it exist in the real world?

Pre-transfer, pre-tax income inequality, 1979-2005
Source: Kenworthy 2009 (http://bit.ly/10u3JXU)

According to data from the Luxemburg Income Study, there are two countries where pre-tax, pre-transfer market inequalities have either decreased or stayed at particularly low levels between 1979 and 2005: the Netherlands and Switzerland (Figure 1). By contrast to Scandinavian countries, which rely quite heavily on taxes and transfers to fight poverty, the Netherlands and – especially – Switzerland do not rely that much on redistribution. In fact, due to strong regressive elements in its transfer and tax system, Switzerland hardly redistributes at all, on par with the US, and its market outcomes are fairly equal in the first place.

In a forthcoming chapter co-authored with Jelle Visser, we outline the mix of policies that have allowed these two countries to achieve low levels of inequality without the high taxes and transfers found in Scandinavia. In a nutshell, the recipe is a combination of high female employment underpinned by access to part-time work, and welfare and skill production regimes which lift incomes in the bottom half. They are good examples of what Kenworthy calls the high-employment road to low inequality, a variant of predistribution.

First, you need high employment rates. The rise of inequality in the West has been underpinned by an increase in the number of high-earners with two incomes, and an increase in the number of low-earners with only one income, or no income at all. These, in turn, need cash transfers. If you reduce the number of households with no or only one income by boosting the employment rate, then you reduce market inequalities. The main tool used to do this in the Netherlands and Switzerland has been part-time employment. These two countries have the two highest proportions of part-time employment in the OECD, and among the highest  female employment rates. These two things go hand-in-hand: since they don’t have the publicly subsidized childcare facilities available in Scandinavian countries, part-time employment has been the main channel for women to access employment. For this, however, you need childcare which makes work pay. If their wages are lower than the cost of childcare, it makes little sense for one of the parents to work.

Second, you need institutions which lift up incomes in the bottom tier of the labour market. This can be done either with earnings-related unemployment insurance which provides for higher reservation wages, a greater role for collective bargaining, or – probably more importantly – greater collective investment in occupational skills. What underpins income inequalities in the UK is the prevalence of a low-skill, low-wage, low-productivity service sector caused by 30 years of de-regulation. There has been a massive expansion of higher education, but skills at the bottom have lagged behind. In the construction sector, for instance, a large part of the workforce is outsourced, formally self-employed to bypass social security contributions, and craftsmen have to be sourced from abroad because companies don’t provide training. In countries like Switzerland or the Netherlands, by contrast, vocational training and apprenticeship systems ensure a higher level of skills at the bottom end of the labour market, and therefore higher wages. Vocational training also provides for particularly low levels of youth unemployment. In the UK, low means-tested benefits lead jobseekers to accept any job as fast as possible, even at lower wages. In continental Europe, earnings-related benefits give more leeway to select better jobs, ensure a better allocation of workers, and prevent wages below the living wage.

These measures do not involve an actual redistribution of wealth, but rather ensure a more equal distribution of it within the market. Because low wages in the UK eventually cost massive amounts of public money through tax credits, better skills at the bottom and easier channels for women’s employment could also be implemented in a context of austerity. Of course, the Dutch and Swiss social models should not be idealized. Dutch households now have the highest mortgage debt in Europe. Austerity policies have now partly undermined some of the policies (e.g. childcare) that had allowed for the employment boom of the 1990s and 2000s. Swiss employment success relies partly on very high levels of immigration which have planted the seeds for the strongest radical right party in Europe. But since the high tax/high transfer policies of Scandinavian countries seem difficult to implement elsewhere, some of their “predistribution” policies may be a more realistic path to follow.

The Europeanization of Portuguese Democracy (Book Review)

Nuno Severiano Teixeira and António Costa Pinto (eds) (2012) The Europeanization of Portuguese Democracy. New York: Columbia University Press. 278pp, £38.00, ISBN 978 0 88033 946 9. Buy it here

Europeanisation of Portuguese Democracy 

This book analyses the Europeanisation of democracy in Portugal between the Carnation Revolution in 1974 until about 2010. Portugal has recently come to the forefront of debates on European integration because it has been one of the countries most severely hit by the Eurozone crisis. By contrast to Greece, it has been presented as a rather “good pupil” in the implementation of austerity measures imposed by international financial institutions. However, the academic literature on this country and its relationship to European integration has been rather scarce, and this book is therefore a welcome contribution to a better understanding of the role of European integration in Southern Europe.

