Welfare and Social Issues

The social consequences of imposed austerity: the case of education

For a short period of time at the beginning of the global economic crisis it appeared that economic policies inspired by Keynesianism were back on the agenda as the governments of the advanced capitalist countries pushed for massive fiscal stimulus packages in an effort to rescue the financial sector and keep the economy afloat.

However, just as the financial stability was attained via taxpayer-funded bailouts the economic and social consequences of government interventions became apparent. Since 2010 onward public finances came under severe pressure as the joint effect of declining revenues and growing costs of the bank bailouts set in. As the public finances across Europe started to deteriorate the stimulus packages were gradually replaced by austerity measures and an ‘old’ rhetoric aimed at highlighting the beneficiary effects of fiscal consolidation was revived. In the debates that have followed the emergence of turmoil within the eurozone the supporters of the austerity politics sought to demonstrate that fiscal austerity can have expansionary effects. On the theoretical level, the notion of an expansionary fiscal consolidation was countered by commentators on the Left who argued that austerity has, since its imposition, brought compression of aggregate demand through the cuts in public expenditure and downward pressure on wages. One could argue that the social and economic conditions which are today predominantly present in the European periphery (both inside and outside the eurozone) negate the possibility of an expansionary fiscal consolidation. If one takes into account the structural divergence between European core and periphery that translates into high debt-to-GDP ratios, imbalances in the current account, race-to-bottom in terms of tax and social policy and, finally, fiscal crisis of the state, expansionary fiscal consolidation does not seem to be a viable outcome notwithstanding ‘the rationality and responsibility’ of a political administration. If one is to judge the imposition of the austerity measures in historical terms it would be very difficult to show that the austerity (a weapon of choice for the financial and political elites) has been anything more than a failed social experiment.

Although one could argue that the underfunded position of the educational system is the outcome of a political decision in the face of budget constraints, it is hard to miss the ideological push of education towards the market-based self-sustainability.

In the context of the fiscal crisis of the state which has a tendency to undermine the democratic processes it is interesting to notice that the post-socialist countries missed the opportunity to introduce any kind of radical social program (Keynesian or other) altogether. The reason for this can be found in the nominal reliance on the paradigm of export-led growth which in the pre-crisis period inevitably turned into credit-fuelled consumption-led growth. Consequently, the distinct features of the post-socialist economies, i.e. the current account imbalances and the rising external debt were often used in the public debates to indicate the inability of the government to reinforce the Maastricht rules and uphold a prudent fiscal policy. Accordingly, in the period of illusive prosperity (2000-2008) the emphasis on the EU convergence requirements with the notion of fiscal responsibility as a pillar of economic development has been a focal point of the political process, only to be sustained by even more conservative policy following the global economic slump after 2008. The divergence between the narrow economic requirements advanced within the neoliberal framework and the need to preserve key social systems can be seen most conspicuously in the case of education and scientific research.

An ideological push

The global economic crisis and the rise of austerity politics have had an adverse impact on systems of education in most post-socialist countries. The process of commodification of education has taken roots in the pre-crisis period, therefore the same basic tendencies in the educational policy can be easily observed throughout the last decade. What is at issue here is the fact that the system of education is an ambivalent realm that can bring empowerment and emancipation, but can also perpetuate class divisions and social inequality. Because of the continuous pressure to comply with the Maastricht rules in most post-socialist countries education system has been underfunded. Hence, there has been a growing tendency to shift the costs of education onto the students and their families. Introduction of tuition fees together with the growing indirect costs (housing, transportation etc.) have contributed to ‘the hidden injuries of class’ (Sennett). Although one could argue that the underfunded position of the educational system is the outcome of a political decision in the face of budget constraints, it is hard to miss the ideological push of education towards the market-based self-sustainability. In that sense, the austerity measures should be viewed as a continuation and reinforcement of the pre-crisis educational policies.

Severe cuts in funding of public universities

If we exclude fire sale of the state-owned assets, austerity measures usually revolve around budget cuts and tax hikes. An analysis of the austerity packages across Europe by the European Trade Union Institute reveals that the ”distribution of measures between budget cuts and tax hikes is skewed in favour of former” and that ”the largest adjustment will be undertaken by the countries who have sought external assistance” (Watt & Theodoropoulou, 2011). Because the primary and secondary education, as well as the higher public education necessarily depend upon public finances the implication of these measures are grave. Several post-socialist countries have requested financial assistance from the IMF (Latvia, Hungary, Serbia), while most of them resolved to make major adjustments in financing public institutions and social program. Report on the impact of the global economic crisis on European universities states several damaging aspects of austerity measures in post-socialist countries. First of all, funding of the public universities has been cut substantially: in Latvia the higher education budget was initially cut by 48% and then again by 18% in 2009 and 2010, respectively. Similarly, high budget cuts above 10% were recorded in Estonia, Romania and Lithuania. In the Central and South Eastern Europe budget cuts were also substantial, ranging between 5 – 10% in Serbia, Croatia, Macedonia and the Czech Republic. The EUA report also points out that in some countries, like Hungary, the government simply decided to disregard already established plans to increase public investment in higher education. Of course, post-socialist countries were not the only ones who experienced the destructive impact of the economic crisis. The peripheral countries of the eurozone (Greece, Spain, Ireland, Portugal) were hit hard as well, and their system of higher education deteriorated in a similar manner as the attack on the public sector spread across European periphery.

