A Theory of Redistribution in New Democracies: How Has

Home , Hasan Polatkan, National Party (Turkey), New Democracy (Greece), New Democracy (Slovakia)

The Pennsylvania State University

The Graduate School

College of the Liberal Arts

A THEORY OF REDISTRIBUTION IN NEW

DEMOCRACIES: HOW HAS DEMOCRACY INCREASED INCOME

DISPARITY IN SOUTHERN AND POSTCOMMUNIST EUROPE?

A Dissertation in

Political Science

Ekrem Karakoç

Submitted in Partial Fulfillment of the Requirements for the Degree of

Doctor of Philosophy

August 2010

The dissertation of Ekrem Karakoç was reviewed and approved* by the following:

Michael H. Bernhard Raymond and Miriam Ehrlich Eminent Scholar Chair Department of Political Science University of Florida Co-Chair of Committee and special member

Lee Ann Banaszak Associate Professor of Political Science Director of Graduate Studies Co-Chair of Committee Dissertation Advisor

Christopher Zorn Liberal Arts Research Professor Department of Political Science

Burt L. Monroe Associate Professor of Political Science

Mark S. Anner Assistant professor of Labor Studies and Employment Relations, and Political Science

*Signatures are on file in the Graduate School

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ABSTRACT

In most new democracies, rising inequality poses a challenge to conventional theories in democratization literature because these theories predict that democracies decreases inequality through its positive effects on social welfare programs toward the poor. To the contrary, I present evidence that inequality does not decrease after democratization and ask why is that democracies cannot generate income equality. Then I explore the determinants of inequality and offer three interrelated arguments that explain the paradox between democracy and inequality. I argue that low political participation by the poor and weak political party system institutionalization increases targeted social spending for electoral purposes, thus having regressive effect on inequality. Here I discuss the linkage between social groups and political parties in some cases going back to authoritarian era in underinstitutionalized party systems and how this leads political parties to use targeted spending, which favors some social groups at the expense of the poor. I adopt a multi-method technique to test the theory because it enables this study to process the causal relation as well as generalize its findings. In particular, I use large-N method and then two paired case studies. For the latter, I take two regions of Europe that have experienced democratization since the Third-Wave and adopt „most similar system‟ research design in

Turkey and Spain in Southern Europe and the Czech Republic and Poland in the postcommunist

Europe. iv

TABLE OF CONTENTS LIST OF FIGURES……………………………………………………………………...... viii LIST OF TABLES…………………………………………….……..…………..……….……..ix ACKNOWLEDGEMENTS……………………………………………………………………..xii

Chapter 1 ...... 1

Research Question ...... 1 Why New Democracies in Europe? ...... 7 Comparative Case Studies ...... 9 Summary of Sections: The Organization of The Dissertation ...... 13

Chapter 2 ...... 17

Theory ...... 19 Turnout and the Poor ...... 23 Electoral Coalitions and Politics of Redistribution ...... 25 The Effect of Weak Political Party Institutionalization ...... 29 The Effect of Volatility on Social Spending ...... 32 Targeted Spending and Income Inequality ...... 36

Chapter 3 ...... 46

Testing the Theory ...... 46 Model for Targeted Spending ...... 48 Dependent Variable: Targeted Spending ...... 48 Main Independent Variables ...... 50 Control Variables ...... 51 Economic Factors ...... 52 Partisanship ...... 53 Demographic Effects ...... 55 Urbanization ...... 55 Election Year ...... 56 Model for Income Inequality ...... 57 Dependent Variable: Income Inequality ...... 57 v

Main Independent Variable: Targeted Spending ...... 57 Control Variables ...... 58 Economic Variables ...... 58 Non-Economic Factors ...... 59 Sample ...... 60 Methodology ...... 60 Results ...... 61 Findings for Targeted Spending ...... 61 Findings for Income Inequality ...... 67 Conclusion ...... 71 Next Chapter ...... 72

Chapter 4 ...... 78

Inequality and Democracy in Postcommunist Countries: Poland and the Czech Republic ...... 78 Social Policy and Inequality under Communism ...... 83 Poland ...... 89 Communist Poland ...... 89 Post-transition Era ...... 94 Voter Turnout ...... 97 Political Parties, Social Policy and Electoral Volatility ...... 102 Political Parties and Their Constituencies ...... 102 Social Policy and Volatility ...... 107 Social Policy in the Early Years of Transition ...... 111 The Czech Republic ...... 119 Communist Czechoslovakia ...... 122 Postcommunist Era ...... 125 Voter Turnout ...... 128 Political Parties and Constituencies ...... 131 Volatility and Social Spending ...... 137 Social Policy and Governments ...... 139 Social Spending and Inequality ...... 144 Conclusion ...... 152 vi

Chapter 5 ...... 204

Inequality and Democracy in Southern Europe: Turkey and Spain ...... 204 Turkey ...... 207 Turkey during the Second Wave of Democracy ...... 208 First Democratic Episode, 1946-1960 ...... 211 Social Policies 1923-1960 ...... 214 Second and Third Democratic Episodes, 1961-1971 and 1971-1980 ...... 215 Social Policy, 1961-1980 ...... 219 Post-1980 Era ...... 220 Fourth Episode of Democracy in Turkey, 1983 – Present ...... 221 Voter Turnout ...... 228 Political Parties, Social Policy and Electoral Volatility ...... 231 Political Parties and Their Constituencies ...... 231 Center-Right Parties ...... 234 Motherland Party (MP) ...... 234 True Path Party (TPP)...... 236 Democratic Left Party (DLP) ...... 242 Far-Right Parties ...... 244 The Welfare Party (WP/ VP/ PP) ...... 244 Nationalist Action Party (NAP) ...... 246 Justice and Development Party (JDP) ...... 248 Social Policy and Electoral Volatility ...... 251 Social Policy in the Post-1983 Era ...... 253 Spain ...... 264 Pre-Franco Era Social Policy ...... 266 Authoritarian Spain...... 267 Social Policy under Franco ...... 269 Democratic Spain ...... 270 Voter Turnout ...... 274 Political Parties, Social Policy and Electoral Volatility ...... 277 vii

Political Parties and Their Constituencies ...... 277 The UCD...... 278 The Popular Party (AP/ PP) ...... 279 Partido Socialista Obrero Espanol (PSOE) ...... 281 Targeted Social Policy and Volatility ...... 283 The UCD...... 285 The PSOE ...... 286 The PP and Social Policy...... 291 Social Spending and Inequality ...... 293 Conclusion ...... 298

Chapter 6 ...... 338

Conclusion ...... 338 Social Policy Legacies of Authoritarian Regimes ...... 341 Labor Market Insiders and the Continuation of Hierarchical Social Policies ...... 343 Political Party Institutionalization ...... 344 Populism ...... 347 Turnout ...... 349 Multi-Method Approach ...... 349 References………………………………………………………………………………………352

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LIST OF FIGURES Figure 1.1 Gini Coefficients Before and After Transition...... 16 Figure 2.1 The median voter versus median likely voter and redistribution...... 43 Figure 2.2 Volatility Scores across Regions...... 44 Figure 2.3 Illustrating Theory...... 45 Figure 3.1 Marginal Effect of Volatility on Targeted Spending by Turnout in New Democracies...... 76 Figure 3.2 Marginal Effect of Volatility on Targeted Spending in in Long-Standing Democracies...... 77 Figure 5.1 Comparing Targeted Spending in Turkey and Spain...... 337

