At the time of the global financial crisis all four of our national cases had experienced several decades of neoliberalism, together with the embrace of the global economy and the need to adapt to the new context it wrought. The degree of transition and its pace varied but a general trajectory was common. Each of the countries retained their own institutional profile of labour relations and labour market policies, the product of distinct historical and sociological development. Even the highly integrated EU consigns jurisdiction in these areas to the national level meaning that adjustments to preferred international options are subject to delay and take specific forms at the national and subnational levels. The starting points in terms of the 2008 financial crisis and its longer-term impacts were different, as were the experiences of the crisis itself. Yet each faced in its own way the structural, political, and ideological pressures emanating from the international political economy and its governance structures. Here we highlight a number of features that relate to labour relations and labour markets in particular. That done, we present snapshots of these countries’ labour profiles at the onset of the crisis, and subsequent comparative developments since the turn to austerity in 2010, paying due attention to the factors involved in the institutionalization, insulation and insinuation schema outlined in Chapter 1.
Underlying national responses to the crisis and longer-run institutional patterns held different configurations of class relations. Often cited indicators of working-class power include trade union density and collective bargaining coverage, strike activity and the existence, or not, of a dependable political ally – usually in the modern period, a social democratic party notionally more pro-labour than other parties.
When the global financial crisis hit in 2008, its immediate policy aftermath destabilized several decades of neoliberal spending restraint through widespread banking sector support and economic stimulus. More familiar elements of the neoliberal policy package would not be suppressed for long, and austerity soon followed through a number of measures affecting public sector spending and discourse, staff and agencies, labour market flexibilization and programme restructuring. Necessary to the needs of capital as a bout of state activism had been, its continuation was to be avoided. The resumption of austerity was painful for many, creating vulnerabilities and exacerbating problems for already precarious communities. A crisis of capital soon transformed into more debt for households, less generous social programmes, enhanced precarity for women, youth and immigrants, and discipline for labour generally. There is an undeniable class component to austerity in its many guises, interwoven with social disparities of all sorts.
Austerity is multi-faceted, as are national experiences. For some countries, like Ireland and Spain, restraint and retrenchment emerged in 2010 in the context of serious structural issues for budgets and labour markets; they too, along with Denmark, had equally to deal with banking sector collapse. Elsewhere, countries like Canada escaped the worst of the initial crisis only to face deep cyclical downturn owing to an international credit crunch and export market-induced recession. Whatever the combination, the 2008 crisis is an important origin story for the past decade of austerity. It is not the only origin story, however. Often austerity was launched where the crisis was comparatively mild (Canada), or where similar plans had been in place for some time (Ireland, Denmark), and austerity reforms were incongruent with the actual experience or cause of the crisis (Canada, Ireland, Denmark, Spain).
The neoliberal era has been one of increased inequality in both income and wealth distribution. The trend started in the 1970s in the US and has been most dramatic in the North Atlantic world but is also apparent in most of Europe. An OECD report (2017) noted that income inequality in Europe had grown over several decades. In Canada, gains in income were similarly concentrated at the top of the spectrum. Between 1982 and 2015, ‘The average real pre-tax income of the top 1 per cent of tax filers more than doubled, increasing by $320,000 – but the bottom 50 per cent of tax filers did not even keep up with inflation – their real income fell by an average of $1,546’ (Osberg, 2017: 28).
More generally, various scholars have made the case that the neoliberal period has been characterized by the rapid growth of transnational firms and finance, and the ongoing transfer of income and wealth to the wealthy few (see Piketty, 2014; Atkinson, 2015; Peters, 2020). As Faroohar (2016: 15) summarizes, ‘the share of financiers within the top 1 per cent of the income distribution nearly doubled between 1979 and 2005’. By this calculation, an unprecedented level of inequality was already in place when the crisis struck. While income inequality earned through bonuses, super-salaries and a dismantling of progressive income tax systems is one part of the story, wealth (and finance) is particularly implicated because, again quoting Faroohar (2016: 15):
[e]ven when you consider the salaries of the modern economy’s supermanagers – the CEOs, bankers, accountants, agents, consultants, and lawyers that groups like Occupy Wall Street rail against – it’s important to remember that somewhere between 30 and 80 percent of their income is awarded not in cash but in incentive stock options and stock shares.