The book contains nine chapters dealing with the interaction between European integration and democratisation, the attitudes of political elites towards the EU, the Europeanisation of executive power, of the Parliament, of courts, of interest groups, and of public opinion. The general picture which emerges throughout the chapters is that of a mutually reinforcing dynamic between democratisation and European integration. After the fall of the dictatorship, European integration was seen as the means to definitively part ways with the authoritarian past, stabilise the parliamentary system after the years of turmoil that followed the revolution, and modernise an economy whose structures had been shaped by a huge colonial empire. As a whole, democracy and European integration appear as “brothers in arms”, as emphasised in Vink’s closing chapter.

Many of the contributions provide valuable insights into the workings of the Portuguese political system. However, the book generally gives a fairly dated impression in the light of recent events linked to the crisis, like a book on the GDR that would have been printed in the summer of 1989. Even if the publishing cycle may certainly be responsible for this, there are very few explanatory elements throughout the chapters that could help explain current events, set aside the introduction by Nuno Severiano Teixeira highlighting the decade of divergence that preceded the crisis, or Pedro Magalhães’s chapter showing the decline in popular support for European integration. In many ways, it seems that the strong enthusiasm for European integration emphasised in the book has concealed deeper politico-economic logics that are only superficially tackled. As the harsh austerity measures recently implemented by the Portuguese government have been essentially justified by the fact that “there is no choice” in the face of EU commitments, the relationship between European integration and democracy in this country now seems much less positive.

To be published in Political Studies Review

 

A Modest Proposal for More Efficient Networking at Conferences, or How giant hats, stilts and Geiger counters could help ambitious academics

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It’s that time of year again: conference season. Great opportunities for academic exchange in different guises: presenting your work and hearing about the work of others, but also multiple venues for socialising, schmoozing and networking. Making the right connections may help you get that publication out, obtain that next job, and open the doors of success, glory and wealth.

For young and ambitious academics eager to distribute their stack of business cards, however, networking is not such a straightforward task: identifying targets for socialising can be tricky. Time is limited, and the aspect of people cannot be taken as a proxy for their value and usefulness, so it is difficult to make rational decisions. You may spend too much time talking to people working at no-name universities or even worse, PhD students, while missing out on the editor of some prominent journal specialising in non-parametric methods. It is easy to identify unsuccessful social interactions ex post when people regularly browse their surroundings while talking to a particular person, looking for an opportunity to escape. The main problem is that interacting with actual human beings is a much more messy business than the safe, precise, clean and predicable environment of statistical analysis. In the comfortable zone surrounding your computer, everything can be measured, quantified and ordered in a limited number of variables.

Now there is no reason why the safety in numbers that many political scientists find in front of their computers could not be extended to social interactions at conferences. A fairly straightforward way to reduce this uncertainty would be to attribute a score – corresponding for instance to people’s H-index – that conference participants would display on a giant shield. This would signal whether it is worth socialising with them or not. For a more technological solution, participants could also display a barcode on their foreheads that special readers could link to their Google scholar profile; one could also imagine a detector that would beep at closer intervals upon approaching a prominent political scientists, like a Geiger counter. Technology opens endless possibilities.

My favourite low-tech solution would be to physically signal the status of participants by specific pieces of clothing such as hats. Academics with lots of publications would wear giants hats. Their size would be proportional to their status. Different disciplines could also be signalled by different colour codes: green for international relations, red for comparative politics, and so on. The problem with this system is that prominent but very short academics would probably be laughed at, and therefore fail to receive the respect that their status deserves. In order to solve this problem, we could also use stilts instead of hats, so that really big shots would gravitate high above everybody else, closer to the stars. At a time when research is ranked, measured and quantified, this should only be a natural and more efficient evolution of the profession.

