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Karolina Ekholm: Making reform happen today

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Karolina Ekholm: Making reform happen today

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Karolina Ekholm: Making reform happen today

  1. 1. Making reform happen today Karolina Ekholm OECD 29 November 2019
  2. 2. Challenges for making reform happen ● Fragmented political landscape resulting in minority governments or coalition governments made up of parties with different agendas. – Low political returns on compromise. – High political cost for breaking election campaign promises. – High risk of reversal of reform in connection with change of government. ● Weak public finances. – Need to finance reforms with tax increases/spending cuts.
  3. 3. Focus on reforms that increase efficiency as well as equality Efficiency Equality
  4. 4. Examples of reform areas ● Access to high-quality education and health care ● Competitive markets to reduce monopoly rents ● Efficiency of tax collection ● Social insurance with workfare elements (requirement to engage in active job search, participate in education programmes etc.) ● Women’s labour market participation (individual taxation, subsidized child care, access to elderly care)
  5. 5. Rise of populism and radical right have contributed to political fragmentation ● Attract and mobilize voters with low trust in establishment. – And perhaps more generally distrust in others. ● Claim that reform can be financed by reducing immigration rather than increasing taxes/reducing spending. – Appealing narrative in countries facing fiscal constraints.
  6. 6. Evidence from Sweden ● Study by a group of researchers led by Torsten Persson finds that the rise of the radical right (Sweden Democrats, SD) partly can be explained by the consequences of economic reforms for inequality. ● Have mobilized economic losers with low trust, partly by coming from the same group. – Share traits with their voters, unlike the other parties.
  7. 7. Increased inequality and job insecurity linked to increased voter share of SD Source: Dal Bó, E., F. Finan, O. Folke, T. Persson and J. Rickne, ”Economic losers and political winners: Sweden's radical right”, 2018 Vulnerable insiders = workers in occupations with relatively high routine task intensity.
  8. 8. Increase in inequality partly result of economic reforms Disposable income of insiders and outsiders (based on the size of labour income) Source: Dal Bó, E., F. Finan, O. Folke, T. Persson and J. Rickne, ”Economic losers and political winners: Sweden's radical right”, 2018
  9. 9. Embrace the engagement of young people ● Risk that young generation sees future in bleak terms. – Climate change – Slow growth with poor job opportunities – Poor access to housing – Violence ● Important with reforms directed to the needs of young people. ● Engagement by young activists effective in mobilizing support for reforms.