Breakthroughs in social policy
Social policy and the welfare state comprise the greatest social – and political – accomplishment of the Metapolitefsi and of this democracy. Every government from 1974 onward strengthened the country’s social policy – some to a greater, others to a lesser degree. And the bedrock of social policy is formed, as we know, by the redistribution of wealth, by intangible things and opportunities for betterment (in social position, career prospects, upward mobility, institutional rights, civic participation etc), aimed at improving living standards among the weakest by reducing poverty and inequality.
Measures were implemented from 1974 and until the mid-1990s, and particularly during the 1982-1987 period, to address major social issues and to balance prevalent economic and social inequalities. This was followed by a gradual increase in social spending as a percentage of gross domestic product. From around 21% in 1997 against the European Union’s 27.5%, it rose to narrow the gap with the bloc (24% against 28% in 2003 and 27% against 30% in 2021). Nevertheless, social policy in Greece suffered from many significant inherent weaknesses that are not reflected in the above numbers.
The first weakness has to do with the fact that the redistributive impact of social policy was counteracted by policies that reversed the process. Explicitly or implicitly, governments funneled income or property to the middle and upper classes – but also to the vulnerable – by tolerating, for example, the encroachment of public land and unlicensed construction, by granting building rights in privileged areas (beaches and protected zones), and introducing regulations compelling citizens to buy services from certain specific professional categories (civil engineers, lawyers, accountants etc) or by hiring a surplus of staff in the public sector. These characteristics also explain the big contradiction in the country’s social policy. Greece has a satisfactory level of social spending but also occupies one of the highest rankings in the bloc for income inequality. It also comes third behind Romania and Bulgaria in poverty and risk of social exclusion.
The second weakness relates to the way social policy is funded, which defines whether the goals of income redistribution and inequality reduction are being achieved. There was a redistribution of income in the years until Greece was inducted into the European Economic Community, but that was mainly directed from the middle class downward. Pensions as a share of social spending also rose significantly, but everyone benefited: low-, middle- and high-income earners. From the late 1990s and until the start of the economic crisis, social policy relied primarily on the distribution of credit resources, so that the recipients of social spending could be satisfied, but without any serious redistribution within society.
Borrowing made everything possible. It dulled the sharp edges of inequality and injustice, it spurred investments, it helped address unemployment and external deficits etc, deferring repayment to the future
A culture that elevated every question into a social and political issue is the third weakness, and it has come at a great social and political cost. Bailing out troubled companies, which came with a price tag of $1.5 billion at the time, was a social issue, as were the bailouts of Olympic Airways, the Larco mines, the languishing shipyards and the handful of defense industries, which instead of manufacturing military materiel ended up making commuter buses and trolley buses. Every big issue obviously has social and political (not clientelist) ramifications, but their cost is heavy when moderation is lost and they start to weigh against social protection, growth and policy.
The fourth point has to do with the 2009 crisis, the biggest economic meltdown Greece experienced in the Metapolitefsi period. Social spending as a share of GDP did not decrease in the crisis, it rose. GDP, however, shrank 27%, unemployment skyrocketed, many businesses folded, social tensions ran high etc. What happened during the crisis was the result of a more general inability to effectively and pragmatically manage socioeconomic relationships in a way that would prevent the crisis from breaking out. The political and institutional structures survived, as economic policy and the economy proved to be the weakest link in the chain. The economy survived too. But at what cost? At the cost of an unprecedented recession in institutional, political and social structures, relationships and balances, and of a terrible blight on social cohesion.
What does all this mean? There are many answers. From 1974 until the present, politics could not or would not pursue the classic redistribution policies. In order to mitigate social pressures, it used levers that essentially kicked the can down the road: fiscal deficits, monetary expansion (before monetary union with the EU) and external borrowing. Borrowing made everything possible. It dulled the sharp edges of inequality and injustice, it spurred investments, it helped address unemployment and external deficits etc, deferring repayment to the future. So the big question is: Why so much denial in dealing effectively with such crucial matters as the social security system, the heath and education sectors, the aging population, tax evasion, the shadow economy, corruption in the distribution of agricultural and other EU subsidies, the inefficient justice system and state services? Why did governments allow themselves to be swayed by short-term, election-mongering concerns at the expense of the country’s productive base? Why was the political system unable to take initiatives that transcended domestic power struggles? Sure, the Metapolitefsi may have been associated with one of the brightest achievements in Greece’s recent history, the creation of the welfare state, but it has also been marked by one of the most painful economic collapses in Greece post-World War II. The gulf between the hope and positive energy of 1974 and the events and aftermath of 2009 cannot be overlooked. This difficult chapter of the Metapolitefsi did not just impact social protection, but also politics, institutions, the economy as whole and many other areas. And what matters now is how it will impact future developments.
Tassos Giannitsis is a professor emeritus at Athens University and a former minister of social security, among other portfolios.
