Paul Stubbs
4 Questions on the Crisis
 
1. How is it possible that the crisis has been defined as a financial or, at best, an economic crisis when it clearly has social dimensions to it?

The so-called financial crisis follows on from related fuel and food crises. Cumulatively, they have affected, and continue to affect, real people and, therefore, can be said to have social impacts. In addition, levels of trust in key social institutions are a crucial factor in terms of how the crisis unfolds in different places at different times. Perhaps even more importantly, however, the nature of the crisis blurs any simple division between the 'economic', 'political' and 'social' spheres. Resolution of the crisis may well need a redefinition of fundamental values, a kind of new social contract, at all levels including individual nation states.

In Croatia, thus far, there has been very little discussion of the social dimension of the crisis. Croatia, regionally speaking, has rather low, but quite persistent, levels of poverty and social exclusion but rather significant, and long-standing, differences in the extent of deprivation between some regions and others. It also has rather high levels of unemployment, particularly long-term unemployment. In the context of war and transition, Croatia’s GDP did not recover to 1990 levels until about 2002 (1). Growth, thereafter, largely consumption-based, which has just ended, was not particularly effective in creating jobs, reducing regional inequalities, nor alleviating poverty. The fear must be that forecast falls in GDP in the current period will be highly effective in terms of job losses, increased inequalities, and increased poverty and social
exclusion, with long-term consequences.
2. Why has the voice of 'experts' been primarily the voice of economists whose solutions have tended to treat social policy as residual and marginal or, indeed, as part of the problem?
Not all economists, of course, speak with one voice on these issues. Nevertheless, a logic of defining the crisis as 'economic' is that one kind of expertised or scientific knowledge, that of economics, is seen to have a more privileged insight both analytically and normatively, than say, social policy might have. What is, perhaps, more worrying is that even though the hegemony of neo-liberalism has been rather eroded globally, there seems to be a basic common sense amongst Croatian economists that state social expenditures need to be reduced and that social policy should be merely targeted on the most vulnerable. They neglect to mention, usually, that such expenditures have being falling in real terms in recent years. It is rare to hear a social investment perspective which asserts that basic social rights, particularly in terms of access to health, education, social services, and housing is crucial for social reproduction. Erosion of social rights in favour of special social funds for the poor neglects this argument, and neglects a large body of evidence on the effects of stigma and low-take up of services and benefits reserved for the poor. Universal child benefits, for example, fulfil a dual purpose – they are an extremely useful and effective means of poverty alleviation for poor families and they help mitigate the increased costs which all families with children face. They are an important part of social protection at the best of times but, in crisis times, when many families close to the poverty line may make decisions regarding their children leaving school early to boost the family income, they fulfil a crucial function, as do other schemes promoting access to education for all. The public debate on social policy in Croatia has begun  to be dominated by those who argue for targeted approaches. There is a great deal that needs reforming in Croatia's social policy system. But an argument that the crisis times must lead to cuts in universal benefits – when it is actually the existence of certain categorical schemes
favouring certain groups which is the real problem - is both short-sighted and counterproductive.
 
3. What new modes of governance are being suggested by the creation of an Economic Council whose advice is, firstly, ignored or rejected by Government and then, step by step, brought back into the public domain?
 
Creating an economist-dominated Economic Council to propose or to ask others (economists again) to propose anti-recession measures seems, at first sight, like a smart move allowing for 'technical' suggestions which can then be debated in the 'political sphere'. In a sense, of course, it smacks of a political trick in terms of 'testing the water' regarding public reaction to certain measures, and attempting to create a no lose situation – if recommended policies succeed, the government takes the credit; if they fail, it was the fault of the 'experts'. The actual reality is even more perverse, with an indecisive government, with at least one eye on forthcoming local elections, making up measures 'on the spot', misreading the
recommendations of others and, then, introducing many measures which they had earlier dismissed. The overnight decision to nationalise the second pillar of pensions, now being retreated from, and a perverse exercise of simply asking Ministries to make cuts wherever possible, are examples of this. Using the crisis to revisit certain debates and to call for expert analysis is one thing but quite another if decisions are made in haste which will have longterm detrimental social consequences.
 