LIST OF TABLES

Table 2.1a Turnout of the Poor Across European Democracies…………………………….39 Table 2.1b Turnout of the Poor Across European Democracies...... 40 Table 2.1c Turnout of the Poor Across European Democracies...... 41 Table 2.2 Governments in Europe, 1990-2006...... 42 Table 3.1 Weak Party Systems, Turnout and Targeted Spending in Europe...... 73 Table 3.2 The Conditional Effect of Volatility by Turnout in Europe...... 74 Table 3.3 Targeted Spending and Inequality in Europe...... 75 Table 4.1 Demographic Change in Poland under Communist Regime...... 153 Table 4.2 Occupational Groups and Change in Income in the 1980s ...... 154 Table 4.3 Economic Indicators in the Early Years of Transition in Poland ...... 155 Table 4. 4 Voter Turnout and Sejm Elections...... 156 Table 4.5 Abstention Rate by the Poor and the Non-Poor (%) in Polish Elections...... 157 Table 4.6 Turnout by Pensioners in 2001 and 2005 Elections...... 158 Table 4.7 Difference in Turnout, Pensioners, and Non-Pensioners (%)...... 159 Table 4.8 Union Membership...... 160 Table 4.9 Turnout and Religious Attendance, 2005 Elections...... 161 Table 4.10 Union Membership and Party Choice (%)...... 162 Table 4.11 Union Membership and Party Choice (%)...... 163 Table 4.12 Union Membership and Party Choice (%)...... 164 Table 4.13 Level of Education and Party Choice (%)...... 165 Table 4.14 Retired and Party Choice (%)...... 166 Table 4.15 Retired and Party Choice (%)...... 167 Table 4.16 Retired and Party Choice (%)...... 168 Table 4.17 Major Income Source and Party Choice (%)...... 169 Table 4.18 Major Income Source and Party Choice (%)...... 170 Table 4.19 Major Income Source and Party Choice...... 171 Table 4.20 Role of Governments in Inequality by Party Choice (%)...... 172 Table 4.21 Religious Attendance and the Party Choice (%)...... 173 Table 4.22 Volatility in Polish Party System...... 174 Table 4.23 Polish Governments, 1989-2006...... 175 Table 4.24 Percentage of Pensioners In Poland, 1993...... 176 Table 4.25 Subsidies and Social Expenditures in Central Europe, 1989-1995...... 177 Table 4.26 Protest Participation Across Social Groups (%)...... 178 Table 4.27 Economic Indicators of the Czech Republic, 1991-1999...... 179 Table 4.28 Voter Turnout, the Czech Republic...... 180 Table 4.29 Abstention Rate by the Poor and the Non-Poor...... 181 Table 4.30 Religious Attendance and Party Choice (%)...... 182 Table 4.31 Current and Previous Union Members and Turnout (%)...... 183 Table 4.32 Turnout and Retired, 2002 Elections (%)...... 184 Table 4.33 Elections Results...... 185 Table 4.34 Occupational Groups and Party Choice (%)...... 186 Table 4.35 The Role of Governments in Reducing Inequality...... 187 x

Table 4.36 Union Members and Their Party Choice (%)...... 188 Table 4.37 Retired People and Party Choice (%)...... 189 Table 4.38 Party Supporters and Support for the Role of Government in Reducing Inequality...... 190 Table 4.39 Major Income Source and Party Choice (%)...... 191 Table 4.40 Volatility in Czech Republic...... 192 Table 4.41 Comparing Poland and the Czech Republic...... 193 Table 4.42 Social Security Contributions...... 194 Table 4.43 Targeted Spending in Poland (% GDP)...... 195 Table 4.44 Targeted Spending in the Czech Republic...... 196 Table 4.45 Targeted Spending in Poland, OECD Public Social Expenditure (% GDP)...... 197 Table 4.46 Targeted Spending by OECD and Transmonee (% GDP)...... 198 Table 4.47 Targeted Spending in the Czech Republic...... 199 Table 4.48 Targeted Spending, The Czech Republic, 1990-2003...... 200 Table 4.49 Gini Coefficients, Poland, WIID2b...... 201 Table 4.50 Gini Coefficients, The Czech Republic, WIID2b...... 202 Table 4.51 Standardized Gini Coefficients, 1990-2006...... 203 Table 5.1 National Election Results (1946-1957)...... 300 Table 5.2 Parliamentary Election Results, 1983-2002...... 301 Table 5.3 Real wage and salary index for Turkish work force, ...... 302 Table 5.4 Private and Public Sector Wages (Average), 1985-1991...... 303 Table 5.5 Turnout in Turkey, 1983-2007...... 304 Table 5.6 Abstentions and Votes for Parties from the RPP and DP traditions (%)...... 305 Table 5.7 Turnout by Occupation (%), 2007 Elections...... 306 Table 5.8 Votes by Level of Education, 2007 Election...... 307 Table 5.9 Urbanization/ Literacy Level (%)...... 308 Table 5.10 Urban Votes of the RPP...... 309 Table 5.11 Social Groups and their Vote Share (%), 2007 Election...... 310 Table 5.12 Turkish Governments in the Post-1983 Era...... 311 Table 5.13 Volatility, 1983-2002 ...... 312 Table 5.14 Number of Pensioners in the post-1990...... 313 Table 5.15. Social Transfers for the IIA...... 314 Table 5.16 Social Transfers in Turkey...... 315 Table 5.17 Collective Agreements in Turkey and Number of Workers Covered (thousands)...... 316 Table 5.18 The Structure of Spanish Economy, 1940-2000, (% of Labor Force)...... 317 Table 5.19 Social Protection Before and After Transition in Spain...... 318 Table 5.20 Social Classes before Transition...... 319 Table 5.21 Voter Turnout, Spain...... 320 Table 5.22 Spanish Elections, 1977-2004...... 321 Table 5.23 Class Identification and Party Preference by Cohort (%), Spain...... 322 Table 5.24 Comparing the pre-Franco era with the 1977 Elections...... 323 Table 5.25 Spanish Governments, 1977-2009...... 324 Table 5.26 Intra and Interbloc Volatility in Spain (%)...... 325 xi

Table 5.27 Volatility in Individual Level...... 326 Table 5.28 Sources of Social Protection in Spain...... 327 Table 5.29 Spanish Social Pacts, 1977-1986...... 328 Table 5.30 Spanish Social Pacts, 1994-2005...... 329 Table 5.31 Unemployment Benefits during the PSOE, 1983-1989...... 330 Table 5.32 Turkey and Spain in Comparison...... 331 Table 5.33 Population above 65 years in Comparison (%)...... 332 Table 5.34 1987 and 1994 Household Surveys of Turkey, Income Quintiles...... 333 Table 5.35 Gini Coefficients, Turkey…...... 334 Table 5.36 Gini Coefficients Before and After Social Transfers in Europe...... 335 Table 5.37 Gini Coefficients of 1980-2001, Spain...... 336

