Slovakia: Vote against (neo)liberal reforms

Slovak elections may appear a minor event in the world or European scale (from football World Cup to Catalonian steps towards more autonomy), but in the discussion over flat tax and neoliberalism it is a significant one. The centre left party of SMER and Róbert Fico won 29 percent of the vote against the 18 percent that the main government party, PM Mikulas Dzureinda's Slovak Democratic and Christian Union. The turnout was 54 percent (which some predicted blaiming on the sunny hot weather forecasts, see Radio Prague).

I have been participating in this discussion last year in Finland, where it's a hot topic, since many on the right want to be following the 'Estonian model' after they feel the 'Swedish model' has been discredited and that change would offer them better income than the current underconceptualised 'Finnish model'. My arguments were that while flat-tax model may suit Eastern Europe, and the political and socioeconomic thinking there, it promotes a very specific conception of equality that differs from mine.

The left in Slovakia managed to mobilise on the basis of critique against the neoliberal policies of the Dzurinda's long-serving right-wing government, which in many circles have been seen as exemplary in Europe. The policies include a version of the flat-tax model, that Fico has criticized. Instead of creating a spread of wealth, these policies have contributed for instance to unemployment soaring high at 15 percent and the cut of social services and state benefits. The minimum wage in Slovakia is 1 euro. Dissatisfaction with living conditions and their effect on human rights have been eating out votes from the Sloval right-wing.

Yet, pretty much all the Slovaks I have met over the last year in the academic circles in Vienna and Budapest, have been staunch supporters of these policies, particularly the flat-tax model and the cutting down of welfare functions of the Slovak state…

Analysts of Slovak politics claim that the direction of the changes are seen as ok, even by Fico, who mainly criticizes their aspects (TOL 19 June 2006.) My point would be the similar to the the Transitions Online commentary: these elections were a critique against the reforms. While I will focus on the past below, their suggestions for future is that Fico integrates parties of the previous centre-right coalition rather than Meciar – whose voters Fico has already successfully gained to his side – and nationalists:

“He [Fico] will pursue a social democrat agenda that takes its lead not from the rigid, bloated, underperforming examples of France and Germany, but from Scandinavia, where states combine the bureaucracy-cutting qualities of the Dzurinda reforms and heavy emphasis on individual responsibility, with efforts to help the unemployed and curb social inequality. Dzurinda has stressed personal mobilization and responsibility; like the Scandinavians, Fico could keep that but, also like them, invest more in human capital.”

In the East European context neoliberal policies and the ethics of the flat-tax model can be seen already as an extension of the communists economic system. It promoted similar kind of individualism and competitiveness as the American model. Instead of developing priorities that are very different from the American model, the Soviets aimed to compete with it on the American terms, which impeded them from creating a radically different economic model. This shows now in the way in which the East Europeans manage to be the 'Little America', the test ground for neoliberalism, János Mátyás Kovács, a Hungarian professor of economics has argued. The symptoms of these policies can now be seen and the effects that Slovaks vote turned to left was because of the negative effects. Nevertheless, the supporters of the liberal policies believe, that their benefits will be seen in the long run, which would make Fico a lucky PM if he embraces some of the positive sides of the reforms.

There are a number of problems in Eastern Europe that would definitely need to be solved. These include high level of corruption, patronage system (which stagnates the employment sector), and inefficiency. Certain state run services, such as hospitals – a hot topic in Hungary, would urgently need reforms as the current state is insupportable. Here privatisation has been seen as the key to success, even though it has obvious faults: studies show that privatisation does not actually save the total expenses of the health sector. Perhaps there would be other ways to tackle the problems at stake.

What the election victory of SMER showed was, in contrast to simply applying a neoliberal model, that rethinking of the reforms, their effects and ethics is vital. Furthermore, elections where different critical alternatives are on offer (instead of offering a number of similar, for example, faithfully neoliberal parties in different colours) works as a democratic check-up mechanism on policies.

One of the issues to debate is whether equality as sameness or equality as equal opportunity was at stake in the state socialists systems or which one should be applied in the policies of today. Equality as sameness seems attractive in the postcommunist situation. Flat-tax is a prime example of this. No one likes to pay taxes, the state is corrupt and distrusted: solution is that everyone pays the same amount – or the same percentage of taxes (although this is the case only in Estonia, Slovak flat tax has different percentage stages).

One argument for flat-tax is to make the tax paying system simpler in the countries where people actually still often do not pay taxes at all. Nevertheless, this system is the harshest on the poor and lower middle classes, who have to pay a considerable amount of their disposable income on taxes. Therefore, this is not a good plan to cut down the black, untaxed labour market.

The argument for why people who earn more money should be getting the full benefit of their salaries is often made on the basis that 'they work more – they have earned it'. Of course, comparing the construction site worker on the minimum wage to the entrepreneur or bureaucrat who earned his or her job through personal connections and spends their time doing the job as well as they can, for instance, keeping up the appearances – there is no obvious difference between the amount of work and the salary.

The concept of equality in the flat-tax discourse is very different from, say, the Scandinavian welfare models. The ethics of redistribution and the generation of equal opportunity to good life is far from the model of the flat-tax. In a flat-tax system, even minimal state-run welfare functions requires a very high level of the tax rate(s).

2 thoughts on “Slovakia: Vote against (neo)liberal reforms

  1. This is a rather simplistic assessment of flat taxation, the precise mechanics of which can vary hugely, and tends – like its advocates to confuse flat taxation with low taxation. In fact some flat tax states have quite high rates.

    Your remark that “neoliberal policies and the ethics of the flat-tax model can be seen already as an extension of the communists economic system” also makes little sense . It makes sense only in the sense that both are economistic and concerned with efficiency and productivity. In this sense, social democracy and social liberalism would also be “extensions of the communist system”, Basically, it is a rather cheap throwaway remark, which doesn’t really stand up to critical scrutiny.

  2. Thanks for your comment, John. I agree, there have been calculations on how high a flat tax should be in order to sustain a certain level of public funding (of services) – and these in welfare systems like Finland would imply that the tax ought indeed be very high.
    Indeed, social democracy was a RESPONSE to the socialist system created basically out of the fear of the calls for an actually existing socialist system and those for greater social justice in postwar Europe (a good read on this would be Tony Judt’s Postwar).
    Nevertheless, let me stress again the relation between communist economic system and the postcommunist turn to neo-liberalism. The individualism inherent in those two systems – and the sense of equality as the (finally very uneven) equality under the state power rather than actual sharing and redistribution are very similar. They therefore set those two systems apart from the social or christian democratic ones.
    In this piece I did not seek to explore flat-tax systems as such. My main argument here has been that IF taxation models are not related to notions of equality, fairness and so on, which are value judgements rather than scientific truths, they are in fact very simplistic.

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