The end of the era of contentment?

The current Euro crisis could be an opportunity for change because it has created the conditions to question the assumptions on how societies should be arranged. The main challenge in this regard is wether or not the culture of contentment that has prevailed in Europe during the last 50 years can be overcome.

In August 2007 credit turmoil hit the markets across the world. The greatest crisis since the 1930s had just started. Three years later countries around the world face huge budget deficits and increasing unemployment and severe cuts in public spending have taken place in most of the EU countries.

The crisis that hit first the United States of America and then expanded around the world had its origins on what possibly was the biggest housing and credit bubble in history. After the housing bubble burst banks felt short of credit, this threatened the whole economy system as banks run into panic and stopped lending money to each other. Governments had to intervene in order save the banks and indeed the whole economic system. Great sums of public money were pumped in order to try to keep the system alive leaving many countries with huge budget deficit.

In September 2008 the US government rescued the giant American International Group, Inc. (AIG) and in October 2008 the Bush administration created a $700 billion bailout plan to purchase failing bank assets. Similarly the UK government put in place a bank rescue package totalling £500 billion. The Bank Northern Rock was nationalised in February 2008 and similar action saved the Royal Bank of Scotland in November. The USA and the UK were not the only countries bailing out the banks. The German government unveiled a €500 billion rescue plan to shore up the banking system and in February 2009 it seized control of the property lender Hypo Real Estate Holding AG.

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In April 2010 the London G20 meeting agreed to tackle the global financial crisis with measures worth $1.1 trillion. The countries of the European Union initially acted in isolation but suddenly the EU showed a great degree of capacity to tackle a common problem. The EU finance ministers met in May 2010 in order to reshape the economic governance of the EU. Many historic decisions followed but the creation of a €750.000 stability mechanism for the Euro deserves special mention. In the meantime, countries like Spain, and Greece were asked to reduce their budgets in order to recover the confidence of the markets. Others like Germany, Italy and the UK followed.

Surely in an event of crisis survival is important and the political game is somehow reduced. However it was surprising to observe how quickly governments have reacted and made themselves available to rescue the banks with public money. This was remarkable especially in an era in which state intervention in economic matters is taken with suspicion. It was also scandalous to realise that once banks have been bailed out it is citizens that are suffering most of the pain. Unemployment has increased and countries are going through hard adjustment measures. Just to give an example of the scale of the cuts: Spain compromised to reduce €20.000 million from its budget for the coming two years mainly from public servants’ payment, pensions and public infrastructures. Greece committed to reduce its public expenditure in €30.000 million in the following three years. These cuts included among other measures such as they reduction in the payment of civil servants and pensioners or the privatisation of some public services.

J.K. Galbraith rightly pointed out that a severe recession or depression could shake the political economy of contentment and lead to change. In this regard we have seen a number of voters for instance in Spain trusting non-traditional parties. The voters are asking politicians to stop taking a so-called problem solving approach. They demand critical approaches; because critical approaches stands apart from the prevailing order. On the contrary, a problem solving approach takes the world as it finds it. It does not aim to change the world but to make current institutions work smoothly.

A critical approach is very costly in the short run. And that my be a problem for parties willing to operate in those parameters but it could be very valuable in the needed task to redesign a new economic system. Hopefully there will be more critics than problem solvers. Radical change is only possible once public opinion has been won and this seems to be the case in the periphery of the EU. Voters tend to dislike change and hence politicians rarely felt pressure to deliver real changes. However this time could be different and we could be having the opportunity at least start a real discussion over the possible alternatives for change.

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Subsided education: a burden for the public school system?

Current austerity measures and economic reforms in Spain include a thorough reform of the education system. The way the reform is thought would not address the problems of the education system in Spain most of which come from the existence of a semi-private state-subsided education that acts as short of burden for the public school system.

When Spain turned to democracy one of the chief social goals was to solve the perceived injustices of the previous regime. The extension of education to all sectors of society was an important way to achieve that. However, the authorities found themselves with a reduced number of public schools and an increasing population. During the Francoist regime the number of schools built was minimum. The scarcity of public schools and the impossibility to build high numbers required a different approach. Once democracy was restored the solution was to create a sistema concertado. Through this system existing private schools, many of which were in the hands of religious orders, would provide state subsided education to the general public.

This was an optimal solution both for school owners and the state. The state could provide education for “every one” and the school owners would retain their ownership and control. Even if national curricula were established, schools, which were part of this sistema concertado, still retained discretion on admission of students as well as on the policies regarding staff employment. Education in these schools was subsided, but schools soon started to charge fees for other concepts such as for instance and additional one hour of lecture a day, sports, etc. This, together with the right of schools to choose which students to admit, effectively left some students from particular backgrounds excluded. The result was that Spain had created a two-strands academic system effectively subsided by the state.

Currently, the number of children of immigrant and lower class families is higher in state schools than in school which function under the sistema concertado. There is an increasing perception that quality of education has lowered in state schools which leads families to turn to non-state schools for the education of their children, even in those families that ideologically would be strongly willing to support a public education system.

A reform of the education system should critically re-assess the Spanish goal of providing education “for every one” by looking at the state of the current Spanish school system. In particular, the assessment should focus on the extent to which the sistema concertado creates a burden for the public school system and its implications. Considering that taxpayers money pay for up to 59% of the benefits of the private education in Spain, the fundamental question we should be asking is: Is it fair to subsidise another education system at the expense of the public system?