Austerity could lead to more extremism

 

Adrian Vatter, in a column in the Tamedia newspapers you asked the question: “Are we saving ourselves to death?” You then received strong reactions, for example from the liberal think tank Avenir Suisse. Does the Federal Council’s austerity package really lead to more deaths?

The title was a bit lurid, I admit. New scientific studies using data from 28 EU countries indicate a significant link between the impact of fiscal policy and mortality. Accordingly, austerity measures correlate with increasing suicide mortality. However, the causal mechanism is still poorly understood. And in countries with harsh austerity policies like Greece, the effect is undoubtedly greater. We should therefore beware of the simple conclusion that the federal government’s austerity measures, which are rather moderate compared to international standards, are driving people to suicide. But in general, austerity packages can have a number of health consequences.

What kind of health consequences?

A distinction is made between direct health effects, such as those caused by poorer health care, and indirect social risk effects, such as stress caused by general uncertainty. The negative effect is evident regardless of the design. The already vulnerable population groups, such as those receiving social assistance, are particularly at risk. But it turns out that even with cuts that are often described as “unproblematic” domestically, such as in the cultural sector, people’s mental health deteriorates. From a federalism policy perspective, the daycare template is interesting.

 

The Federal Council wants to cancel contributions to supplementary family child care. Almost 900 million francs are currently planned for daycare centers from 2030. But the federal government is threatened with a structural deficit, and daycare centers are the responsibility of municipalities and cantons.

In Switzerland, less than 50 percent of public finances go through the central government, which is extremely low internationally. Resistance is currently building up on the part of the cantons because, in their opinion, the austerity package is shifting too much of the burden onto the cantons. But the cantons will only be able or willing to only partially compensate for the cut federal funds. In the end, it is the communities and families who suffer. The last ones then bite the dogs, as is so often the case in federalist conflict.

Well, then these families can campaign for daycare subsidies in the canton. We live in a semi-direct democracy.

Of course, in the end the majority decides. However, these decisions can come at the expense of population groups that belong to the minority. The majority reacts most sensitively to pension cuts, such as the recent pension fund reform. Firstly, because we all grow old someday. Secondly, because we have an aging population of those who vote. The phenomenon is particularly evident in France.

In France, among other things, there were protests over pension cuts under President Emmanuel Macron, and images of the yellow vest movement went around the world.

Yes, the yellow vest movement and the pension reform show the mechanism well: When the state threatens to cut public services, this often happens with pensions and social transfers because these are the largest items. As a result, disappointed citizens are turning away from the governing parties and staying at home. Or they vote for more radical, extremist parties. The left-wing populist La France insoumise and the right-wing extremist Rassemblement national celebrated spectacular successes. The desired austerity policy therefore promoted the “pulverization” of the established parties, which had already begun before Macron’s pension reform, especially among the conservatives. This leads to political instability; we see how difficult it is to form a government in France.

Healthy government finances also ensure political stability. Switzerland’s successful model has low debts compared to other countries, which promotes consumption and investment. In return, we enjoy a low unemployment rate and comparatively low inflation. We should take care of that.

That’s right. However, two different conclusions can be drawn from this. On the one hand: In order to avoid harsh austerity packages with high political and human costs, as is currently the case in Argentina, we should keep the national budget in order and put together relief packages now. On the other hand, even small spending cuts, for example in pensions, ensure redistribution from bottom to top, demonstrably promote polarization and strengthen radical parties. So it’s a difficult balancing act that politicians have to walk.

Argentine President Javier Milei was able to reduce hyperinflation thanks to his tough austerity measures. Poverty initially increased, but pensions and wages are now rising again. Doesn’t this show that short-term sacrifices are necessary for long-term prosperity?

In principle, it is absolutely right to pay attention to low national debt in order to keep interest rates low and to have financial leeway. But Milei’s example confirms my analysis: Argentina has a history of high levels of national debt; the state almost collapsed in 2001. The fact that a politician like Javier Milei, with his chainsaw rhetoric and his extremely libertarian positions, is elected at all has of course to do with this situation. Since then, he has cut tens of thousands of administrative jobs. These people are now on the streets, plus pension cuts. Just last week there were huge demonstrations again.