This web site (http://www.vrijemeje.com ) exists in order to ensure that more voices are heard; that a more reasoned, and more holistic, set of arguments can prevail; and, crucially, that the suggestions within the technocratic-political arena are open to more accountable public scrutiny. Above all it is based on a real sense that without reference to the connection between the economic crisis, social cohesion and environmental issues, more damage will be done to the social fabric and to an already dangerously threatened ecological system.
4. What social policy measures are needed to minimise the social impacts of the crisis?
There is no magic solution, panacea or golden key, of course. But neither do we need to reinvent the wheel. Advice from the European Union points to the importance of carefully analysing the impacts and then responding with a set of clear measures. Croatia's priorities in the alleviation of poverty and social exclusion are set out in the Joint Inclusion Memorandum (JIM) signed on 5 March 2007 (2), which is part of the accession process to the EU. The JIM commitments form a solid basis for action which is all the more important in the context of crisis but there is a real danger of some of them being postponed or abandoned. Only through partnerships can the social impact of the crisis be minimised, with regional and local self governments, civil society organisations, and businesses all having a role to play.
In a time of crisis, as noted above, it is particularly tempting to look for short-term solutions which target the poorest and most vulnerable, on the grounds that limited funding should reach those most in need. Whilst these are an important part of any possible response, there are real dangers that targeted programmes become costly to administer, produce stigma, erode social rights, and do not achieve their goals in reducing vulnerability and risk. A wider range of 'smart' policies including categorical, universal, and insurance-based measures, are more likely to work, providing they are based on a clear analysis of risk and vulnerability and with the aim of ensuring that people's survival strategies in the crisis do not further erode human capital.
 
The European Commission also recommends temporarily increased transfers to the unemployed, through unemployment benefits, in terms of: amount of benefit; duration of entitlement; and a widening of eligibility criteria. Currently, only some 24% of the registered unemployed in Croatia receive benefits. These measures could most usefully be targeted to workers with children and/or particularly vulnerable groups such as older workers, workers with disabilities, or workers in disadvantaged regions. There is a real need, also, to balance this with active employment policies, more attention to job counselling, skills building and retraining, public works' programmes, as well as, if necessary in certain key sectors,
temporary wage subsidies. Housing and fuel subsidies, currently the responsibility of local government, may need to be extended in size and scope, together with policies to help those who fall behind in their credit payments on their homes. Lower VAT could be considered for key items in the consumption basket of the poorest. In addition, more community based social services will be needed, to cope with the increased social stress in communities but also as a more effective, more dignified and, fortunately, cheaper alternative, to widespread use of institutional care. As noted above, policies to support families with children at risk of leaving school early should also be a priority.
 
The crisis we have in Croatia is both acute, in terms of the current recession, but also chronic and long-term. Many socio-economic problems are structural in nature including disparities in regional development, the low percentage of the work force with a university degree, the diminishing share of industry in GDP in general and the lack of high-technology industries in particular. Hence, these structural problems need to be tackled alongside the current problems. The crisis cannot be fought by 'economic nationalism' much less by a race to the welfare bottom in which competitive advantage is secured through lower wage costs and decreased social welfare payments. Whilst nothing short of a new New Deal and, indeed, a new social contract may be needed, co-operation within a European and regional context become all the more important in ensuring that anti-recession measures are carefully co-ordinated and sequenced in ways which help to minimise negative social impacts. The fate of marginalised
regions cannot be left to market forces and significant actions will be needed to avoid a decline which will have impacts on subsequent generations. Now may be the time to shift the terms of the debate more fundamentally, and above all ensure that both the social and ecological dimensions of the crisis are recognised and remedial action taken.
 

1 See P. Stubbs and S. Zrinšcak (2009) ‘Croatian Social Policy: the legacies of war, state-building and late
Europeanization’, in Social Policy and Administration 43(2); 121 – 135.
2 Croatian version: http://www.mzss.hr/hr/content/download/1934/16827/file/JIM_hrv_potpisano...
English version: http://www.mzss.hr/hr/content/download/1935/16830/file/JIM-signedl_05030...
Note: Comments on a first draft by Vlado Cvijanovic and Siniša Zrinšcak have been incorporated into this new version. Responsibility for the text remains mine alone, of course. Comments and suggestions gratefully received, email: pstubbs@eizg.hr