Industry-wide bargaining to be suspended, €50 billion to be raised through privatization, social security to be cut by more than €4 billion over four years, nominal public sector wages to be slashed by 20 per cent, and on it went. Such was the list, so named were the targets. It was 2011, the Eurozone was in chaos, the global economy was in tatters, and the stimulus era proved fleeting. Austerity was widely en vogue and it was being visited in dramatic fashion on Greece: the Troika bailout demanded it, capitalist interests needed it, and the government and its people were put on notice (BBC, 2011). Greece is an exceptional case, but it is far from an isolated one.
The global financial crisis of 2008, the ensuing and prolonged economic crisis, and policies of austerity implemented from 2010 have imposed major costs on most Western societies. These include direct economic costs such as lower GDP, slower economic growth, higher unemployment and lost output, various forms of underemployment, much of it in precarious and poorly paid jobs, and increased household debt obligations that drag down disposable income. Other, perhaps less direct, effects can be categorized as social and human costs. Phenomena such as inequality (a legacy of the entire neoliberal period: see Piketty, 2014; Atkinson, 2015) increased in the post-crisis years (Schneider et al, 2017), and higher unemployment and insecurity were exacerbated by austerity measures such as cuts in social and health care spending, and labour market restructuring. Inequality and unemployment are linked to various social problems involving mental health, drug use and addiction, lower life expectancy, increased obesity, low education achievement and aspirations, more violence and less social mobility (Wilkinson and Pickett, 2009, chapters 4–12).
Austerity, in one form or another, coloured the politics of the past decade (2008–18). As the previous chapters have demonstrated, austerity comes in varieties: fiscal consolidation by means of balanced budgets and expenditure cuts or restraint, plus multiple modes of public sector restructuring and privatization, and labour restructuring by flexibility and internal devaluation. Having, in previous chapters, tracked the impact of austerity, both as a general programme and in its specific forms, we now turn to the issue of how much and what kind of resistance there has been and its effectiveness in halting or reversing these policies. Reactions to austerity vary enormously from enthusiastic support, to various levels of acceptance and consent (ranging from enthusiasm, to resigned – there is no alternative), to disaffection (Clarke, 2017). Resistance, too, comes in many forms (Dean, 2014; Horvat, 2014). Some actions may be highly individualized, such as refusing to accept responsibility and making the tough choices required by the justificatory rhetoric of austerity (Mitrea, 2017). Others might involve efforts to mitigate the effects through self-sacrificing behaviour (Baines, 2017). Often these responses will barely register on a scale seeking to measure resistance yet they do indicate, where detected, non-acceptance of austerian policies and practices on the part of individuals or spontaneously formed collectivities. Other forms of resistance are more visible and can be compared according to a number of criteria. One might be the scale on which they develop – from highly localized, to regional, national or international. Another is whether resistance is primarily defensive, directed against some specific instance of austerity, such as reductions in a social service, or the eviction of an occupant from housing, or resistance that escalates into a protest against austerity in general.
Public budgets might be thought of as technocratic documents that set out planned revenues and expenditures for the fiscal year. But with fiscal policy connected to all aspects of government activity, budgets hold significant repercussions for a wide range of actors including the state, private enterprise and labour. Budgets focus the relationship between government and economy: where and for whom spending and revenue are directed or diverted, implicating existing institutions, empowering (new or established) agencies, insulating or exposing particular segments of society, and insinuating degrees of blame and responsibility for both the good and bad times. Budgetary analyses must therefore consider the political economy context of fiscal crises, revenue and spending, and the relationship between state expenditures and private enterprise. The (re)allocation of public money by the state reflects the political priorities and choices of government.