Isn’t the cause of the eroding middle more likely to be migration than austerity? Increasing polarization can also be seen in Germany, where the AfD and the Alliance Sahra Wagenknecht (BSW) celebrated successes, or in Austria, where the FPÖ has gained strength.

The three parties AfD, BSW and FPÖ must not be lumped together. In the German state elections, the AfD was elected primarily out of dissatisfaction with the traffic light government’s policies, in fact precisely because of the migration issue. Foreign policy and anti-elite attitudes play a particularly strong role in the election motives for the left-wing populist BSW. In contrast, migration policy is less crucial. But my main concern is to broaden the discussion about the austerity proposals: so far, the focus has been on the economic and fiscal policy consequences. It is important that we also talk about the political consequences: voters could increasingly turn to polarized parties or not go to the polls at all. This is not desirable in terms of democratic policy.

The population can vote for whomever they think is suitable. This is democracy.

Of course, I’m just pointing out the consequences. The consequences of including authoritarian-populist parties in government are very well documented in political science: Such parties influence the design of public policy by normalizing previously extreme positions, for example on immigration. Their integration also has high costs in terms of democratic policy – both in terms of the dismantling of liberal freedoms and the stability of democracy as a whole. You should also not forget: A clear majority of the population did not vote for the AfD, BSW and FPÖ.

In Switzerland, the right and left edges are firmly covered by the two largest parties, SVP and SP, both of which are integrated into the government. Do you think that Finance Minister Karin Keller-Sutter’s austerity measures will lead to the establishment of right-wing extremist and communist parties?

No, I don’t think so. Firstly, the austerity package does not correspond to a harsh austerity policy by international standards, and secondly, we have the important valve of direct democracy. It is possible that polarization in Switzerland will continue to increase. But the dissatisfaction will probably result less in protests or strikes than in a correction through a referendum. Nevertheless: Think of Markus Ritter’s example. The farmers’ president stood on the Bundesplatz last week and threatened to fight the austerity package with demonstrations.

The proposed cuts in agriculture of 490 million francs are very moderate, considering that farmers receive 3.9 billion francs annually.

Ritter hopes that politicians will refrain from doing this. His final sentence on the Bundesplatz was: “We hope that it is possible without tractors.” So he threatens protests. I don’t expect it to come to that. But at least the discussions are more heated than usual. Nevertheless, my hope remains that our political system balances extreme positions.

The geopolitical situation is worrying, there is war on various fronts. For the bourgeois majority it is clear: protecting the population with a defensible army is a priority.

For the right side, the Ukraine war requires more funding for the army in the short term. In view of the climate change and the health care crisis, the left wants government investments in these areas as quickly as possible. Liberal forces ultimately want to save in good times in order to have enough leeway in emergencies. In the end, the political majorities decide.

The middle class majority sees great savings potential in international cooperation. The National Council’s Finance Commission wants to cut this by one billion francs. What would be the consequences?

On the ground, even “small” changes such as food aid or the construction of suspension bridges have a measurable effect that demonstrably improves people’s lives. The effects of cuts in international cooperation are correspondingly negative for those affected. Interestingly, the expert group and the Federal Council saw comparatively little potential for cuts here. It is the Finance Commission of the National Council that wants to save more here.

What felt like seconds after the Federal Council presented its austerity package, the Social Democrats were shouting and shouting murder and talking about social cuts. Do you agree with them?

Austerity packages are electorally risky for social democratic parties, especially if spending is cut. Social democratic parties lose particularly badly if they support spending-based consolidations that cut capital spending or wages in the public sector because that is where their voters are employed. On the other hand, tax increases do not lead to electoral losses for the left. But I don’t want to allow myself to be exploited by any political side. Where savings are made is a question that should be negotiated politically.