IS THERE A FUTURE FOR „SOFT” [SOCIAL SENSITIVE] CAPITALISM IN THE POST-SOCIALIST EUROPE?
byPál TAMÁS [Hungarian Academy of Sciences,
Budapest]
THE TAXONOMICAL QUESTION
Is there an East European [post]socialist welfare state model beyond the European „classical 4” welfare regimes?
Yes, the „early-born welfare state” [Janos Kornai] of EE as a fundamental concept for legitimation of the social order.
a. Survival ratio of that E-B welfare state? The strategic debate.
b. How to reduce the social expenditure? Tactics and time-horizons
c. What does happen with the European social model in that context? 2 Europes- with an internal periphery?
EVOLUTION OF THE SOVIET WELFARE REGIME [as a
concept]20-30ies –patchwork of differently
modernized social segments, islands, pockets. Differentiated social services in different segments. Close to the „classical” Chinese communist system of social insurance of the 50-70ies
From the late 50ies-early 60ies de facto universal: Bismarcian instruments, but universal in its system via obligatory and permanent full employment.
The system collapsed in the early 90ies.
THE TRANSITION DEBATE OF SOCIAL POLICIES IN THE
90iesSocial expectations of the universal regime
in the public opinion are there, the sources and tools of the service providers for the new situation are absent.
Discoursive mode of the political-intellectual debate in the early 90ies dominated by the „Americal model” and and neoliberal hardliners.
Social democratic alternatives emerge with the Eastern Enlargment of the EU- from the late 90ies
IS THERE ONLY ONE „EAST-EUROPEAN REGIME”?
Argentinian, Mexican economy- with ambitions of the Swedish social policy programs
different hybrids- more loyal to the past [HU]- more hostal to the past [PL] and between
Basic elements:1. Early gender mobilization [pre 1989]2. Strong pro-population policies [pre 1989]3. Forced integration of poverty [pre 1989]4. Weak civil society [pre + post 1989]5. Neoliberal pro-growth policies fpost 1989]6. „transformation costs” transfered to the lower
social classes and strata [post 1989]
THE „SCANDINAVIAN DREAM”
„Scandinavia” as an ideal case [like the romantic concept of the „pure love”] is there at least from 1968 [the Prague Spring], but after 1989-90 everybody is realistic, and tries to „marry the first potential reach partner; wife, husband”]
Special cases : a. the Finnish model” in Hungaryb. The ambivalence of the Baltics- Scandinavian
modernization but without scandinavian social policies [Estonia, Latvia- brutal neoliberal growth regimes with Scandinavian foreign policy umbrella and economic domination]
STRATEGIC DILEMMAS
A. „optimal” and „acceptable” social inequalities [the „Atlantic” and the East Asian developmental states].
B. The post-communist underclass and the social reproduction
C. Changing social justice concepts as tools for legitimation of transition
D. Limits for a new social contract [political assets of transformation]
E. Re-integration of alienated generations after the transition
BIFURCATION OF THE EUROPEAN SOCIAL MODEL
„Eastern options”- short- and medium-term: there isn’t free choice there
Obligations of the eurozone, minization of budget deficits +flat-tax competition in the region [ECE]
Actual ECE social expenditures: 19-21% of the GDP [Scandinavia- 29-30%, DE, AU -26-27%]
The new „Eastern model” [overgeneralization!] 16-18% of the GDP- strong public education + growing share of private investment in health +minimalistic social assistance [deep poverty + some population policies]
A strategic example: share of education and health sectors in the % of the
Hungarian GDP, 2005-2007
Share of strategic sectors in the GDP, in %
sector 2005 2006 2007
education 6,44 6,21 5,67
health 5,27 4,77 4,49
Gross National Income Per Capita (PPP)
0
2,000
4,000
6,000
8,000
10,000
12,000
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Central Europe
Baltic States
Western CISBulgaria and Romania
Other South-Eastern Europe
Central Asia
Caucasus
0.20
0.25
0.30
0.35
0.40
0.45
0.50
0.55
1994 1995 1996 1997 1998 1999 2000 2001
Georgia
Moldova
Russia
Estonia
Serbia and Montenegro
Kyrgyzstan
Azerbaijan
Romania
Poland
Hungary
Income inequality, 1994 - 2001 (Gini coefficients)
At-risk-of- poverty rate and needed social transfers
Source: Eurostat Yearbook 2006-07:118
Further life expectancy for men aged 65 (Eurostat 2005)
10
11
12
13
14
15
16
17
1992 1994 1996 1998 2000 2002
Life
exp
ecta
ncy
(yea
rs)
EST
LAT
LIT
POL
CZ
SK
HU
SLO
ROM
BUL
EU15
Further life expectancy for women aged 65 (Eurostat 2005)
14
15
16
17
18
19
20
1992 1994 1996 1998 2000 2002
Life
exp
ecta
ncy
(yea
rs)
EST
LAT
LIT
POL
CZ
SK
HU
SLO
ROM
BUL
EU15
Hypothesis on determinants of demographic development in Western and Eastern Europe
Determinants Western Europe
Eastern Europe
Life expectancy
Fertility / /
Migration patterns
Immigration Emigration
Immigration/emigration patterns (Eurostat 2005)
-30
-20
-10
0
10
20
30