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ACKNOWLEDGEMENTS I am grateful to a number of scholars, friends and a number of coffee shops across the globe during my graduate study. For me, State College has been a fertile ground where I have developed research interest in inequality, social policy and political parties. When I was having difficulty making sense of disconnected but relevant literatures, my advisor Michael Bernhard‟s insights helped me save from suffocation. He has read each chapter and then whole dissertation a number of times and gave very timely and most insightful comments. Moreover, over time, we have also developed a common research agenda where we worked on a number of projects. Without his assistance, my graduate training and the development of my scholarship would take much longer than one can anticipate. During my graduate study at Penn State, Lee Ann Banaszak inspired me with her unlimited optimisim and encouraged me to develop a good theoretical work and a good research design. I am also grateful to Mark Anner, who was very informed about how political and economic actors operate in the ground. I am hopeful that I will be able to benefit from his insight and vision that led me to go to the ILO meeting and benefit from may conversations with political, business and union leaders in Switzerland. Chris Zorn was great saving me from many occasions when I was not sure which way to go. He is the one making things easier for me and many other in the department. Burt Monroe led me to think about how to make theory more concise and I am grateful for all their help. Donna Bahry was also helpful at the initial stage of this work. Many friends from my undergrad years and graduate school have made my life easier, and without their assistance, I would not be able to make it today to write these acknowledgments. In particular, Fatih Mehmet Sula, Tatiana Vashchilko, Andreea Mihalache, Sushmita Chatterjee, Paula Golombek, Faten Ghosn, Kanisha Bond, Martha Thomas, Julie Sandell Pacheco, Young Hun Kim, Birol Baskan, Nga Phuong Nguyen, Yunus Kaya, Talha Kose, Arif Orcun Soylemez, Emre Hatipoglu, Jiso Yoon, Simone Dietrich, Sara Edwards, Onur Yavuz, Ilhan Kubilay Geckil, Bilgin Erdogan, Zaid Balushi, Muhammad Atiyat,Mustafa Erbakan, Najeem A. Adeleke and many friends in the State College Turkish and Islamic Community. As a good friend, Fatih Mehmet Sula came to State College whenever I need his assistance and gave the most insightful comments, not necessarily academic. Paula Golombek kept me encouraging and she was there when I was unsure whether I am doing good or not. Andreea and Tatiana have made my life particulary bearable in State College and I am grateful all three of them. I should add that my day with Andreea at Barnes and Nobles were one of the most productive times. My graduate training took longer than I expected and my family has been the most patient. I am grateful to my mom, Sŭryal Karakoç, my late father Kemal Karakoç, my sister Nilgŭn Sevinç, my brother Sabri Karakoç and my nieces; Zeynep Hazal Sevinç, Ayşe Sinem Sevinç and Incinur Karakoç . I hope my doctoral study in the US will be worth losing many years during which I was not able to have good communication with many people I love.

Chapter 1

Research Question Does democracy reduce income disparity? Conventional approach in political economy literature argues that democracies are responsive to majorities and thus should generate income equality (Acemoglu and Robinson 2006; Boix 2003; Ghorbarah, Huth and Russett, 2004; Mcguire and Olson 1996). They suggest that the disadvantaged have voice in democracies because they can turn numerical into political advantage and demand redistribution. In fact, several studies confirm one important assumption -- that democracies see significant increases in social spending in the aftermath of transition from authoritarianism (Huber, Mustillo and Stephens 2008; Lake and Baum 2001).

Another fundamental assumption in these studies is that this increased social spending goes to the majority, mostly the poor because democratic leaders need a larger winning coalition than authoritarian leaders, and thus choose policies with an eye toward improving their electoral chances (Acemoglu and Robinson 2006; Bueno de Mesquita,

Smith, Siverson and Morrow 2003).

This study argues that despite such theoretical expectations new democracies do not show any remarkable capacity to reduce income inequality following transition.

Most new democracies have maintained their inherited inequality levels or have shown increases over time. Figure 1.1 presents change in inequality levels across thirty-one new and established democracies by comparing their inequality levels under authoritarianism, during transition and under democracy, starting from 1975 to 2005.1 Overall the

1 Please note that the transition year varies across countries. For example, it is 1989 for

Poland, but 1975 for Spain. 2 significant increase in mean inequality across new democracies seems to contradict the conventional expectation that democracy should reduce inequality. The table, which provides us a comparison that controls for growing inequality across the globe, indicates that the increase in inequality in new democracies is especially large. While the mean increase in inequality between the transition year and the posttransition year (2005) is about 7.2 points for new democracies, it is around 1.2 points for established democracies.

The increase in inequality is more than double in new democracies. This difference begs for an explanation.

[Figure 1.1 about here]

These empirical observations do not conform to theoretical expectations and are thus quite puzzling. Why is it that some new democracies have difficulty generating income equality? This remains an important puzzle because the majoritarian and redistributive character of democracy lies at the center of democratic theory. Meltzer and

Richard (1981) and other studies such as Acemoglu and Robinson (2006) and Bueno de

Mesquita et al (2003) would lead us to believe that a transition to democracy should lead to increased taxes for the rich, and, as a result, a more equitable distribution that increases the welfare of the average citizen (voter). However, Figure 1.1 belies this expectation.

This dissertation takes up the task of explaining this puzzle in the political economy literature: Why do new democracies promote inequality? Recently some scholars have been skeptical of theories concerning the relationship between democracy and inequality (Ross 2006; Haggard and Kaufman 2008; Keefer 2007); however, theoretical explanations have not been definitively framed. Contrary to the expectation that democracy should improve the lives of the have-nots and reduce inequality, this

3 study both shows and explains why new democracies fail to deliver on their economic promises. However, this claim is made with an important caveat: this study does not endorse a claim that countries would be better off if they remained authoritarian. The aim of this study is to develop a systematic theory and account for the persistence of inequality in hopes of contributing to burgeoning literature that examines the democracy/inequality relationship. Accounting for the persistence of economic inequality in new democracies is important because academics and policy-makers adhere to the promotion of democracy for improving the life of the disadvantaged (Sen 1999; Diamond

2008). In other words, this study offers a new theory to explain why these promises are not fulfilled in new democracies, and applies it to the study of new democracies in

Europe.

This new theory is based on the two interrelated arguments. The first of these maintains that the role of low electoral participation by the poor and weak political party institutionalization in new democracies cause high levels of “targeted” spending, which has a negative effect on income equality. This idea questions well-established assumptions on the voting patterns of socioeconomic groups. Previous studies assume a normal distribution of voter turnout or abstention, ignoring the fact that the disadvantaged tend to vote less frequently because of lower levels of material resources and social capital, or a weaker sense of political efficacy when it comes to having an impact on politics and public policy (Dahl 1961; Lijphart 1997; Barro 1997; Solt 2008). This study shows that the low political participation of the poorest parts of society has implications for social policy formation that negatively affect the poor, and suggests that economic inequality translates into political inequality in new democracies.

In addition to turnout, weak political party institutionalization shapes distribution of domestic resources at the expense of the poor, giving more leverage toward organized groups and those who have higher voting turnout. Such behavior undermines the assumptions that underlie the conventional wisdom which takes for granted that new democracies have stable political party environments that resemble those of long- standing democracies, and thus generate increased social spending to mitigate deprivation and reduce inequality. In this respect, weak party institutionalization increases electoral uncertainty and provides parties with strong incentives to use social policies to secure their own electoral base. It leads political parties to resort to particularistic and targeted social spending to overcome trust and credibility shortcomings (Keefer 2007; Kapstein and Converse 2008).

Finally, while these factors tend to increase level of targeted spending, they have a drastic effect on our main dependent variable: income inequality. Targeted spending refers to public cash spending by governments to benefit their electoral bases. As targeted spending excludes the poor in distribution of domestic resources, it is expected that it will have a regressive effect on income equality. In contrast, the poor is able to benefit from universal social policy such as education and health-care spending. Their coverage is wider, helping the poor to benefit and use it as an opportunity to increase their well-being and climb up the social mobility ladder.

