Distributional issues in the context of the economic crisis in Europe

Intereconomics

Volumn 44, Issue 2, 2009, Pages 82-89

  Watt, Andrew ^a  

^a Employment and Social Policies Unit of the Research Department at the European Trade Union Institute   (Belgium)

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EID: 64749098346     PISSN: 00205346     EISSN: 1613964X     Source Type: Journal    
DOI: 10.1007/s10272-009-0281-3     Document Type: Article

References (32)

1. A. Watt: The economic and financial criAis in Europe: addressing the causes and the repercussions, European Economic and Employment Policy Brief, No. 3, 2008; http://www.etui.org/research/Media/Files/EEEPB/2008/ 3-2008. 2 Ibid.
2. Contributions that have begun to tease out some of the implications of "fi nancialisation" include: E. Hein, T. van Treeck: Financialisation in Post-Keynesian models of distribution and growth - a systematic review, IMK Working Paper, No. 10, 2008
3. T. Palley: Financialisation: What it is and Why it Matters, IMK Working Paper, No. 4, 2008.
4. For an analysis of the role of private equity within this complex see A. Watt: The impact of private equity on European companies and workers: key issues and a review of the evidence, in: Industrial Relations Journal, Vol. 39, No. 6, 2008, pp.548-568.
5. Günter Franke, Jan P. Krahnen: The Future of Securitization, CFS Working paper, No. 31, 2008, Centre for Financial Studies, Frankfurt am Main 2008, http://www.ifkcfs.de/fileadmin/downloads/publications/wp/ 08_31.pdf.
6. On this see also T. Palley, op.cit.
7. For a survey: R. Gordon, I. Dew-Becker: Controversies about the Rise of American Inequality: A Survey, NBER Working Paper, No. 13982, May 2008.
8. OECD: Growing unequal? Income distribution and poverty in OECD countries, Paris 2009.
9. Own calculations based on the OECD data in Table 2.1, p. 29
10. it is also the case in the Czech Republic and (just) Hungary, for which data are only available for the mid-1990s to mid-2000s.
11. Survey data is well-known to poorly capture incomes at the top, and researchers have to rely on administrative (tax authority) data, which has its own problems, and limits country coverage.
12. Other factors, including household composition effects, may also play a role. Especially in the fi rst half of the period the stronger employment growth in the UK and USA than in Europe also had the effect of stabilising the wage share there
13. See for instance OECD: Employment Outlook, Paris 2007, ch. 3.
14. It is of course a normative judgement that, from current levels, further increases in inequality are negative, a return to a more equal distribution positive. It is not entirely arbitrary, however. It can be justifi ed on Rawlesian grounds up to the point at which the absolute welfare of the poorest would be negatively affected by any "effi ciency" losses caused by higher equality.
15. International Monetary FuOd: The state of public fi nances: outlook and medium-term policies after the 2008 crisis, IMF Board paper, 6 March 2009
16. http://www.imf.org/external/np/pp/eng/2009/030609.pdf.
17. The IMF table from which these data are taken contains 14 detailed footnotes, not reproduced here. The point of this exercise is to gain an idea of the order of magnitude. The fi gures given here are as of 18 February 2008.
18. The IMF's best guess of the likely actual cost of the guarantees is 2-6% of GDP, but it notes that the "margin of uncertainty is large" (p. 9).
19. D. Saha, J. von Weizsäcker: Estimating the size of the European stimulus packages for 2009: An Update, BRUEGEL Policy Contribution, 2009, http://www.bruegel.org/Public/PublicationPage.php?ID=1174#14541. This assessment is also fraught with diffi culty and should taken as indicative only. The cut-off date is virtually the same as for the IMF study, 20th February.
20. Using the weighted average of the OECD countries. The underlying fi gures refer to the years 2008-2010. OECD Economic Outlook, Spring 2009.
21. Cf. International Monetary Fund, op.cit., pp. 31 ff.
22. Among many others see Willem Buiter's Maverecon blog: http://blogs.ft.com/maverecon/.
23. The disclosure document is available at: http://media.ft.com/cms/ 22704bc0-11a7-11de-87b1-0000779fd2ac.pdf.
24. Public outrage led to some of this being paid back.
25. The 70% government-owned Royal Bank of Scotland paid almost $1 billion in bonuses (cash and "deferred" payments in own stock) to staff for 2008 having received a $20 billion bailout. Astonishingly this was presented by the British government as representing a positive "cultural change" (fi nance minister Darling), because the bonus was 90% down on the previous year and was the "absolute legal minimum".
26. See "RBS to pay bonuses worth up to $950m, Financial Times, 17 February 2009, http://www.ft.com/cms/s/0/ 81d2f4b8-fd08-11dd-a103-000077b07658.html.
27. Based on Figure 1, which shows a breakdown for nine countries. Of these in three cases the BRUEGEL authors did not identify any additional labour market measures at all.
28. It is true that this has increasingly been recognised by European governments. The recent Geithner plan in the USA, however, raises major concerns in this regard.
29. This is also vital to avoid future crises ("moral hazard"). Of course the decision on the extent of such enforced losses is a tricky one in any given instance, given the possibility of systemic repercussions
30. This would be only a small part of the decline in the top rate of income tax which is typically around 40% in European countries, whereas it was often 60% or more in the 1970s. Exceptions might be needed in Denmark and Sweden, countries where the rate has been stable in recent years at 59% and 55% respectively, http://www.kpmg.ch/docs/ MM_Individual_Tax_Rate_081110_ENS.pdf.
31. E.g. S. Schulmeister, M. Schratzenstaller, O. Picek: A General Financial Transaction Tax. Motives, Revenues, Feasibility and Effects, Österreichisches Institut für Wirtschaftsforschung, 2008, http://www.wifo.ac.at/wwa/jsp/index.jsp?fid=23923&id= 31819&typeid=8&display_mode=2.
32. Depending on coverage and the rate chosen, revenues of the order of 0.5-1% of GDP could be realised in Europe, S. Schulmeister et al., op.cit., pp. 46ff.