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IS THERE A FUTURE FOR „SOFT”
[SOCIAL SENSITIVE] CAPITALISM IN
THE POST-SOCIALIST EUROPE?
by
Pál 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 90ies
Social 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 „EASTEUROPEAN 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 Hungary
b. 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!] 1618% 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
health
6,44
5,27
6,21
4,77
5,67
4,49
Gross National Income Per Capita (PPP)
12,000
Central Europe
10,000
8,000
6,000
4,000
Baltic States
Western CIS
Bulgaria and Romania
Other SouthEastern Europe
Central Asia
Caucasus
2,000
0
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
0.55
Income inequality, 1994 - 2001
(Gini coefficients)
0.50
0.45
Georgia
Moldova
Russia
0.40
Estonia
Serbia and Montenegro
Kyrgyzstan
0.35
Azerbaijan
Romania
Poland
0.30
0.25
0.20
Hungary
At-risk-of- poverty rate and needed social
transfers
Source: Eurostat Yearbook 2006-07:118
Further life expectancy for men
aged 65 (Eurostat 2005)
Life expectancy (years)
17
EST
LAT
LIT
POL
CZ
SK
HU
SLO
ROM
BUL
EU15
16
15
14
13
12
11
10
1992 1994 1996 1998 2000 2002
Further life expectancy for women
aged 65 (Eurostat 2005)
Life expectancy (years)
20
EST
LAT
LIT
POL
CZ
SK
HU
SLO
ROM
BUL
EU15
19
18
17
16
15
14
1992
1994
1996
1998
2000
2002
Hypothesis on determinants of
demographic development in Western
and Eastern Europe
Determinants
Life expectancy
Fertility
Migration
patterns
Western Europe
Eastern Europe


/
/
Immigration
Emigration
Immigration/emigration patterns
Net balance immigration/emigration
(in thousands)
(Eurostat 2005)
30
20
10
0
1992
-10
-20
-30
1994
1996
1998
2000
2002
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
Long-Term
Unemployment
Unemployment
Rate (2003)
Rate (2002)
BG
Cyp
CZ
EE
HU
LV
LT
MT
PL
RO
SK
SL
Source: Eurostat
8,9
1,1
3,8
4,6
2,4
4,3
6,1
3,5
10,7
4,1
11,1
3,4
17,8
3,9
7,3
9,5
5,6
12,6
13,5
7,7
19,8
7,5
18,7
6,1
Risks Derived from
Ageing
Old Age Dependency
Ratio % (2001)
Risks Derived from
Insufficient Income Support
At Risk of Poverty Rate
After Social Transfers
(2001-2003) (1)
24
17,3
19,8
22,7
21,4
22,6
20,2
18,1
17,8
19,6
16,5
20,2
13
16
8
18
10
16
17
15
17
18
21
10
Which Values? Evidence versus
Ideology
• Social solidarity
– Focus on fairness
and equity
– Explicit crosssubsidy
– 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 …
Tax Revenue of the Consolidated Central Government Including Social Security (percent of GDP)
average 00-03
45
40
Slovenia
Hungary
35
Czech Rep.
Slovak Rep.
Israel
30
Poland
Estonia
Tunisia
25
Latvia
Lithuania
20
Thailand
Malaysia
Mauritius
Korea
Singapore
15
Costa Rica
Hong Kong
10
5
0
0
5000
New member states
10000
EU-15;
15000
20000
Other high-income OECD*;
25000
30000
35000
40000
45000
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.
Source: IMF World Economic Outlook database; IMF Government Financial Statistics database;
… health spending is comparable to other
European countries, and may even be on
the low side in some new member states…
12
Total health expenditure (% of GDP)
10
Hungary
8
Slovenia
Czech Rep.
Lithuania
6
Poland
Slovak Rep.
Estonia
Latvia
4
2
0
0
10000
20000
30000
GDP per capita
New member states
EU-15;
Other high-income Europe*
*Switzerland and Norway
Source: WB SIMA; IMF World Economic Outlook database
40000
50000
60000
….amongst a comparator group which includes wellperforming middle-income countries pension spending
looks high in Central Europe
16.0%
14.0%
Slovenia
Pensions as a share of GDP
12.0%
Poland
10.0%
Hungary
Czech Rep.
Latvia
8.0%
Slovak Rep.
6.0%
Lithuania
Estonia
4.0%
2.0%
0.0%
0
10000
20000
30000
40000
50000
60000
70000
GDP per capita
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
Source: “International Patterns of Pension Provision” by Palacious and Parrales-Miralles, 2000; IMF World Economic Outlook
database; EUROSTAT
….amongst a comparator group which includes wellperforming middle-income countries pension spending
looks high in Central Europe
16.0%
14.0%
Slovenia
Pensions as a share of GDP
12.0%
Poland
10.0%
Hungary
Czech Rep.
Latvia
8.0%
Slovak Rep.
6.0%
Lithuania
Estonia
4.0%
2.0%
0.0%
0
10000
20000
30000
40000
50000
60000
70000
GDP per capita
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
Source: “International Patterns of Pension Provision” by Palacious and Parrales-Miralles, 2000; IMF World Economic Outlook
database; EUROSTAT
Total health expenditure as % of GDP
EU-15: 8.9 (2001)
Central, South East Europe & Baltics: 5.8 (2001)
<= 12
<= 10
<= 8
<= 6
<= 4
<= 2
No data
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.
Good governance
Poor governance
SPENDING
“Unproductive”
expenditures
No measurable
impact
Negative impact
“Productive”
expenditures
Positive impact
No measurable
impact
“Distorting” taxes
Negative impact
No measurable
impact
“Non distorting”
taxes
Positive impact
No measurable
impact
TAXATION