The contributions and implications of this study are manifold. First, it contributes to our understanding of the relationship between democracy and inequality. It suggests that certain assumptions political economy literature has regarding voter turnout or the presence of stable political party institutionalization must be reconsidered. Modifying

5 these assumptions, it offers a new version of Median Voter Theory: Median Likely Voter

Theory. Second, it emphasizes and analyzes the effect of volatility in political party systems in new democracies and how high volatility leads to social policies that do not reduce economic inequality. It brings together a variety of literatures – democratization, social policy, income inequality and political party system institutionalization literature-- to solve the riddle of why transitions to democracy can lead to greater inequality. Third, the combination large-N and case study methods and a diverse range of data sources are meant to contribute to the bourgeoning multi-method approach in political science.

In addition, the theory and the findings of this dissertation have some implications and contributions to welfare state and social policy studies as well. For example, Rudra

(2008) recently argued that the middle class rather than the poor were most affected by globalization. This is because the former was never a beneficiary of state social policies, whereas the middle classes, who benefited from government programs, were not powerful enough to resist retrenchment in developing countries. However, this study challenges her argument and shows that is the poor, not the middle class, that is most affected. This may be because transitional politics are geared towards demobilizing the labor force and other active segments of society. Additionally, this study augments

Haggard and Kaufman (2008) who emphasize the importance of previous social policies on present ones. Similar to Pierson (1994) and Campbell (2003), it emphasizes policy legacies and shows how groups fight against the retrenchment of programs of which they are the beneficiaries at any cost. This study also highlights an overlooked dimension of social policy formulation in democracies -- and how policy outcomes are affected by the weak institutionalization of political parties.

The findings contribute to studies on pension programs in Europe as well. In particular, it adds postcommunist countries to findings by Lynch (2006) who argues that occupational pension systems contribute to fragmented and particularistic social policy programs in democracies. Due to the legacy of communism in Eastern Europe and the former Soviet Union, and etatist economic policies in Southern Europe, occupational social insurance programs have remained an important element of social policy. In the aftermath of transition, social policies have continued to privilege some occupational sectors and this was exacerbated through early retirements or high replacement rates in certain occupations. In other words, the occupational systems in most of the new democracies create opportunities for politicians to use social policies for their particularistic goals (Lynch 2006). These groups not only vote in higher proportions but possess more resources with which to affect the policy-making process (McAdam,

Tarrow & Tilly 2001). As the failed healthcare reform of the Clinton era shows, the lobbying effort of these groups in the face of the weak mobilization of the groups that benefit from this reform may shape the formation and persistence of inefficient social policy (Brady 2009). In particular, the findings of this study support Lynch (2006) who shows the importance of pensioners as an important beneficiary of welfare state. Through early retirement and other policies that benefit certain age groups in specific occupations, pensioners have increased their leverage and become an important constituency in highly volatile electoral contexts. In Poland, for example, retired people constitute an important percentage of electorate, such as up to 30 percent of electorate. In this respect, this study adds to the literature on the influence of pensioners on welfare spending and shows that

7 pensioners become one of the most important beneficiaries of welfare spending

(Wilensky 1975; Pampel and Willamson 1989).

To reiterate, this study argues and finds empirical evidence that the expectations for increased social spending and a reduction in inequality does not hold in new democracies. It presents clear evidence of the persistence of inequality in new democracies and then explains the causal mechanisms behind this outcome using multiple methods of inference. First, it confirms the basic theory proposed in a time- series cross sectional analysis of 30 European countries. Then it adopts an approach of cross-case and within-case analyses to document the causal mechanisms at play in individual cases to overcome limitations of large-N studies on social policy (Haggard and

Kaufman 2008; Gerring 2004). It relies on two paired case studies of new democracies, one set in postcommunist Europe and the other in Southern Europe, to more fully specify the causal mechanisms that underlie the theory and in identifying instances where the general theory does not fully work in particular contexts.

Why New Democracies in Europe? The rapid increase in the number of democracies globally as well the occasional reversals of democratization processes since the 1970s have led scholars to investigate the factors that affect the survival and consolidation of democracies (Bernhard,

Nordstrom and Reenock 2001; Reenock, Bernhard and Sobek 2007; Slovik 2008; Sing

2010). Regardless, all processes of democratization have created some winners and losers, leading to conflicts of interest amongst different socioeconomic groups. In some cases this has proved to be no impediment to democracy whereas in others it has

8 provoked military coups and reversions to dictatorship. This study confines itself to studying democratization in Europe for several reasons. First, this region hosts significant number of the democratizing countries that have not experienced regime change since their transition to democracy. This continuity enables us to test the theory in a maximum number of countries controlling for a number of regional factors. Other regions especially

Latin America had similar experiences but in terms of the number of countries in which we can test the theory is more limited. In addition, a European sample allows us to control for unobserved heterogeneity across countries. The region (including Post-Soviet region such as Baltic countries) also hosts countries that have started democratization almost at the same time. The Southern European and postcommunist countries made transitions to democracy in the mid-1970s and late 1980s-early 1990s respectively

(Turkey being an exception in 1983). The advantages of doing cross- and within- case study analysis in these two regions of Europe is that both sets of democratizations are temporally proximate and allow us to reduce the effect of both time related factors and unobserved factors on our variables of interest.

Another advantage of a European sample is that it allows for the control of global trends in inequality, something that is warranted in the period since the 1970s. Europe with a comparison group of long standing, highly developed democracies that stand at the center of the global economy provide an effective way to control for the effect of general trends in the world economy. In our large-n analysis we include long-standing democracies to control for whether the inequality we see in new European democracies is explained by an upward global trend in inequality world-wide. This enables us to show whether new democracies are different from long-standing democracies and whether our

9 key independent variables operate differently in new democracies. The findings suggest that as new democracies reduce party system volatility and increase voter turnout, targeted spending and inequality will drop. Finally, this study chose Europe because it is the only region in the world that can provide the kind of data with which to test the theories. No other region can do so at this time.2

Comparative Case Studies A substantial part of the dissertation is composed of two sets of paired comparisons, one drawn from the postcommunist Europe (Poland and the Czech

Republic) and one from Southern Europe (Spain and Turkey). Both sets of comparisons will include observations that exhibit variation on the main independent and the dependent variable (high volatility/high inequality and low volatility/low inequality).

The case studies will examine patterns of voting turnout, the development of the political party system, and the struggle over social spending by organized interests and political parties.

In order to increase confidence in the causal connections between the variables, the two paired case comparisons use the process-tracing method. Process-tracing is an important tool to understand causal mechanisms. It provides “a continuous and theoretically based historical explanation of a case, in which each significant step toward the outcome is explained by reference to a theory that makes process tracing a powerful method of inference” (George & Bennett 2005: 30). Causal relations among variables,

2 Countries in our sample can be found at Appendix A.

10 starting from the authoritarian era can tell us about the mechanisms by which they affect each other and also point out when they do not work.

With regard to case selection, I will now discuss its criteria for this study. In terms of party system volatility (the Pedersen index), postcommunist countries have unprecedentedly high levels of volatility and the new democracies of Southern Europe have more moderate levels. But both regions exhibit a range of volatility as well. In combination with different levels of income inequality and patterns of social spending, this allows me to test my theory over a set of cases that vary broadly in terms of volatility. These two regions provide sufficient variation both across and within in order to test the theory in a small-n context.

In designing research, I rely on „most similar systems design‟; that is to say, I choose cases with similar socioeconomic and political variables. In selecting these cases,

I have followed the suggestion of Seawright and Gerring (2008) to choose a combination of most similar comparison to avoid the pitfalls of selection bias in the case selection variable (Geddes 2003; King, Keohane and Verba 1994). In other words, I have selected case pairings that are most similar in terms of their control variables, but still exhibiting a range of variation in the main independent variables.

