Learning the hard way?

It is well known that there are people who actually like getting slapped – but it is puzzling to discover such a penchant with the right-wing parties and business organizations in Switzerland. Or then it must be some mixture of naïveté and stubbornness that makes them impermeable to learning any lesson from past failures. The latest slap is the massive (almost 73% of the votes) rejection of occupational pension cutbacks at the polls, in a direct democratic referendum that took place this Sunday March 7th. The result is a downright triumph for the left and trade unions – especially in a country where the combined Left (Social Democrats and Greens) gained less than 30% of the votes in the last national parliamentary elections.

However, the result of the referendum is not at all surprising to anyone familiar with welfare politics in Switzerland (and – for that matter – OECD democracies in general). And it is not – contrary to what the conservative newspaper NZZ, business leaders and right-wing politicians tried to argue in their first reactions – the result of a confusing campaign, a “momentary state of uncertainty” among voters or their “denial of reality”. Rather, some denial of political realities seems to be prevailing among those parties who pushed this proposal through parliament and into the direct democratic circus maximus. Indeed, the result of the referendum is exactly what we would expect in the light of the past 15 years of research on welfare politics in the age of austerity. Here’s why.

In the 1990s, Paul Pierson made a huge impact in the field when he explained how difficult it would be for governments to consolidate or retrench existing social policy programs, because these policies (pensions being the best example) create their own support coalition that reaches far beyond the left-wing electorate. On this basis, he predicted near-perfect policy stability. More recent research, spearheaded by Swiss political scientist Giuliano Bonoli, proved him wrong by demonstrating that reforms could be achieved, under the condition that governments combine cutbacks with elements that benefit the most precarious social groups, mostly low-skilled, young and female voters. In a book that will be out with CUP this month, I have shown that this kind of “package deals” has become a necessary condition for successful pension reforms over the last 20 years, not only in Switzerland, but also in Germany, France and other European countries. The 2003 reform of the pension scheme in Switzerland, for example, did combine the same kind of occupational pension cutbacks that were rejected on Sunday with more generous protection of low-income earners. This combination led to a two-dimensional reform space that allowed for a very broad support coalition among parties and interest organizations of both the left and right (all actors in the green ellipse). The Swiss Union of Trade Unions SGB (the only actor consistently critical of the reform package) had learnt in earlier campaigns that it would be hardly possible to win a popular referendum all on their own, with part of the left supporting the reform. Hence, it refrained from challenging the 2003 proposal in a referendum and the reform could be enacted.

In the same year, however, the right-wing parties and business organizations tried to push through a reform of the basic pension scheme (AHV) that consisted of cutbacks only – and they got their fingers badly burnt. Just as last Sunday, the then reform was opposed by a unified left and got rejected massively by the voters in a referendum. And there are numerous examples confirming the same pattern in labor and unemployment insurance law. Moreover, the right-wing majority in Parliament could have known better: experts and some MPs warned that unbalanced cutbacks would be very difficult to sell. What reform-supporters have to realize is that the question here is not technical, it is social and political. What matters is not whether voters believe or disbelieve the economic and demographic projections on which the right-wing parties and the government base their retrenchment strategies. Irrespective of whether voters share the general idea that a financial stabilization of the welfare state is necessary in the long run, no cutbacks can be implemented unless at least part of the losers are compensated.

The outcome of the Sunday referendum bodes ill for a range of other reform projects the right wants to push through during this year, from cutbacks for young people in the unemployment insurance to lower basic pensions. But it bodes well for the left, since every slap the right takes is precious capital for further reform-processes.

3 thoughts on “Learning the hard way?

  1. That’s a great post, very interesting, thank you.

    I got three questions regarding your book and your statement “that this kind of “package deals” has become a necessary condition for successful pension reforms over the last 20 years”:

    1. How many reforms did you examine? And over what time frame?

    2. Did you notice a change over time in the conditions needed for a reform in existing social policy programs? In other words: Did these “package deals” really become a necessary (and no sufficient?) condition OVER or were they a necessary condition IN the last 20 years?

    3. Did you use boolean algebra to determine necessary and sufficient conditions (and INUS and SUIN?)?

    Actually more than three questions, I’m sorry, but I had troubles keeping them from growing bigger. And they’re quite connected with each other.

    • thank you very much, these are great questions.

      in the book, I examine all pension reforms that took place in France, Germany and Switzerland between 1970 and 2005. That is about 65 reforms total.
      You are perfectly right, there is indeed a change over time. Until the early 1980s (i.e. when all three countries were still in a context of “expansion” in their pension policies), packages were not necessary (even though they sometimes occurred, too). Only when the context turned to austerity and retrenchment did governments have to counterbalance cuts with expansive measures. The assertion that these packages are a necessary condition is based on the observation that all the restrictive reforms that did NOT include compensations failed (no boolean algebra here). Packages, however, are not a sufficient condition for success. The conservative Kohl government, e.g., tied a package in 1997 with only very limited compensations. The left opposed it and made it a huge issue in the 1998 election campaign, which led to the change in power (the Schröder-government took over in 1998). As one of the first actions in government, Schröder cancelled the 1997 reform. In that sense, the Kohl-reform failed even though it was a package.

      thanks again for your questions and interest!

  2. Congratulations Silja!

    First blogpost and right away a link from Matthew Yglesisas. Definitely a good start.

    It is nice to find colleagues from old times past in the blogosphere again.

    Good post by the way. I am looking forward to read more from you. Greetings from Geneva.

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