Education sector – victim of a post-socialist ideology

Budget cuts are just one form of damaging development that the public sector in general, and the educational systems in particular, face in time when ‘the capitalism hits the fan’. Other, equally disturbing processes are related to the pressures to restructure universities by virtue of affirmation the commercial principles. For example, in 2011 protests and faculty occupations were organised at the University of Belgrade against tuition fees. The organisations of the Serbian student movement pointed out that tuition fees are regularly used as money pool out of which wages and benefits of faculty and technical staff is secured as the state refuses to release additional funds following the imperative of balanced budget. In the same year the academic staff of the University of Zagreb together with Higher education union ‘Academic Solidarity’ organised strike against the market-based reform proposed by the Ministry of science and education. The aim of the new legislation was to bring the university and the economy closer together by keeping the current model of tuition fees and, at the same time,  giving incentives to faculties and research institutes to became more self-sustaining via market operations and private-public partnerships. The Croatian case is a clear example of the notion that scientific research should be used as a means of economic development and that the optimal level of the instrumentalisation of science can be achieved by exposing the research process to market mechanism i.e. by putting the product of science on the market. This trend is present across Europe and has several important implications. Humanities and social sciences are at the forefront of the neoliberal offensive against the public sector because the knowledge production in those domains cannot offer more than a few ‘products’ to the private sector. Furthermore, fundamental research in natural and life sciences will face more constraints inasmuch as the private sector is reluctant to invest in long term and therefore risky research projects. With the austerity measures in place the universities and research facilities in the post-socialist part of Europe face extreme difficulties in keeping up with their counterparts in the advanced capitalist economies. As can be seen by analysing the recent development, the imposition of austerity goes hand-in-hand with the introduction of competitive principles in the realm of higher education and scientific research. For many universities in the Central and South-eastern Europe this amounts to difficult task of doing more with less. As the EUA report notes: ”Competitive funding schemes can achieve positive effects such as increasing quality and stimulating efficiency when introduced carefully and considering the nature of the complete funding system. On the other hand, when coupled with reduced university funding, they can endanger the universities’ financial sustainability, especially when grants do not cover the full cost of the activity for which the funding is awarded.”(EUA, 2011)

Europe 2020 out of reach

Since the beginning of the crisis there has been little evidence that the implementation of austerity packages can bring economic recovery and sustainable growth. In fact, one could argue that fiscal austerity prolonged the economic stagnation and reduced social welfare in a class biased manner, forcing the most vulnerable part of the population to take disproportional part of the overall social costs of the crisis. Likewise, the connection between science, education, economic growth and social prosperity appears to be more complex than the narratives of the entrepreneurial university and technology transfer would allow us to assume. Under the present conditions of fiscal austerity, jobless recovery and growing social inequality, the goal of an increasing access to higher education as envisioned by the Europe 2020 strategy of the European Commission is effectively out of reach. The recent economic and social history of Europe is anything but smart, sustainable and inclusive. The domination of the neoliberal discourse in various spheres of social life has proven to be particularly adverse for the post-socialist countries.

Humanities and social sciences are at the forefront of the neoliberal offensive against the public sector because the knowledge production in those domains cannot offer more than a few ‘products’ to the private sector.

To counter these negative tendencies post-socialist countries must exit the destructive trajectory initially informed by the so-called Washington consensus and then fortified by the austerity measures in the period of global economic downturn. At the same time, a shift away from the notion of education as a private investment and science as a leverage for economic growth is imperative. The fiscal adjustments imposed on scientific research and education are not the result of the unavoidable economic necessities nor long term concern for social welfare as the macroeconomic data and the sociological analyses clearly demonstrate. Rather, it is an outcome of the political process that imposes its own values and short-term goals on the budget. The prospects of science and education in the European periphery depend upon the imposition of democratic accountability and policy action beyond deceitful promises of welfare via austerity.



  • Alesina, Alberto & Giavazzi, Francesco (2012) The Austerity Question: ‘How’ is as Important as ‘How Much’
  • Alternative White Paper: In Defence of the Higher Education
  • Arestis, Philip & Pelagidis, Thedore (2011) The Absurd Austerity Policies in Europe, Challenge 53(6)
  • Bilbow, Jörg (2006) How Maastricht Treaty Fosters Divergence as Well as Fragility, Levy Institute of Economics, Working Paper, No.460
  • Declaration on Science and Education, Higher Education Union ‘Academic Solidarity’
  • European University Association (2011) Impact of the Economic Crisis on European Univerisites
  • Parentau, Rob (2011) Fiscal Austerity is Not Expansionary After All
  • Ortiz, Isabel, Chai, Jingqing & Cummins, Matthew (2011) Austerity Measures Threaten Childern and Poor Households: Recent Evidence on Public Expenditure From 128 Developing Countries, UNICEF Social and Economic Policy Working Paper


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