How does fiscal austerity impact on poverty and inequality? The Spanish case

The aim of this paper is contributing to fill the gap between the macroeconomic effects of policy reforms and the microeconomic and social ones, considering simultaneously both kind of impacts. Regarding fiscal adjustments, concern about the sustainability of public deficit and debt resulting from the Great Recession led governments to adopt austerity measures in most European countries. Our analysis considers the redistributive effects of such adjustments for the Spanish economy by simulating a hypothetical reduction of public deficit and distinguishing between spending cuts and tax hikes. In terms of analytical approach, a Computable General Equilibrium (CGE) model and a microsimulation model are integrated to include the general equilibrium effects of these measures as well as the effects on income distribution. The results contribute to the growing but limited literature on the distributional effects of fiscal consolidations by showing that policymakers have to choose between more inequality or more poverty.

US demographic change will have broad economic effects

Significance This has implications for the size of the workforce and the living standards that the US economy is capable of supporting. It will also have broader consequences for the US economy over the next 30 years. Impacts Lower workforce participation rates will lower average living standards, relative to what they would have otherwise been, by 10% by 2050. Medicare and social security spending will rise by 4% of GDP over the next 30 years; higher taxes or spending cuts elsewhere will be needed. Immigration is projected to be just sufficient to offset natural population decline by 2050, cushioning the working-age population drop. Estimating the extent to which immigration and automation could help to fill worker shortages over the longer term is difficult.

In Defence of Ordinary Help: Estimating the effect of Early Help/Family Support Spending on Children in Need Rates in England using ALT-SR

Randomised controlled trials are often inappropriate for many forms of preventative children’s services; as such, observational studies using administrative data can be valuable for evidence-based policymaking. However, estimates of effectiveness can be confounded by differences in thresholds of intervention and national policies that exert pressure on local trends. This study adjusted for these factors using methods developed in clinical psychology to control for individual traits and developmental trajectories, Autoregressive Latent Trajectory Models with Structured Residuals, to analyse the relationship between local authority preventative spending and Children in Need (CIN) rates in England. Higher spending was associated with significant decreases in CIN rates between 2010/11 and 2014/15, but not from 2014/15 onwards. In the first half of the decade, 1% increases in expenditure were associated with between 0.07% and 0.157% decreases in CIN rates. Based on average local authority spending cuts, this translates to an additional 13,000 to 16,500 children and young people put or kept at risk of developmental or health impairments nationally for each year between 2011 and 2015. These findings highlight the potential of early help/family support policies and concerns around how their effectiveness has changed consequent to prolonged austerity and a deliberate policy focus on ‘what works’.

UK corruption scandal opens door for the opposition

Significance These scandals are serious for the government because they reflect poorly on dozens of Conservative MPs as well as Prime Minister Boris Johnson. In addition to undermining the government’s public support, they have also damaged Johnson’s support among party colleagues. Impacts Anger towards the government could grow in poorer regions as tax rises and spending cuts are gradually introduced. The persistence of corruption stories threatens to further damage the United Kingdom’s international reputation. Domestic pressures and ‘Brexit fatigue’ may ultimately prevent London from triggering a trade war with the EU.

Welfare Retrenchment

This chapter examines the debate over the retrenchment of the welfare state. It discusses Paul Pierson’s groundbreaking ‘new politics of the welfare state’ thesis, which argues that the politics of welfare retrenchment operates according to fundamentally different rules from the politics of welfare expansion. In particular, the presence of groups with a shared interest in preserving existing social policies means that the defence of the welfare state is not left just to labour and parties of the left. In addition, both recipients and providers of welfare policies stand ready to mobilize against programme cuts, making retrenchment exceedingly difficult. To the extent that retrenchment takes place, Pierson contends that it occurs primarily via techniques of obfuscation that hide the government’s responsibility for its actions. The chapter also analyses claims that retrenchment is more extensive than Pierson acknowledges if a different metric is used, such as social spending relative to need, or if recent cutbacks are taken into account, such as those that occurred in Greece in response to the sovereign debt crisis. Finally, the chapter traces an alternative trajectory of welfare reform. As against the unsavoury and conspiratorial methods emphasized by Pierson, governments may enact spending cuts by taking their case to the public, hitching retrenchment to higher objectives, negotiating with the social partners or political opposition, and addressing concerns about fairness. The two channels of reform are not mutually exclusive; rather, they point to different ways to cut, adapt, and modernize the welfare state.