Postcommunist countries present a unique opportunity to explain the variation in social spending because these countries had similar “welfare state structures, featuring centrally administered, budget-financed, comprehensive though poor quality, social provision” (Cook 2007:23). It enables me to control different socioeconomic and political variables. Among the postcommunist countries, I chose the Czech Republic and

Poland because they are very similar in many of the control variables. Both countries

11 have successfully consolidated democracy and market economies. Both countries have ethnically homogenous societies, had similar trajectories in the Soviet bloc and entered the EU at the same time.

Despite these similarities, these two countries have followed very distinct social policies following transition. In the early phase after the transition Poland began by reforming only its in-kind benefits such as subsidized housing or goods. Attempts to reform pensions or other social programs were strongly resisted by unions that successfully mobilized to block such efforts in the early 1990s. Despite this, starting from the mid-1990s, the government was able to restrict social benefits (Gorces et al

2003) as unions were fragmented and lost their initial momentum (Cook 2007:200). On the other hand, the Czech Republic was able to keep their spending constant by only introducing only small incremental changes in the early post-transition years. After a period of weakening economic performance and less political instability in the late 1990s, the Czech Republic was forced to embrace policies of retrenchment and spending reduction. These inverse trajectories in social spending in the two provide inferential leverage to tease out the causal mechanisms behind the growth of inequality. The chapter on postcommunist countries will examine how a low volatility/low inequality (the Czech

Republic) and high volatility/high inequality case (Poland) differ in terms of how they allocate social spending.

For Southern Europe, important factors such as an imperial legacy, the importance of the European Union (EU), the role of the military, the place of the traditional family in a social safety net and other factors, Turkey and Spain come close to fitting the criteria necessary for „most similar systems‟ research design, compared to

12 other potential pairs in Southern Europe. Many of their socioeconomic and political similarities stem back to their histories prior to the recent adoption of democracy. Both countries are successor states to Empires (the Spanish Kingdom and the Ottoman

Empire). In both Spain and Turkey their militaries were the dominant players in domestic politics for most of the 20th century. Also both countries aspired to be part of the EU for decades and launched various reforms to fulfill its membership requirements.

Furthermore, the traditional family, particularly in those large segments of the labor force employed in rural areas, is still important and serves as a social safety net (Gunther, Sani and Shabad 1986; Gunther, Montero and Botella 2004; Ercarnacion 2008; Kalaycioglu and Carkoglu 2007; Tugal 2007; Ozbudun 1988; Insel 1986; Bugra 2008). They also exhibit similarities in their postransition political and economic policies as both countries adopted gradual economic and political liberalization.

Nevertheless, there are important differences between the two. Most importantly they differ in terms of their modes of transition to democracy. Spain is the prototype of a pacted transition whereas Turkey is a classic transition from above. They also differ in terms of their levels of socioeconomic development (Sunar and Sayari 1986). As for their social policies, both countries followed distinct trajectories. Following the transition to democracy, there was substantially higher social spending in Spain under its social democratic (PSOE) government.

These two cases also exhibit significant variations in the variables of interest --- namely voter turnout, social spending, and inequality levels. Here to there is sufficient variation to provide the inferential leverage to examine whether the proposed causal relationship exists. This significant variation in our key variables makes the two

13 countries suitable for a „most similar systems‟ research design (Bennett and Elman 2006;

Mahoney 2007; Seawright and Gerring 2008).

Field Work This study is also based on fieldwork in all four countries, but most prominently in Turkey and Spain where it was essential to understand the relationship between organized interests and political parties. The fieldwork included interviews with state welfare bureaucrats, union officials, and political party representatives, as well as archival research in newspapers and journals, and legislative records.

These sources allowed me to understand and analyze interaction between policy- makers, politicians and the representatives of organized groups. I used an open-ended questionnaire to uncover and analyze interaction between political parties and different social groups, and the motivation that politicians hold when they expand the coverage of social policies or increase payments for pensioners. The fieldwork included an original survey conducted in Turkey, which enabled me to better understand the distribution of social policies at the level of recipients. The survey was nation-wide and included questions on voting behavior, party affiliation, whether one benefits from social programs at the local or national level.

Summary of Sections: The Organization of The Dissertation The following chapter, Chapter 2, discusses the conventional approach with regard to democratization and socio-economic equality. It briefly summarizes and then criticizes the basic argument and empirical findings in these literatures. I then offer my

14 theory of how the median likely voter in weak political party systems leads to an increase in targeted social spending, and inequality.

Chapter 3 includes two main sections. The first one examines the effect of turnout and volatility in political party systems on targeted social spending. This first section includes the research design, methodology, operationalization of the variables, and the results. This section presents evidence of how low turnout and high volatility are two consistent indicators of targeted spending. It also shows that the effect of volatility on inequality depends on level of turnout. At higher levels of turnout, the effect of volatility on inequality diminishes significantly and even is reversed. The second part of this chapter includes an analysis on the effect of targeted spending on inequality. The result suggests that targeted spending increases inequality.

Although we show the theory is supported by large-n regression analysis, case studies constitute a second and essential form of inference in this study. Case studies flesh out the mechanisms behind the main claim of this book, that the level of turnout by the poor and high party system volatility determines the level of targeted spending and increases inequality. Chapter 4 compares Poland and Czech Republic, two cases that work nicely in a most similar research design and exhibit variation on the main independent and dependent variables. The paired comparison relies on process-tracing to uncover the essential causal mechanisms.

The discussion in this chapter discusses the legacies of the past on contemporary social policy with attention to both the interwar and communist periods. Most of the chapter discusses social policy in the postcommunist period. The sources for these cases include the legislative record, interviews with party bureaucrats and union officials, and

15 the extensive secondary literature on both countries. The picture that emerges from both studies confirms the theory proposed. Poland as a country with high electoral volatility and low voter turnout increased targeted spending, and experienced a larger increase in inequality. In contrast the Czech Republic has a much more stable party system, and was able to reduce targeted spending and thereby launch a more equitable social policy that kept inequality low.

Chapter 5 examines looks at the Southern European cases of Spain and Turkey to confirm that the causal mechanisms posited indeed operate. It takes two countries, namely Turkey and Spain to show the causal mechanisms. Here I discuss social policies under authoritarian and democratic eras separately for each country. The findings suggest that targeted spending increased in a country (Turkey) with high volatility and high turnout, while it decreased in a country (Spain) with low volatility and medium-high turnout.

Chapter 6 concludes the dissertation. It reiterates the theory, findings, and discusses potential questions, and its contributions in literature. Its main focus will be on how the theory and the findings of this study contribute to political economy, democratization and political party systems literatures respectively as well as how it contributes to bridging these literatures. This chapter also talks about how the theory speaks to previous studies. In terms of its contribution, to present clearly this chapter is divided into a number of subsections that emphasize how this study contributes and speaks to relevant studies. In particular, subsections include social policy legacies, political party systems, voting behavior, populism and others respectively.

Figure 1.1 Gini Coefficients Before and After Transition.

Inequality in New and Long-Standing Democracies

Post-transition Pre-transition

27.9 Long-Standing 26.7

33.1 New 25.9

Note: N. 31. Data come from World Income Inequality Database (WIID2c), standardized gini coefficients by Solt (2009). Gini Coefficients (0: Complete equality; 100: Complete inequality). Pre-transition refers to average gini coefficients of one year before transition; Post-transition refers to the year of 2005. Sample is European new and long-standing democracies.

