PROJECT: Economic Justice

PROJECT: Economic Justice

Project: Economic Justice

The State’s role comes to the fore

The pandemic threw into sharp relief inequalities within and between countries, in labour markets, in the quality and access to social and healthcare services and vaccines, among genders. It also led to public policy responses which have reasserted the role of the state in stabilizing the economy, providing a social safety net and steering economic policies to underpin the necessary economic and social resilience. The magnitude of the public policy responses has cast doubt on how binding financial limitations are after all when it comes to tackling politically important societal and economic challenges.

The timely transition to a net-zero carbon economy and the building of resilience to shocks similar to the current pandemic seem to be gaining acceptance, while reducing inequalities as a moral but also as a pragmatic imperative for engineering the necessarily climate mitigation also enter the debate. In fact, the most recent Global Inequality Report suggests that Europe has been more successful in containing economic inequalities compared to the US thanks to its pre-distribution rather than its redistribution policies: the former ensure better market outcomes to start with.

Critical policy frameworks have come under review in the EU, including the monetary policy strategy of the ECB and currently the European Economic Governance with its fiscal rules to allow a more activist role for these policies in pursuing full employment and in facilitating the green transition. International organizations, including the European Commission have been calling for loosening up the grip of these rules to allow for more discretionary fiscal policy, including public investment.

Public investment gaps had emerged in many EU countries since the 2000s and public investment is expected to crowd-in rather than crowd-out private investment flows to finance the urgent and just transition to a more sustainable socio-economic model. On the other hand, industrial policies in the EU have the new objective of securing the area’s ‘strategic autonomy’ in critical resources and commodities, while it is becoming increasingly evident that they have to be the subject of consultation among broader stakeholders, including the social partners.

Greece has not been spared from these global policy challenges and in fact, entered the pandemic with more significant economic, financial and social vulnerabilities than many other European countries from the previous crisis in the 2010s. First, a deep recession and then a long drawn-out recovery since 2008 decimated incomes, drove up unemployment, especially among the young, and increased inequalities. Despite unprecedented fiscal consolidation, the Greek public debt still stood at 180% of GDP in 2020, while the country has remained under ‘enhanced surveillance’ and has committed to achieve high budget surpluses for several decades in exchange for measures that could lighten the burden of servicing its public debt.

The recession, labour market reforms and the massive public spending cuts of the 2010s, especially in healthcare, meant that, despite some changes in the right direction (for example, the extension of eligibility of unemployment benefits to self-employed people), the supply of social and labour market protection did not meet the increased demands.How relevant is this international debate on the role of the state in economic and social policies for Greece? The opinion survey of About People presents some interesting findings in this respect.

The survey suggests that there is a widely shared perception among the respondents that class inequalities are important: 85% of respondents think that they are very or quite important. This percentage changes across different demographic, income, class and political self-identification but is still as high as 75% among those earning monthly over €2000, the highest earning group in the sample. The perception is significantly high among respondents self-identifying politically across the spectrum of Left (91.1%) to Right (79.3%), suggesting that this should be a political priority across parties.

The majority across groups (62.5%) of the respondents perceives economic inequality as the outcome of the economic and social system. The opinions of high earning respondents and those politically self-identifying with the Right seem to be more balanced between that view and the view that economic inequalities reflect the ‘deeper human nature which leans towards individual interest, the acquisition of property and competition’.

Interestingly, 85% of respondents think that wealth is not fairly distributed between business owners and employees, with business owners being favoured and leaving very little to employees. While again the shares of respondents agreeing with that view vary across groups, the clear majority agrees with this view even among the high-earners and those identifying with the Right/Centre-Right. Interestingly, the area in which respondents to the survey thought that ‘injustices’ are greatest is the fact that there are working people with salaries which allow them and their families to enjoy a decent standard of living.

When it comes to redistribution tools for reducing inequalities, perceptions seem to be more mixed. Almost 9 out of 10 respondents believe that the tax burden is predominantly born by employees and pensioners and 83% of respondents agree or rather agree that taxes ‘on the rich’ should be increased to support the economically weaker, while about 2 out of 3 respondents do not think it is right that the middle class pays for the solidarity benefits of the poorer. Almost 80% of the respondents think, however, that the priority of future governments should be to reduce the tax burden on businesses so that they can grow to create jobs to reduce unemployment, against a 15% of respondents who think that tax revenues should be increased so that public services and the welfare state are improved to reduce inequalities.

When it comes to benefits, half of the respondents think that when the state provides too many of them, it induces citizens to make less effort, although this does not seem to apply to unemployment benefits, which the majority of respondents think that they should become more generous (in level and duration), possibly reflecting both the recent very high prevalence of unemployment but also the very low coverage of the unemployment benefits system to the unemployed.

While there is a widespread perception that the taxation burden is not fairly distributed and taxation not sufficiently progressive, most respondents think that a priority for future governments should be to reduce the tax burden on companies in the hope that more jobs would be created, even against a background of unfair wealth distribution among companies and workers, rather than increasing taxes which could finance more and better social services and the welfare state. Indeed, the preferences of respondents seem to be overall more in favour of lower taxation even if it means a weaker welfare state rather than the other way around, although these preferences vary as we move from the Left to the Right of the political spectrum. These perceptions are interesting also against the background of almost 9 out of 10 respondents thinking that public expenditure on the national healthcare system should be increased.

Turning to the role of the state in the economy beyond redistribution, the results of the survey suggest that respondents generally are in favour of a market rather than a centrally planned economy but are also in favour of state interventions to improve the allocation of resources. More than 2 out of 3 respondents think that without an appropriate state strategy, the Greek economy will never achieve strong exports, a view that is majoritarian across the Left-Right spectrum and across different groups of earners. The responses regarding the degree of state intervention in the economy seem balanced between the state intervening so much that it stifles the private sector from creating wealth and jobs and the state intervening so little that it allows the private sector to act without any constraint.

Indeed, most respondents seem to emphasise the need for ‘better state intervention’ in the economy rather than a smaller or bigger state. In the context of transitioning to a net-zero carbon economy and the possible trade-offs it entails, it is worth noting that 3 out of 4 respondents are in favour of stricter environmental regulation even if it comes at the expense of investment.

Overall, it seems that while class and economic inequalities and injustices are very prevalent in the perceptions of respondents, state interventions in favour of job creation or of supporting small and medium companies seem to be perceived by respondents as preferable to more classic redistribution tools such as taxation and benefits (in cash and in-kind). According to the survey results, between 60 and 70% of respondents have very little to no trust in institutions such as the Tax Authority and the EFKA. Going forward, developing strategies for not just creating jobs but also ‘good jobs’ is not without challenges for Greece.

Beyond the investment gap that needs to be covered after the expiration of the Recovery and Resilience Facility, the uncertainty involved in the dual green and digital transitions would advocate for coordinated policies across policy domains and more cooperative forms of governance, with the involvement of stakeholders, as suggested in work by Dani Rodrik and his colleagues. Most respondents in the survey seem to agree that without strong trade unions and works councils there can be no well-paid jobs. At the same time, however, almost 8 out of 10 respondents has low or no trust to trade unions.

Thus, to tackle inequalities and engineer a just dual transition with a different/bigger role for state policies, Greece faces not just financial challenges, the severity of which will depend on ideas in the current international debate and politics shaping the ongoing review of EU policy frameworks but also domestic institutional challenges.

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