Towards a Sustainable Welfare State: The Role of Universal Basic Services

The idea of pooling resources and sharing risks to provide universal services according to need not ability to pay was at the heart of the post-war settlement. However, decades of market ideology and deep spending cuts have left most services starved of power and resources. Universal Basic Services (UBS) offers a principled framework for policy and practice that aims to ensure everyone has access to life’s essentials. Based on need theory it combines universality with sufficiency to provide a secure social foundation for all within planetary boundaries. Needs are met in different ways, combining collective and individual measures, as illustrated by examples of childcare, housing and food. UBS can be combined with an income guarantee to ensure no-one’s income falls below an agreed level of sufficiency. Cash and services, which represent a ‘social wage’, are best understood as two sides of the same coin, supporting rather than competing with one another.

Precarising Formality: Understanding Current Labour Developments in Chile

More than forty years ago, the Chilean economy led the way in a process of flexibilising and privatising a wide range of areas: finance, pensions, education, work and so on. In 1990, with the end of Pinochet’s dictatorship, Chile continued to pursue neo-liberal economic policies and maintained the liberal conception of collective labour rights (imposed in 1979). By 2017, labour informality in Chile was among the lowest in South America. Taking these two factors into account (labour regulation that benefited business spending cuts and only “moderate” informality), this article explores the following questions: What are the features of current forms of labour formality in a paradigmatic neo-liberal context like Chile’s, and what space does informality occupy? Is labour formality far removed from the kind of vulnerability usually associated with informality? How have formality and informality related to each other in Chile in recent years? We address these questions with mixed methods: a literature review, development of a conceptual proposal, processing of statistical data and case studies. We conclude that a particular kind of labour formality currently prevails in Chile, which we call precarising formality. This concept disputes the traditional idea of labour formality, both because labour regulations lack substance and because they are ineffective, which is, of course, politically produced. We consider it precarising based on an analysis of multiple dimensions of precarity in contexts of theoretical labour formality. The article also describes forms of struggle and resistance by workers’ organisations that protest against capitalist action from within this new configuration of labour. KEYWORDS: formality; informality; labour precarity; Chile

The new Zambian president faces long-term challenges

Significance Hichilema's surprise win came despite extensive voter suppression and intimidation attributed to former President Edgar Lungu and the ruling Patriotic Front (PF) against supporters of Hichilema’s United Party for National Development (UPND). Impacts The broad scope of Hichilema’s reform programme will pose difficulties of prioritisation, particularly within current fiscal constraints. Higher copper prices may mitigate some of the social costs associated with debt restructuring and spending cuts. The cancellation of a meeting between President Joe Biden and Hichilema over LGBT rights concerns may complicate relations with Washington.

Alliance Participation, Treaty Depth, and Military Spending

How does alliance participation affect military spending? Some argue that alliance membership increases military expenditures, while others contend that it produces spending cuts. I argue that deep formal defense cooperation modifies the impact of alliance participation on military expenditures and can explain increases and decreases in spending by small alliance members. Security-seeking junior members of deep alliances usually decrease military spending because these treaties are more credible. Joining shallow alliances often increases junior alliance member military spending, however. I test the argument by creating a latent measure of alliance treaty depth and using it to predict differences in how alliance participation affects military spending. The research design generates new empirical evidence linking alliance participation and percentage changes in state military spending from 1919 to 2007. I find that deeper alliance treaties tend to decrease military spending by junior alliance members, and shallow alliances often increase military spending. These results help scholars and policymakers better understand a central question about alliance politics that has been debated in scholarship for decades.

UK government seeks to refocus agenda

Significance As the worst stages of the pandemic appear to be over, attention will quickly turn to issues Johnson sees as vital if his Conservative Party is to win the next election. These include making progress on the ‘levelling up’ agenda, supporting conservative voices in cultural battles, combating climate change and addressing a shortage of affordable housing. Impacts Inevitable spending cuts look set to weaken Johnson’s agenda for climate change and levelling up. If a cabinet reshuffle is not forthcoming, Johnson will face pressure from rebels in the Conservative Party. Negative polling trends in Scotland may slow First Minister Nicola Sturgeon’s drive to hold a second independence referendum. The departure of Johnson’s former chief advisor, Dominic Cummings, is unlikely to have a major impact on the government’s agenda.