Chapter 2

A Theory of Redistribution in New Democracies

As discussed in the previous chapter, the persistence of inequality in new democracies is a puzzle in political economy literature. In order to solve this puzzle, I offer a two-stage theory that deals with the determinants of targeted spending and how it affects inequality. I argue that the median voter theory as currently presented is ill-suited for explaining this puzzle for three reasons. First, contrary to its assumption that „all votes‟ or „abstentions‟ are normally distributed across all socioeconomic groups, the

(extremely) poor do not vote or are less likely to vote for several reasons, including a lack of social and economic resources and low political efficacy compared with those at the upper end of the distribution spectrum. As a result, the placement of the median voter will skew toward those better off. Who constitutes the poor is an important question. For the sake of simplicity, following previous studies (Solt 2008; Franzese 2008; Hays and

Franzese 2008), this study defines the poor as those at the lowest socioeconomic ladder, identified as the lowest income quintile. The poor include the unemployed, seasonal

(agricultural) groups, unskilled workers and others. Given that the size and occupations of people and the level of the poor in each class vary across thirty-one countries, the use of the lowest income quintile for each society enables us to do better comparisons; however with sacrifice of not able to make more detailed analysis in these cases.

Secondly, the theory ignores the link between political parties and their social bases. This connection results in the overrepresentation of these groups in the making and development of social policy. Many of these connections go back to previous authoritarian eras in which hierarchical social policies privileged some social groups over

18 others. These groups were in the strategically important sectors due to economic policies

(e.g. import-substitution policies) and allied with the authoritarian incumbents. Other groups supported the democratic opposition at key junctures and became social base for newly established political parties. In sum, these groups constitute a significant portion of likely voters that political parties target in their public policies even after the transition.

Moreover, these groups are more organized and have links to political elites; thus, political parties target these groups with social benefits in order to gain their support

(Keefer 2007; Ross 2006; Rudra 2004). Third, the theory ignores the fact that political parties in new democracies operate under electoral environment with high uncertainty that creates incentive to use social policies for electoral purposes. High volatility in political party system increases the likelihood that political elites appeal to their social bases using targeted social spending such as pensions, unemployment benefits, child benefits and other cash transfers. In other words, high volatility in the party system creates incentives for political parties in government to use targeted social spending.

The effect of targeted spending on inequality is clear. As social policies benefit more likely voters within the (potential) social bases of parties, this widens the gap between the poor and the rich. Rudra (2004) argues and finds that the privileged groups in developing countries tend to benefit more from social welfare and security expenditures, compared to developed democracies. As a result, inequality increases in her cross-national analysis and targeted spending, inefficient redistribution becomes a tool to sustain in power, which widens income disparity (Acemoglu and Robinson 2001).

The chapter proceeds as follows: the first section gives a brief summary of median voter theory and then discusses its shortcomings in the context of new

19 democracies. Next, I present my theory that low turnout and volatility lead to increases in targeted social spending, which regresses income equality as political parties appeal to more likely voters, especially organized groups, by using social policies. I then present empirical evidence that the poor are less likely to vote, that strong links exist between organized groups and political parties, and that political party systems in new democracies are highly volatile.

This dissertation offers several potential contributions to existing literature. First, it offers a new version of the median voter theory: median likely voter theory. Secondly, it emphasizes and analyzes the effect of volatility in political party systems and how volatility leads to social policies that do not reduce economic inequality. It brings together a variety of literatures – democratization, political economy, and the party system institutionalization-- to solve the riddle of why transitions to democracy can lead to greater inequality. Third, the combination large-N and case study methods and a diverse range of data sources are meant to contribute to the bourgeoning multi-method approach in political science. Finally, it offers a theory that connects historical legacies to contemporary politics, emphasizing a more dynamic approach for solving an important political puzzle.

Theory

Redistribution is a policy tool that parties use in maximizing their electoral chance and takes place as a transfer of income from high income percentiles to lower income percentiles (Downs 1957). Political parties are office and vote-seekers and in order to win elections they make (binding) electoral promises. This process leads them to move toward the policy position of the median voter. The difference between the mean income

20 and median income determines the level of redistribution. If median voters are relatively worse off, then parties distribute more to narrow the gap. Later extensions of Downs‟ theory of redistribution (1957), such as Meltzer and Richards (1981), Acemoglu and

Robinson (2006) and Boix (2003), are based on median voter equilibrium and apply

Downs‟ model to explain the difference between democracy and authoritarian regimes in terms of distribution and income inequality. Their argument is built on several premises.

First, authoritarian leaders need the support of the elites and therefore favor their interests in order to stay in power, which makes them less concerned with the well-being of the poor. Second, unlike authoritarian regimes, democracies are pro-majoritarian, which means that in order to come to power, they should have the majority in parliament.

Therefore governing parties in democracies target the median voters, whose incomes are below the mean income and who push for more redistribution. This coerces political parties into implementing more redistributive policies that aim to narrow the gap between the median and mean income. The rich are taxed more and the poor receive more from redistribution. As a result of such redistributive policies, the expectation is that democracies reduce inequality. 3

[Figure 2.1 about here]

3 The conventional approaches that argue a positive link between democracy and inequality are partly correct in the sense that public/social spending increases in the aftermath of transition to democracy (Lake and Baum 2001; Huber et al 2008; Rodrik

1997). However, these studies overlook who benefits the most, which this study aims to fill in.

Challenging the conventional approaches, this study argues that the median voter theory presents an important but restricted framework for capturing how political parties work in new democracies. First, it assumes a normal distribution in which everybody votes and redistribution favors the middle and lower classes because they demand redistribution in order to narrow the gap between median income and mean income.

Figure 2.1 illustrates this point. If we take into account the probability of voting by income groups, the relevant population of likely voters will switch to the right side.

Therefore, new median voter will represent a more realistic version of distribution of social spending. The median (likely) voter‟s policy preference replaces µ0 with π1, favoring a more prosperous set of voters because the policy preferences of groups that are resource-rich are more likely to be represented by political parties in government. 4 In sum, the median likely voter will be wealthier, where redistribution favors at the expense of the poor. The next section presents empirical evidence that the better-off groups are more likely to vote, compared with the poor, who often lack economic and organizational resources. As electoral representation of the poor falls, the influence of the more well-off via voting as well as extra-electoral activities such as lobbying rises, which in turn exacerbates income redistribution (Franzese and Hays 2008).

Secondly, the median voter theory assumes that governing parties do not have preference of redistribution over certain societal groups, especially organized voters at the expense of the poor (Ross 2006; Come and Morris 1995). Political parties find it more effective to focus on segments of population that are more likely to vote and historically support the party (Rosenstone and Hansen 1993). Similarly, Gray and Caul (2000:1104)

4 The figure was created based on Larcinese (2007)‟s illustration.

22 argue that “parties target cost-effective strategies toward potential voters who are the easiest and most likely to be swayed or influenced while neglecting those who are unlikely to offer support.” Moreover, the theory also ignores prior relationships between political parties and organized interests such as unions, professional groups or small business owners, which may go back to an authoritarian era. During authoritarian eras, authoritarian elites co-opted different groups to consolidate the regime while pro- democratic alliances challenged these regimes. For example, in some countries, the working class partnered with the middle class to work for democracy, while in others, either of these groups allied with authoritarian regimes (Rueschemeyer, Stephens and

Stephens 1992; Brownlee 2007). It is not surprising that the parties that came to power in the aftermath of these transitions, have given precedence to these groups in their social policies in order to retain their support (Hipsher 1996).