The normative dimension of budget allocation is a prime expression of its politics. Consequently, the pre-eminent position of ministries of finance within the state ought to be no surprise. Likewise, monetary policy, commonly the preserve of independent central banks, affects not only the money supply but also interest and exchange rates, conditioning the behaviour of many economic sectors and government departments. Other strictures like balanced budget legislation and cost control equally pressure public decision makers, often with more to say on expenditures than revenues (especially revenue beyond taxation).
In this chapter on selling restraint through the politics of public sector budgeting, we analyze the fiscal narratives of Canada, Denmark, Ireland and Spain through a political economy lens that understands fiscal policy, public sector spending, cuts and reallocations to be intrinsically political activities, which fundamentally delineate the contours of the state–society relationship through changes (or lack thereof) on both revenue and expenditure sides of the ledger.
When the 2008 crisis hit, all four countries (Canada, Denmark, Ireland and Spain) were in relatively good shape fiscally. Within a few short years the public sector and its finances were not only implicated in, but also targeted as causing, a crisis of profligate spending. While the bulk of this book focuses on cutbacks, retrenchment and restructuring, in this chapter we expose the significant commitments to capital made in the name of austerity. Thus, the austerity era should not be confused with one where public sector spending is simply curtailed; instead state support for capital is often extended in new and familiar ways. In short, there is a lot of spending to account for in times of austerity.
In this chapter we: 1) provide an economic background for, and brief overview of, fiscal adjustments and drivers of spending in an austere time – these being related most closely to a) domestic economic imbalances, b) financial and housing bubbles, and c) exposure to international economic downturn; and 2) summarize the massive bank bailouts and aid to the financial sector that each country offered capital in the wake of the 2008 crisis (often institutionalized through public sector agencies). We begin with national snapshots of each country’s fiscal–financial condition when the 2008 crisis first hit, weaving in, where appropriate, an historical overview. Next, we provide a thematic description of the nation-specific bailouts and banking sector guarantees (insulations): a) stimulus and guarantees (credit underwriting, insurance support and the like), b) bailouts (asset taking, nationalization), c) write-offs and taxpayer-borne risks, d) partnerships and privatization, and e) international pressures (from supranational institutions and investors).
Austerity means a lot more than less. Cutting public sector budgets and staff holds long-run implications for the capacities and orientation of the state. When fiscal cuts are connected with particular normative programmes, transformation rather than erosion becomes the watchword. The purpose of this chapter is to put post-2008 public sector restructuring in its historical context by examining some of the central strategies for reform connected to the longer-run trend of New Public Management (NPM). Rooted in neoliberal ideas, particular sets of economic theories, managerial strategy and normative assumptions of efficiency and expenditure, NPM has been altering the internal workings of the state for several decades, not only post-crisis. By merging elements of neoclassical economic theory and private management studies (Hughes, 2003: 3), including an emphasis on value for money, competition and market mechanisms, NPM is a rather broad agenda that generally consists of government doing more steering than rowing through the privatization of state-owned assets and the marketization of service delivery using public-private partnerships (PPPs).
NPM has been covered extensively in the public administration literature (see Hood, 1991), indicative of the context in which post-2008 austerity and public sector reforms emerged. Contemporary developments are easily traced to decades-old ideational, structural and policy changes that have transformed public administration into public management, with significant ramifications for staffing, spending, procurement, the workplace, planning, public works and service delivery, and other core elements of the public service and public sector (on NPM and privatization see Whiteside, 2015, 2019). By the early 1990s, the OECD was publishing on the widespread nature of this new paradigm among member states, and advising of the benefits of this good managerial approach (Holmes and Shand, 1995).
Austerity is not always one-size-fits-all; it can be a flexible, class-based strategy taking several forms depending on the political-economic forces and institutional characteristics present.
This important book identifies continuity and variety in crisis-driven austerity restructuring across Canada, Denmark, Ireland and Spain. In their analysis, the authors focus on several components of austerity, including fiscal and monetary policy, budget narratives, public sector reform, labor market flexibilization, and resistance. In so doing, they uncover how austerity can be categorized into different dynamic types, and expose the economic, social, and political implications of the varieties of austerity.