Crisis, neoliberalism, and social policy

A report, based on updated data collected by the Social Barometer, analyses the main impacts of the economic crisis, placing emphasis on the re-directions of public expenditures.

By BSE1 of Colectivo Ioé the February 21, 2013

Social barometer of Spain

Crisis, neoliberalismo y políticas sociales

Main conclusions:

● In the last decades records an adverse distribution of income among classes as part of the wages on the overall income declined as much during the growth cycle -6 percentage points between 1994 and 2007 (from 67.3 per cent to 61.6 per cent)- as in these years of crisis -other 4 points between 2007 and 2012 (up by 57.3%)-. In sum, the share of wages in national income declined continuously during the last cycle of growth and returns to fall with the adoption of policies of “adjustment” since 2010, thus perpetuating and deepening a structural trend to the redistribution down the income.

● In addition, there exists a significant inequality between the wages that has been extended with the crisis. The relationship between the average wage of those earning five times the Minimum Interprofessional Salary (SMI) and those who were paid below the national minimum wage rose from to 17.6 in 2007 and to 18.5 in 2011, increasing the distance between “wage-earners the rich” and “wage earners poor.” In 2000, the average remuneration of women was 22.7% lower than the average wage and the disadvantage happened to 31.5% in 2011; for its part, the young people increased from 54,1% to 60,6%.

● During the years of growth improved the income distribution (what is entered each year in the households), falling in three points, the index of inequality in its distribution. However, the distribution of wealth (the whole of the heritage accumulated by households, beyond the changes to economic income) worsened clearly: in 2002, the 25% richest households was 33.3 times more equity than the 25% poorest; in 2005, the difference had grown to 39,3.

With the crisis has worsened the distribution of income and wealth. The first has dropped 3 points, losing the progress made during the years of growth. Therefore, the rate of poverty has increased from 18% to 21%. The gap of inequality of wealth among the quarter of households richest and the poorest increased from 39 to 50 times. So, “thanks” to the crisis, the inequalities of heritage are five times more pronounced than that of income.

In the past 30 years the 1% of the Spanish population with the highest income increased its participation in 21.5%, at the expense of the 99% remaining that reduced it by 1.8%. And the inequality grows greater the more we approach to the summit of the wealth: 0.1% with higher income (15,000 households) achieved an increase of 40,1%, and 0.01% (1,500 families) reached 73.1%

● The economic growth up to 2007 led to a severe deterioration of the environmental conditions (increased energy consumption, energy dependency, emissions of CO2, etc). The onset of the economic recession resulted in the improvement of some indices, due to the fall in production (reduction of emissions, the consumption of fertilizers and chemical pesticides, growth of the renewable energy sources, etc). However, in 2010 and 2011, recorded a new worsening. Currently Spain is in breach of the Kyoto commitments and the ecological footprint remains impractical: to sustain existing production in 2008 would require a territory that is more than 3.3 times the surface area of the country.

● The stagnation of wages during the economic cycle, expanding demand is fueled through borrowing (consumer credit and mortgages). The debts of the households, constituted in 1944, the 66% of your annual income, and went to 150% in 2007, providing a volume of business to the financial system of one trillion euros. During the crisis years the volume of household debt has hardly been reduced, and gravel, very especially to low income sectors: in 2008 the debt of the poor households supposed to be a load 17 times higher in relation to their heritage, that in the case of households with greater wealth. The loss of income of many families has led to a substantial increase in evictions: more than 300,000 families who have not been able to pay their mortgages; adding the evicted from rental housing we approach 500,000 driven from their homes.

● The development of the crisis and the policies adopted have generated serious problems for a large sector of the working population and pensioners, especially for those who are unemployed, especially if they do not receive any unemployment benefits (2.8 million people) and/or all members of your group for coexistence are out of work (one out of every ten households). In 2012, 45% of the households cannot afford one week of vacation per year (33.5% in 2008), the 40% cannot handle unforeseen expenses (26.1% in 2008) and 7.4% had delays in the payment of its usual home (5.4% in 2008).

● The tax and Social Security contributions are the basis of the government social policies that constitute the salary is indirect from the households. In 2010 his contribution in goods and services accounted for 94% of the wage bill: in terms of thick, wages indirect global has nearly the same magnitude as the total direct salary. In spite of this important volume, the expense of Spain in social policies in relation to the GDP has always been lower than the average of the European Union during the past 20 years.

The importance of the social benefits in comparison to the overall income of the households has varied greatly depending on the time of the economic cycle: in 1994 –at the end of the previous economic crisis – accounted for 46%, but in 2005 –in full real-estate boom and financial – hardly accounted for 18%. In 2010-after the collapse of the various bubbles –they provide 48% of the income of the households. These figures refer to the set of households; obviously their relevance is much higher for the sectors of lower-income population.

The main items of social policy are aimed at pensions, health care, education and unemployment benefits. Among the four accounted in 2011 for 80% of social spending and 24% of the GDP. From the turn of 2010, resulted in the budgets of 2011, the policy of cuts has been a deterioration in the resources allocated to health care, education and unemployment, while reducing the pace of enlargement of the allocation to pensions.

The resources allocated to health and education experienced a growth rate slightly below the GDP per person in the expansionary phase of the economy, to rise above the stage of crisis, despite the declines experienced in 2010 and 2011, as their contraction was lower than the economy as a whole.

The pension increased at a much lower rate than GDP until 2008 but it is the only game that has continued to grow until 2011, the year that exceed the expenses on education.

The volume destined for unemployment benefits fell a lot in the expansion phase due to the reduction of unemployment, and grew intensively in 2008 and 2009, in parallel with the destruction of employment, to go down in 2010 and 2011 at the end of the period of payment of the benefit by a large portion of the unemployed and stops of long duration.

In short, the economic crisis is being used as an excuse to deepen in the model of neoliberal capitalism, such as made from of the Washington Consensus in many peripheral countries. Now, based on the european Treaty of Lisbon (2009), the so-called Fiscal Pact (the elites) and the European Stability Mechanism (2012) we are exposed to similar processes of social deterioration and, perhaps, of political confrontation.

For more information, read the full text of the report at:

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