As Kaufman (2009) argues, democracy empowers the middle and working classes, which are not always in favor of the transfer of resources toward the poor. In addition, the previous and current insiders of labor market favor policies that may exclude the working class poor and the poor in general from distributive policies. While some unions work diligently to keep their privileged pension and other social policy benefits, others may be complicit to cooperate with employers and governments to keep their benefits intact at the expense of the majority (Mares 2003).

Thirdly, the median voter theory assumes that political parties exist and operate in a stable political party system in which voters are informed about the policy position of the incumbent and opposition parties. This is true for long-standing democracies; however, political parties in most new democracies operate in a highly volatile electoral

23 environment, which increases the likelihood that political parties will use social policies for electoral purposes. Under such uncertain electoral circumstances, parties deviate from programmatic policies and target their social base that is likely voters, rather than designing policies that may appeal to larger segments of population. As a result, as volatility in the political party system increases, they are more likely to deviate from programmatic policies that may benefit the poor and tend to move toward those organized constituencies from which they are likely to win votes.

Consequently, as turnout by the poor and electoral volatility end up increasing the level of targeted spending, income redistribution will take place at the expense of the poor. In countries with low turnout by the poor and high electoral volatility we can expect to see an increase in inequality.

The next section will explain these concepts in greater detail and present empirical evidence on turnout by the poor, demonstrating the link between organized interest groups and political parties and the formulation of social policies within the context of new democracies. I will then discuss volatility in political party systems in new democracies and its effect on spending.

Turnout and the Poor

Contrary to assumptions of studies based on median voter theory including

Acemoglu and Robinson (2006) and Boix (2003), surveys conducted in a number of new democracies show that the poor are less likely to vote in elections compared to the middle and upper classes, thereby putting less pressure on the ruling elite. Beramendi and

Anderson (2008) in their study on OECD countries show that abstention rates in elections

24 are much higher for people below the median income. Like Goodin and Dryzek (1980), they also note that there is a negative association between inequality and voter turnout.

Decline in voter turnout comes from the demobilization of the poor (Rosenstone and

Hansen 1993). These studies suggest that the poor in these highly unequal countries tend to withdraw from formal political participation because they do not have resources to participate, or their political efficacy level is low.

Since low turnout by the poor is an essential part of this theory, and there is no empirical data on turnout by the poor in new democracies, I use data from all three waves of European Social Surveys conducted between 2002 and 2006 to test whether there is a difference between the poor and the more affluent across countries. ESSs are particularly chosen because the methodology of surveys across countries is the same, which makes it easier to compare the findings. It should be noted that since the surveys are based on the level of household, the extremely poor, who may not have housing or may otherwise be difficult to reach, are more likely to be excluded. I assume that such surveys are more likely to undercount the poor and overestimate their voting records.

Table 2.1a-c shows the poor and their level of abstention from voting across both democracies and new democracies, using all European Social Surveys, 2002-2006. Given the nature of the surveys, it is impossible to determine the lowest income quintile.

Therefore, I chose the percentages of the lowest income groups that are the most close to

20 percent. Then I calculated the abstention rate coming from the poor. The difference between the percentages that indicates the poor varies across the countries and the percentage of the abstention rate coming from the poor enables us to see whether there is disproportionate abstention by the poor. Subsequent t-tests show whether the difference

25 in abstention by the poor and the non-poor is statistically significant. The findings suggest that the poor in old and new democracies make up a significant portion of non- voters.

Except for the UK, Spain and Slovenia, the difference in abstention of voting between the poor and the non-poor in Europe is statistically significant. Among the postcommunist countries, in Hungary, Czech Republic and Poland, the difference is ten

(10), seven (7) and five (5) percent. Among long-standing democracies, such as Italy, the difference goes up to fourteen (14) percent. Other surveys, ESS 2004 and 2006 lead us to similar conclusions with different rates of abstention. For example, the 2004 survey shows that in Poland, Sweden, Slovakia, Greece, Spain and Hungary, twenty-nine (29), twenty-three (23), thirty (30), twenty-four (24), twenty-four(24) and nineteen (19) percent of people at the bottom makes up thirty-five (35), twenty-five (25), thirty-five

(35), thirty-one (31), thirty-one (31) and twenty (29) percent of abstention of voting respectively. It may seem surprising that in Turkey the difference of abstention by the poor and non-poor is not statistically significant. However, a close look at the 2002 election in Turkey shows that political apathy as a result of two consecutive economic and political crises depressed turnout, especially by the middle class (Kalaycioglu and

Carkoglu 2007).

[Table 2.1 about here]

Electoral Coalitions and Politics of Redistribution

In order to understand why the poor are disfavored under democratic regimes, we should also look at the coalitions of social groups that emerged during eras of

26 authoritarian rule. The political dynamics of authoritarianism and the transition to democracy are crucial to developing an understanding of who votes and what social groups benefit from social policies. The groups allied with the authoritarian regime or that have effectively challenged it tend to enjoy greater privilege in social policies compared with other groups. The former have continued to enjoy their privileges in new eras and thus have been the main pillar of ex-authoritarian parties, while the latter groups pressed pro-democratic parties to respond to their demands and expanded the scope of social policies or increased benefits. As a result, the working class that played a significant role in democratization has benefited from social policies extensively as a result of their ties to left parties in Latin America and Southern Europe. Similarly, small to medium business owners and rural conservative constituencies were favored by the right-wing governments in abovementioned regions.

We should also note that the configuration of political coalitions vary across countries. For example, Rueschemeyer et al (1992) emphasize the pivotal role of the working class and the middle class in pushing democratization in Latin American countries. If the working class and the middle class ally against the dominant class, such as the landowners, a transition to democracy is more likely. However, these findings as well as the observations of Jose Nut (1967) point out that the middle class is not always in favor of democratization. The middle class, threatened by the power of the working class, may ally with the authoritarian classes and defend the status quo in order to protect their privileges.

A brief historical analysis may illuminate how government preferences in redistribution are shaped by political alliances between political parties and organized

27 groups. Before universal suffrage, suffrage was restricted to privileged classes, starting with the (wealthy) male adult population, while excluding women and the poor. In order to survive, these regimes wanted to create their own supporters by providing public and private goods to them. Favoring these groups over others increased as the country developed and suffrage was extended to new groups. In latter stages of authoritarianism, these regimes have incorporated other societal groups, including workers. In return, they demanded their support or quiescence.

Empirical evidence gives some support to this interpretation. Organized groups such as the military or public service workers had priority in the social security systems of these regimes because of the ways in which the regime recruited support. Another recent study succinctly summarizes the evolution of social policies in Latin America:

“social security schemes were first established for privileged groups (military, police, judiciary, civil servants) and later extended to crucial white collar (teachers, bank employees) and blue collar (miners, railroad workers, port workers) categories, and finally to formal sector employees in general” (Huber, Mustillo and Stephens 2008:423).

Other new countries have also developed social security schemes, but they have remained more limited (Mesa-Lago 1989). Social security schemes in Turkey were mostly limited to public sector employees with generous benefits to military personnel and high-ranking bureaucrats before 1950, when the first democratic transition occurred. In the aftermath of transition, these groups have continued to benefit from existing social security schemes and developed strong linkage with major left or right political parties that defend their interests.

Opposition to the authoritarian regime can sometimes forge alliances between middle and working class groups, which extend beyond the transition. Following transition governments are more likely to be responsive to political and economic demands of groups that are part of their alliance before transition to democracy. In particular, first post- transition governments concerned about the impact of economic adjustment on their popularity is prone to provide housing subsidies, retirement packages and other benefits (Hipsher 1996). In short, both authoritarian and opposition alliances continued to be important in post-transitional politics because both are allied to political parties that are more likely to respond to their demands.

