Welfare Consequences of the Great Recession: Dr Stefán Ólafsson Explores the Impact of Policies and
On Thursday 6 February, the Oxford Institute of Social Policy hosted the third installation of its new seminar series, Austerity and Beyond?. Dr. Stefán Ólafsson, Professor of Sociology at the University of Iceland, joined the department to speak about how policies and institutions shaped the welfare consequences of the Great Recession in Europe.
Image provided by Dr Stefán Ólafsson
MSc student Juhi Kore spoke with Dr Ólafsson following the seminar, to discuss the commonalities in responses to the Great Recession, the role of international organisations in austerity policies, as well as continuing impacts.
Thank you so much, Stefan, for such an insightful presentation- everyone really enjoyed it. In terms of the content, I was really hoping you could expand a bit more on the Eastern European states and whether there were some commonalities you found to play a role in the different outcomes during the Great Recession?
Yes. We really actually ended up by splitting the Eastern European countries into two groups, the three Baltic states, and then the rest of the Eastern European countries. The Baltic states really went into a very big crisis which increased their unemployment and financial hardship tremendously. But they actually recovered quite well and quickly.And most of them bottomed out in 2010 or 2011 and then started progressing up again. The other Eastern European countries were less directly impacted by the financial crisis. It was the Baltic states which had the big bubble economies like Iceland, Ireland, Spain and Greece possibly also. So in that sense, those countries did not have a clear reaction to the financial crisis crisis, except that they were obviously more vulnerable since they had the weaker welfare states or social protection systems.
But in general, even some of the Eastern European countries were actually reducing financial hardship during the crisis years. So they were just improving, which is nice and more in line with the way they were developing up to the crisis. They were sort of catching up with the rest of Europe
That's a really interesting observation.
It's interesting also when you look at how badly the Mediterranean countries are coming out of the crisis. I wonder if some of the Eastern European countries might progress beyond the Mediterranean countries in terms of the levels of poverty and financial hardship, that they might actually leave the Mediterranean countries on the bottom. It would be sad for them and well, sad for everybody. We would want them to recover better, but the Mediterranean countries haven't really showed sufficient recover.
Something that you alluded to earlier, especially in the context of some of these Eastern European states was the role of international organizations on austerity policies. How do you think those countries would have chosen their policy?
Well, in many ways, I guess what would be normal in a crisis situation is that the government is faced with demands and needs from the population and should sort of respond to that in clearly functioning democracy. What was happening to many countries like the Baltic states, for example, was the policy environment of the European Union and the European Central Bank were dictating who could seek support from the International Monetary Fund. They were all pretty much sort of dictated by economic prescription, which in many ways didn't really respond to the needs and wishes of the population. And in many ways, I think most governments would be inclined to try to do what they could to relieve the crisis difficulties. But the economic doctrines of the neo-liberal environment, which is quite prominent within economic circles and and financial circles, often works against what came out, what, why and what can be shown are the best solutions.
It is such a cookie cutter approach too.
It is. I mean, we show that in our studies that Keynesian welfare inclined policies are what really shortens the period that the crisis lasts and avoids it being too deep. So these other policies are and I think as you ask what governments would have chosen differently, many of these and definitely in Greece, like, for example, I mean, we have the governments with the left government which came in. They couldn't really deliver what they have promised the electorate. And it was the troika would stop that.
Just to continue in that vein, the role of the internal politics is also so pressing and it's almost gotten ignored in the context of these austerity policies.
Oh yes, absolutely. I mean, they just drove over democracy. These individual countries and their unelected power holders in the European Central Bank, they got their way often and to the worst [end] sometimes. Sometimes.
Do you think that that that almost "running over democracy" as you just mentioned, had an effect on the role of immigration and immigration, on the policies and outcomes in some of these states?
Well, maybe not directly, but indirectly, probably. Well, I guess the living conditions in the crisis situation is that the main driver of immigration or emigration and emigration, in the case of the countries which were really suffering deeply and emigration was in many cases important [in places like] Portugal and Spain and also in the Baltic countries, and Poland.
You could say about the Baltic states that they exported their unemployment to some extent, even though that did actually go about 20 percent for a while. But then despite that, without the emigration, it would have been worse, no doubt.
The free flow of labour can be important in these situations. But if there are no opportunities in the other European countries, that sort of limits what can be offered. So it's it's not the biggest factor in explaining the softening or or how nations manage to cope with a crisis. But it's an important a factor as well.
When you looked at so many different variables and tried to match them, to come up with what you were looking at, like financial hardship - what was something that was unexpected? Or something that once you had conducted all these data analyses. and when you were looking at the relationships between welfare regime types and the policy responses, was there something that you weren't expecting?
Yes, I didn't expect from the beginning that the outcome would be would be so consistent with many of the research findings about the comparative welfare states in general. We were dealing there with something different from what most of the comparative studies are dealing with. They are looking at the qualities of the of the policies, structures and administrations and the outcomes and how well they do. We were specifically looking at how how welfare states coped with the deep crisis. And we find that we get in many ways similar patterns.
Most of these comparative welfare state studies to the distribution by regime types or welfare generosity or equalisation strategies that where you have welfare states and governments applying policies which were in line with the sort of Keynesian welfare state economics and social policy. That's where you had the best success in alleviating the harsh consequences. I didn't expect this pattern to be here in this way - in a way it's a bit like sort of just another support to the old sort of competition with welfare state. They had this best tool which is lagging behind.
So that is fairly consistent then. But when you look at it though, it's quite logical. After all, the welfare state is supposed to be an insurance system which steps in when you lose your other means of subsistence. And there are threats or declines in your level of living. And the welfare state steps in. And the better the welfare states are organised, the better means they have of dealing with such problems, the better the outcome.
A short audio excerpt of Juhi Kore's interview with Dr. Ólafsson is available below.
Juhi Kore is a published author, researcher and TEDx speaker currently pursuing her Master’s in Comparative Social Policy. Juhi graduated with her Bachelor’s degree in Political Science where she focused on International Relations, Leadership Studies, and Urban Studies, at the University of Tampa. Upon graduation, Juhi worked with different startup accelerators in London and Silicon Valley, in U.S. politics, and as a policy analyst specialising in low income housing policy.
Juhi’s graduate research looks at the intersection of policy and technology adoption in the context of policies that result from technology adoption as well as the political processes leading to technology adoption. She hopes to expand on this work in her doctoral studies.
The views expressed in this article are the author's own and do not necessarily reflect any editorial policy.