How Greek austerity has stoked inequality
A new study, Greece: solidarity and adjustment in times of crisis, shows that the impact of the austerity and structural adjustment policies applied in Greece between 2008 and 2013, since 2010 through loan conditions imposed by the Troika (IMF-European Commission-ECB) have been overwhelmingly borne by lower-income households, resulting in a sharp increase in income inequality.
Among other things, it shows that between 2008 and 2012, taxation, which made a 72.4% contribution to ‘fiscal adjustments’, was increased by 337.7% for lower income households, compared to just 9% for higher income groups. It observes a sharp growth in income inequality between 2008-12, ‘amid growing poverty and total pauperisation of a substantial part of Greek society,’ leading to the conclusion that the ‘emergence and persistence of such divides implies that certain categories of people have come out as winners from the crisis’.
Overall, a ‘deficient crisis management approach and ideological inflexibility coupled to established political interests’ made ‘the exit from the crisis more complicated and painful’ while ‘this policy had much more destructive effects on the productive base of the economy than a spending-led adjustment process, leaving intact an inefficient, corrupt and backward public administration’.
The 140-page study by authors Tassos Giannitsis and Stavros Zografakis was published in March by Germany’s Macroeconomic Policy Institute (IMK), affiliated to the Hans-Böckler Stiftung. The abstract says:
“This report attempts to examine the impact of the crisis and crisis policies on incomes, inequality and poverty in Greece. Based on extensive income and tax data, it investigates changes in incomes, direct, indirect and property taxation and their incidence between 2008 and 2012-13, their impact on pre- and post-tax inequality and the resulting social reclassifications within the Greek society.
The report is distinguishing income by sources at the deciles level, including the top 1% and 0.1%, household and individual income while focusing also on the sub-groups of the ‘same households’ and the ‘same individuals’. Furthermore, the analysis combines unemployment and income data and uses an ‘index of despair’ reflecting the pressure felt by households hit from salary drop and unemployment.
The findings suggest that pauperisation hit large parts of the society, that policies had very differentiated effects on different groups and that, therefore, average values obscure contrasting changes in inequality regarding particular sub-groups, that during the crisis all income classes comprise winners and losers and last, but not least, that many macro-variables and social indicators were the result of a deficient crisis management approach and ideological inflexibility coupled to established political interests, making the exit from the crisis more complicated and painful.
The findings of this analysis should be assessed in the light of the severe economic depression caused by the Troika’s policies.”