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Naturalizing the Status Quo

I recently read and discussed a World Bank book chapter by Sandor Sipos and Dena Ringold (2005) covering “social safety nets” in post-communist Eastern and Central European (CEE) countries en route to, and after EU accession. They conclude that:

“after a period of transition confined more narrowly to poverty relief (…) accession to the EU facilitates restoration of broader and more active instruments of social inclusion.” (ibid.: 89)

They cite the EU’s efforts of

“simplifying and streamlining the various strands of work on social protection and social inclusion into a coherent framework within OMC [Open Method of Coordination]“ (as cited in ibid.: 106).

But what does any of this even mean? How are we doing in terms of CEE enlargement and poverty?

To be fair, Sipos and Ringold’s contribution is a descriptive account of the transformation, focusing on the difficulties of bringing formerly authoritarian, paternalistic, egalitarian and planned-economy societies “up to capitalist welfare state speed” – and I have not even read the remaining chapters of the edited volume.

And yet, when we are doing policy analysis, we must be careful not to naturalize the status quo. Not, to borrow Rogers Brubaker’s (2002: 165) words, to make it a part of our “analytical toolbox”, for the status quo and its implications are “what we want to explain, not what we want to explain things with” (ibid.: 165, emphasis in original).

Take “poverty relief”, or even “social assistance” for example. By making its administrative implementation the object of study, it is likewise rendered an inevitable, or objectively given category. “Poverty” and its relief become disconnected, dichotomous and arbitrarily defined concepts. It doesn’t matter why, or by which distributive forces you became poor. Also, you are either poor , and thereby subject to relief policy – or you are not, when above a threshold, haphazardly defined to be 40% of median national income.

You don’t have to go back to Foucault to see how this language has truly powerful implications. “Poverty”, if anything, is not a disconnected phenomenon, but one that arises at the interplay of individual decisions and macroeconomic possibilities. It is not dichotomous, but the lower end of a broader distributive continuum.

I’m not suggesting that we should stop talking about poverty, or worry about how to implement policies to fight it. It is an empirical reality: some people cannot make enough (or any) market income to make ends meet. And it is difficult to find the right mix of passive security and activating elements in helping these people, particularly when public administration is weak, as in early post-communist countries.

I just think that we should be both more careful, and bolder in picking the hypothetical counterfactual against which we compare reality.

Good policy analysis shows how rarely something about the status quo is inevitable.

Getting the (Normative) Counterfactual Right

So, what is a good hypothetical counterfactual? A good hypothetical counterfactual is a normative one, not just a historical or all-other-things-equal scenario.

With regard to European enlargement and liberalization, it cannot suffice to show how reality differs from pre-1990 socialism (an easy benchmark), or how Central and Eastern Europe would have done without EU accession.

Ultimately, we need to concentrate on how we could have done better – and explain why we have not. The question really isn’t whether liberalization is right or wrong, but how whether a superior political-economic configuration of open markets is possible.

So, fundamentally, for policy analysis, we need to know how an optimal free-market world would look like.

Here is a suggestion for thinking about economic development, inequality and international liberalization.

A good political economy should be fair in extending opportunity to everyone, and every nation. It should be efficient in using our scarce resources. It should be equitable in distributing the fruits of efficiency. And it should be sustainable, that is, able to work in the long run, without diminishing (discounting) the life chances of those who come after us.

Listed above are some policy paradigms (on green), policy goals and policy proposals (in italics) that speak to these ideals, both in domestic and international context.

To be sure, this is the proverbial cheap talk. Many of these paradigms are incompatible, goals contradictory and proposals uncertain. To name just a few: Growth and redistribution, efficiency and equity are famously held to be frequently at odds. Converging post-tax rents on factors, to avoid a ruinous tax race to the bottom, diminish the very possibility to take (comparative) advantage of different productivities and factor endowments. Infant industry protection is difficult to implement, and even harder to protect from rent-seeking exploitation.

Rather than providing a normative solution, the above really is a list of questions and quarrels.

Yet it is conspicuous, how many of these goals are not met domestically, and how many of these conditions are not given on the international level with our current brand of EU enlargement and liberalization.

And these failures matter. Take “poverty” and social assistance policy in Eastern and Central Europe, for instance.

What would have happened to the impoverished steel worker in Bulgaria, had his job not been slashed by more efficiently produced imports but rather allowed him and his employer to catch up with modern modes of production, all the while exporting some of his relatively cheap labor abroad? Maybe, he would not have fallen into poverty in the first place.

Or what if, hypothetically, to introduce EU-15-class unemployment insurance, Romania could have taxed capital without fear of factor flight, rather than procyclically placing the burden on labor. Maybe, some of the transition unemployment would never have led to poverty and dispair.

Take an interest, policy analyst

I’m not saying that there is a solution to all hardship during economic transitions. In part, this hardship and the flexibility it requires are what makes capitalism prosper. But clearly, to analyze and ultimately judge policy on social assistance under liberalization, we need to look further than just administration.

From the normative standpoint of a different kind of liberalization, with strong protection for the poorer countries and an able international polity to pass taxation and regulation, the status quo looks far from inevitable. That is the kind of superior political economy configuration that may get us closer to reconciling efficiency and equity, open markets and strong states, competition and redistribution.

I’m not suggesting that policy analysts should devote their time to utopian daydreams. Clearly, policy must always, to some extent, respond to and take as a starting point, the status quo.

But that doesn’t mean the status quo can’t be changed. It means, policy analysts are in the business of explaining how it can be changed to approximate a more ideal world, and where it cannot.

Seriously, “disinterested”  just doesn’t cut it anymore.

References:

Brubaker, R. (2002). Ethnicity Without Groups. Archives Europeennes de Sociologie, 43, 163-189.

Rawls, J. (1971). A Theory of Justice.

Sipos, S., & Ringold, D. (2005). Social Safety Nets – Evolution from Inclusion and Control to Inclusion and Participation. In N. Barr, Labor Markets and Social Policy in Central and Eastern Europe – The Accession and Beyond. Washington, DC: The World Bank.