Karolina Ekholm: Making reform happen today

1. Making reform happen
today
Karolina Ekholm
OECD 29 November 2019

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. Focus on reforms that increase efficiency
as well as equality
Efficiency
Equality

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. 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. 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. 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. 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. 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.