L’austérité au Portugal: de la dictature de Salazar au diktat de la Troika

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Même s’il  a été l’un des pays les plus touchés par la crise de la zone euro, le Portugal n’a pas fait beaucoup de vagues malgré une situation économique catastrophique. Au contraire, le gouvernement de Pedro Passos Coelho arrivé au pouvoir en 2011 a été un bon élève de la Troika, et a diligemment mis en œuvre les mesures d’austérité que celle-ci a imposées malgré les conséquences dramatiques sur la consommation. Malgré un taux de chômage à 18% (42% chez les jeunes), le troisième plus élevé de l’UE, et un PIB qui a décru à son niveau de 2001, le pays n’a pas subi l’effondrement des partis traditionnels et l’émergence de l’extrême droite comme en Grèce, ni l’instabilité politique que l’on a pu voir en Italie. Comparées aux scènes de guerre diffusées depuis Athènes, les manifestations anti-austérité qui ont eu lieu a Lisbonne ont semblé bien paisibles. Cette apparente résignation peut s’expliquer en partie par l’importance du canal traditionnel de résolution des tensions sociales : l’émigration.

Contrairement à la Grèce, à l’Espagne ou à l’Irlande, le Portugal n’a pas connu de bulle immobilière depuis son entrée dans l’euro. Alors que ces pays ont connu une période faste soutenue par des taux d’intérêt bas alignés sur l’Allemagne, le Portugal, comme l’Italie, a traversé une décennie perdue marqué par la stagnation économique, la détérioration des finances publiques et l’endettement privé. Avec l’euro a un niveau surévalué, ses exportations ont perdu en compétitivité et sa balance commerciale s’est déséquilibrée, surtout face aux nouveaux pays de l’UE à la main d’œuvre moins chère et souvent mieux qualifiée.  Dans ce contexte, l’austérité a commencé bien avant la crise de l’euro. Le gouvernement socialiste de José Socrates arrivé au pouvoir en 2005 avait déjà entamé un bon nombre de réformes impopulaires pour réduire les déficits publics.  Après 2009, les taux d’intérêts sur la dette ont pris l’ascenseur, et les socialistes, cette fois à la tête d’un gouvernement de minorité, ont négocié une série de paquets d’économies avec l’opposition de droite. Ces mesures incluaient un gel des salaires de la fonction publique et des prestations sociales, combinées avec des hausse d’impôts considérables.

En avril 2011, après que l’opposition a refusé de soutenir le quatrième paquet d’économie, Socrates a démissionné et demandé en catastrophe l’assistance financière de la BCE, de l’UE et du FMI, devenant ainsi le troisième pays a être secouru par la Troika. Durant la campagne électorale qui a suivi, le chef de l’opposition Pedro Passos Coelho avait promise d’aller « plus loin que la Troika » dans la réduction des déficits publics. Après son élection, la droite a en effet poursuivi et poussé encore plus loin la politique d’austérité des socialistes sous les auspices de la Troika. Les 13e et 14e salaires de la fonction publique ont été suspendus, et le budget 2013 prévoyait les augmentations d’impôt les plus importantes depuis la fin de la dictature. La plupart des entreprises publiques ont été ou sont sur le point d’être vendues : la compagnie d’électricité EDP a passé sous contrôle chinois, la compagnie aérienne TAP est à la recherche d’un repreneur, et le gouvernement souhaite également privatiser la télévision publique RTP. Ces réformes, destinées avant tout à impressionner la Troika, ont été un échec quant à la réduction de la dette et au retour de la croissance. Les prévisions ont été maintes fois revues à la baisse en raison des effets multiplicateurs des coupes budgétaires. Même si l’opposition socialiste a récemment adopté une posture plus combative, elle est consciente qu’elle même a adopté les mêmes politiques auparavant, et n’a pas de menace crédible sur sa gauche. Le vieux Parti Communiste et le Bloc de Gauche ont été incapables de tirer profit de la crise. Contrairement à la Grèce et à l’Italie, les Portugais semblent préférer voter avec leurs pieds plutôt que dans les urnes. Depuis 1998, 1 million de personnes sont parties pour fuir la stagnation économique, notamment vers la Suisse, et cette tendance s’est fortement accélérée au cours des trois dernières années. En 2011, plus de 100’000 portugais ont émigré, un niveau similaire aux grandes vagues des années 1960, lorsque la dictature de Salazar tolérait l’émigration pour réduire les tensions sociales. Entre Salazar et la Troika, beaucoup de Portugais qui ont manifesté récemment en brandissant les symboles de la révolution des œillets pensent que peu a changé.

Publié dans Pages de Gauche, Juin 2013.