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In the Run-Up to the Word Economic Forum 2018

In Times of Political Polarization, Progressive Policymaking Suffers

December 18, 2017 | by CHRISTOF SCHILLER

"Internationally coordinated policy solutions have recently diminished to a dangerous extent." Photo by Evangelisches Schuldekanat Schorndorf. CC0 1.0, https://creativecommons.org/publicdomain/zero/1.0/deed.en

Social inequality, climate change, demographic change, global migration and digital transformation – these are the biggest challenges now facing the governments of EU and OECD states. How forward-looking are their responses to these challenges? And how are growing political polarization and the rise of nationalist populism affecting the policymaking of these countries?

One thing appears to be clear: the prospects for sustainable national policymaking and internationally coordinated policy solutions have diminished to a dangerous degree recently. This is one of our main findings in this year’s Sustainable Governance Indicators (SGI) from the Bertelsmann Foundation. This international monitoring tool sheds light on the future viability of all 41 countries in the OECD and EU. On the basis of 136 indicators, we assess government actions and reforms. More than 100 international experts are involved in our study.

There are always wide variations in the performance of states, but these differences have increased further with the question of how to manage the consequences of the global economic and financial crisis in a socially and ecologically sustainable way. International cooperation is stagnating as well, especially with regard to climate protection. In this context, it is alarming that the indicators show the international community to be drifting further apart in terms of quality of democracy and the development of the rule of law.

The Nordic states, led by Sweden, continue to be best equipped for the future. But even they face a whole series of difficult tasks, such as rapidly growing income inequality and the ongoing integration of refugees in the labor market. Finland is struggling with a faltering labor market on top of this and – in terms of unemployment – now only comes in at number 31 of out all 41 OECD and EU countries. Of the largest economies, only Germany and the UK still occupy positions in the top ten of the Policy Performance Ranking.

States’ employment policies perform differently

Most OECD and EU countries continued to recover economically from the consequences of the economic and financial crisis during the reporting period. This is especially true for what used to be called the ‘crisis countries’, the United States, Ireland, Italy, Spain and Portugal, where the structural reforms made to economic policy in recent years are now having a positive impact on the labor market. Ireland, in particular, has been enjoying an impressive economic policy comeback since 2015. Its debt-to-GDP ratio shrank from 120% in 2013 to 76% in 2016. Strong economic growth caused unemployment to fall to 7.2% in December 2016 and led to an increase in the number of employed, particularly among highly skilled workers.

By contrast, recent developments in the labor markets of Austria and France have been anything but satisfactory. In response, French president Emmanuel Macron has undertaken a series of structural reforms on the labor market. In addition, he recently held a keynote address in support of a fundamental reform of the EU with the goal of deeper European integration in economic and social policy. Austria’s new chancellor Sebastian Kurz, on the other hand, is going down the opposite path, striking a Euro-skeptical, nationalistic tone with the apparent goal of putting limits on European integration rather than deepening it.

Few improvements in social sustainability

Progress has been comparatively poor across countries when it comes to the question of how to ensure that more parts of society not only have better access to the labor market but can participate in the upcoming economic upswing over the long term. In the area of social sustainability, the vast majority of industrialized countries are either treading water or only making moderate improvements. This stagnation has been especially stubborn in the realms of sustainable healthcare and future-proof old-age security. This is an extremely alarming development given the fact that the baby boom generation will retire in many countries during the next few years.

In addition, social sustainability is stagnating or even declining in countries like Poland, the United States, Mexico, Slovakia, Bulgaria, Romania and Hungary. These countries were already doing poorly in this area to begin with, and their political landscapes have recently been highly polarized or marked by the advance of nationalist populism. These negative trends are most apparent in critical areas such as access to high quality, universal education and investive family policy. This development significantly widens the gulf in social policy between these countries and the leading group of Nordic states again.

Little movement in international cooperation

There is a deep divide in ecologically sustainable policy as well. Countries that already had a poor environmental policy balance, like the United States, Mexico, Poland, Australia, South Korea, Israel, Turkey and Greece, have declined even further or have not moved enough. The gulf between countries that show a high degree of international engagement and countries that opt only for isolated, uncoordinated engagement has become more firmly established too. Whereas France and Germany have further expanded their engagement in this area, the majority of industrialized countries have further curtailed their climate policy engagement as a result of the economic and financial crisis. Canada is an honorable exception here, having introduced environmental taxes, created new jobs in the renewable energy sector and championed the Paris climate agreement.

Discrepancies growing in the development of democracy across countries

The states in the study have been implementing high quality democratic processes and standards to very different degrees. There have been very alarming developments in Poland, Hungary, Turkey and Mexico. Turkey and Hungary, in particular, have significantly distanced themselves from the rest of the OECD community during the survey period again. Observers in both countries have noted extremely worrying tendencies in terms of government support for the rule of law, with essential principles such as judicial independence, freedom of the press and the effective protection of minorities being most affected. Societies in both countries can no longer automatically assume that they will be able to effectively restrain their government through the media, social groups or parliament.

Christof Schiller is project manager of the Bertelsmann Stiftung’s Sustainable Governance Indicators (SGI), a cross-national comparative survey designed to identify and foster successes in effective policymaking.

Translation from German to English: Douglas Fox

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