1992 1994 1996 1998 2000 2002
Net
bal
ance
imm
igra
tion/
emig
ratio
n (in
thou
sand
s)
EST
LAT
LIT
POL
CZ
SK
HU
SLO
ROM
BUL
Social risk indicators for EMU accession (2003)
Social Risk Indicators: Absolute Values
Risks Derived from the Labour Market Risks Derived from
Ageing Risks Derived from
Insufficient Income Support
Long-Term Unemployment
Rate (2003) Unemployment
Rate (2002) Old Age Dependency
Ratio % (2001)
At Risk of Poverty Rate After Social Transfers
(2001-2003) (1)
BG 8,9 17,8 24 13
Cyp 1,1 3,9 17,3 16
CZ 3,8 7,3 19,8 8
EE 4,6 9,5 22,7 18
HU 2,4 5,6 21,4 10
LV 4,3 12,6 22,6 16
LT 6,1 13,5 20,2 17
MT 3,5 7,7 18,1 15
PL 10,7 19,8 17,8 17
RO 4,1 7,5 19,6 18
SK 11,1 18,7 16,5 21
SL 3,4 6,1 20,2 10 Source: Eurostat
Which Values? Evidence versus Ideology
• Social solidarity– Focus on fairness and
equity– Explicit cross-subsidy– Social protection– Universal Access, not
related to income– Role of state usually
important– State capture?– Most prevalent in
OECD
• Individual responsibility– Focus on efficiency– Little cross-subsidy– Limited Access– Stratification by income– Individual risk rating– Limited risk pooling– Consumer protection?– US Model and attempts
in FSU
Tax revenue is high for income level, especially in Central Europe …
Source: IMF World Economic Outlook database; IMF Government Financial Statistics database;
New member states EU-15; Other high-income OECD*; Middle-income high-performing countries**; *USA, Australia and New Zealand; **The choice of middle-income high-performing countries varies from one chart to the next, in part dictated by data availability. This does not affect the comparisons made.
Tax Revenue of the Consolidated Central Government Including Social Security (percent of GDP) average 00-03
0
5
10
15
20
25
30
35
40
45
0 5000 10000 15000 20000 25000 30000 35000 40000 45000
Latvia
Poland
Lithuania
Slovak Rep. Czech Rep.
Hungary
Slovenia
Estonia
Israel
SingaporeKorea
Hong KongCosta Rica
Mauritius
Thailand Malaysia
Tunisia
… health spending is comparable to other European countries, and may even be on
the low side in some new member states…
Source: WB SIMA; IMF World Economic Outlook database
0
2
4
6
8
10
12
0 10000 20000 30000 40000 50000 60000
GDP per capita
To
tal h
ealt
h e
xp
en
dit
ure
(%
of
GD
P)
EstoniaLatvia
PolandLithuaniaSlovak Rep.
Czech Rep.
Hungary Slovenia
New member states EU-15; Other high-income Europe* *Switzerland and Norway
….amongst a comparator group which includes well-performing middle-income countries pension spending
looks high in Central Europe
Source: “International Patterns of Pension Provision” by Palacious and Parrales-Miralles, 2000; IMF World Economic Outlook database; EUROSTAT
New member states EU-15; Other high-income Europe*; Middle-income high-performing countries**; * Switzerland and Norway; ** Chile, Costa Rica, Israel, Korea, Malaysia, Mauritius, Singapore and Tunisia
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
0 10000 20000 30000 40000 50000 60000 70000
GDP per capita
Pen
sio
ns a
s a
sh
are
of
GD
P
EstoniaLithuania
Slovak Rep.Latvia
Czech Rep.Hungary
Slovenia
Poland
….amongst a comparator group which includes well-performing middle-income countries pension spending
looks high in Central Europe
Source: “International Patterns of Pension Provision” by Palacious and Parrales-Miralles, 2000; IMF World Economic Outlook database; EUROSTAT
New member states EU-15; Other high-income Europe*; Middle-income high-performing countries**; * Switzerland and Norway; ** Chile, Costa Rica, Israel, Korea, Malaysia, Mauritius, Singapore and Tunisia
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
0 10000 20000 30000 40000 50000 60000 70000
GDP per capita
Pen
sio
ns a
s a
sh
are
of
GD
P
EstoniaLithuania
Slovak Rep.Latvia
Czech Rep.Hungary
Slovenia
Poland
Total health expenditure as % of GDP
<= 12<= 10<= 8<= 6<= 4<= 2No data
EU-15: 8.9 (2001)
Central, South East Europe & Baltics: 5.8 (2001)
Impact of Early Reforms in the Last Decade
– Slowly improving health status but low user satisfaction
– Separation of funding from supply, Social Insurance– High growth rates of (mostly private) providers and
increase in providers revenue– Devolution of ownership structure of hospitals– From budget to fee-for-Service to budget caps– Funding fragmentation creates considerable
administrative costs (>3%)– Comparatively low health care wages curtail even
higher growth of expenditures– Public Health collapse
The impacts on growth of public spending and revenues also depend on
the quality of governance.
Size of government and spending mix matter most when governance is poor; Spending and revenue mix matters
more when governance is good.SPENDING Good governance Poor governance
“Unproductive” expenditures
No measurable impact
Negative impact
“Productive” expenditures
Positive impact No measurable impact
TAXATION“Distorting” taxes Negative impact No measurable
impact
“Non distorting” taxes
Positive impact No measurable impact