Previous democratic experience also matters. Countries with prior long-term democratic experience tend to have broader political coalitions, compared to those with no prior experience. Political alliances from earlier democratic episodes are more likely to resurface, despite the fact that authoritarian regimes use tactics, such as violence or divide-and-conquer (/rule), to weaken these groups. Unions may be localized and government-appointees may be assigned to unions or business and/or professional associations. Nevertheless, it is relatively easy to reestablish political alliances in redemocratizing countries. The strength and scope of the alliance may depend on whether prior democratic experience exists and how long the subsequent authoritarian regime endured. In other words, earlier episodes of democratic experience may result in larger political coalitions against the authoritarian regime. If so, this may also increase the scope of social policies implemented in a new democratic era. As a result, these groups receive preferential treatment from the political parties in the policy arena.

The Effect of Weak Political Party Institutionalization Compared to developed democracies, political party systems in new democracies are often highly volatile. Political parties in established democracies have been built upon deep social and political cleavage dating back to the last century (Lipset and Rokkan

1967). This stability in the political party system can be shown in the volatility scores across regions (see Figure 2). As Bartolini and Mair (1990) show, the average volatility score for thirteen Western European countries between 1885-1985 is 8.6, and this rate increases only to around 10 in the 1970s and 1980s.5 Volatility in the 1980s in Latin

America doubled this rate, and then became 28.2 in the 1990s (Roberts and Wibbels

1999). Post-communist regions have a higher volatility (37.2) than Latin American countries (Bernhard and Karakoc 2008).

[Figure 2.2 about here]

Volatility has important ramifications for the dynamics of political party systems.

In low-volatility party systems, parties are founded on deep social cleavages and have stable electoral constituencies. These parties in governments have long-term horizons in their public policies and are less concerned about electoral risk that may amount to an exit from parliament. In these stable political party systems, the likelihood that the same political party can come to power, or the same parties can establish coalition governments in the coming or next election, is predictable and substantial, compared to high volatility countries. This reflects itself with a low turnover in parliamentary or government parties.

5 These scores are based on vote share. Chapter 3 will discuss how volatility is calculated in more detail.

Table 2.2 illustrates change in governments and governing parties in stable political party systems versus weak political party systems.6 Here I compare stable political party systems of the UK and Germany with volatile ones of new democracies.

As Table 2.2 shows, although five governments seemed to be in charge, we have basically two parties in charge in the UK: Conservative Party from 1987-1997 and Labor from 1997 to the present time. Similarly, between 1990 and 2005 in Germany, Social

Democrats (SPD) and Christian Democrats (CDU) and their allies were in charge with their predictable coalition partner.

[Table 2.2 about here]

As Table 2.2 shows, the picture in new democracies is quite different. In highly volatile political party systems, the likelihood that the same parties will form future governments is low. Unlike developed countries, where existing political parties have endured for decades and established one-party governments or long-standing coalitions, political parties in new democracies have a low survival rate in governments or parliament. Naturally, as electoral risk has increased, this has also affected the duration and ability of parties to stay in power, resulting in particularly high turnover. In contrast to countries like the UK and Germany, frequent changes in government parties of new democracies are not uncommon and it has been perpetually hard to predict which party will form the government. For example, in the same time interval of 1990-2007, six different coalition governments were formed in Turkey and Poland. In Poland, the first government consisted of six parties, which did not turn out to be in government again in subsequent elections. Even in the Czech Republic with its relatively stable party system

6 http://www.terra.es/personal2/monolith/00europa.htm

31 among new democracies, the level of turnover in government parties is higher than that of developed countries.

In high volatility countries, not only is the incumbent party more likely to change, but as we see Table 2.2, the parties in coalition tend to change as a result of the highly uncertain electoral environment. The parties are more likely to have different coalition partners from one government to the next. The difference between these coalition governments and the ones in old Europe is that coalition partnership in the former has been stable over time. For instance, the Social Democrats and Greens, or Christian

Democrat Party (CDU) and Free Democratic Party (FDP) in Germany have been long- standing coalition partners. In contrast to their counterparts in developed countries, coalition governments in new democracies tend to have a short life-span. Two examples may provide clarification. In Turkey, especially in the 1990s, coalitions were highly unstable. In this decade, DYP (True Path Party) and the center-right party have formed three coalition governments with center-left parties including the CHP (Republican

Popular Party), the DSP (Democratic Left Party), the Islamic party, and the Refah

(Welfare Party). Similarly, the ANAP (Motherland Party) and the DSP, a center-right and a center-left party, also had a very short-coalition partnership. Similarly, in the Czech

Republic (considered to have one of the most stable political party systems among new democracies), KDU-CSL (Christian Democratic Union- Czechoslovak People‟s Party) had coalition governments with both the left wing party, the ODS (Civic Democratic

Party), and the center-left party, the CSSD (Czech Social Democratic Party). Although some new democracies such as Spain or Greece have more stable political party systems that resemble the UK or Germany in terms of turnover in government or long-term

32 coalition partnerships, the overall picture in new democracies remains unstable and hard to predict which set of parties will form coalitions.

In summary, high volatility, epitomized by high turnover in governments and the absence of long-term coalition partnerships in government, increases electoral risk for political parties. This pushes parties in government and parliament to pursue short-term interests, using social policies for electoral purposes (Diaz-Cayeros 2008). The next section will analyze how political parties use social policy to target certain constituencies to reduce electoral risk for themselves.

The Effect of Volatility on Social Spending There are two implications of high volatility for social policy. First, volatility brings electoral uncertainty for political parties in government. In order to survive in a very volatile party system, politicians are more likely to resort to policy tools to maximize their electoral chance. As a result, they focus more heavily on the likely voters compared with their counterparts in countries with established party systems. Extending social policies to their core constituency as well as (potential) supporters is one of the most important policy tools they possess in their effort to increase their credibility and stay in power ( Keefer 2001; Kapstein and Converse 2008).

When electoral uncertainty increases electoral risk, political elites can adjust their policies to enhance their chances of electoral success. Policies can be used to target organized groups who can turn out voters for those who provide benefits. In most cases, using social policies to support their own party base is not enough. Targeting groups that are concerned about social policies and whose likelihood of voting is high often brings advantages. Parties especially look for supporters among potential voters (those who are

33 more likely to show up at the polls) or seek to win the support of those who are weakly opposed to the party (Nichter 2008; Stokes 2005). For example, after losing around 15 points in the 1989 elections, the governing party in Turkey, the MP (Motherland Party), had to compromise its financially conservative policies by increasing pension, child and maternity, health and other benefits for public workers in order to win significant support for their newly established party. The subsequent governments in 1990s went further and made dramatic changes that have had a long-standing effect on the social security budget.

In 1991, the Center-Right/Center-Left government, the TPP (True Path Party) and the

SDP (Social Democratic Party) governments reduced the retirement age for public service workers by 20 years for women and 25 years for men. After all three coalition parties were turned out of the government in the 2002 election, the winning party, the

JDP (Justice and Development Party), extended social policies to appeal to low-level public workers and urban workers, as well as its potential supporters in poor, urban and rural areas. The JDP government has established the Social Assistance and Solidarity

General Directorate in 2004 (by transforming the Solidarity Fund founded in 1986 into a new official entity) to provide social assistance to those in need.

As a result of the electoral uncertainty prevalent in the last two decades, governments increased targeted social spending from around four percent to twelve percent of the GDP from 1983 to 2003. These patronage politics contributed to substantial budget deficits in subsequent years, which forced the JDP government to adopt the IMF‟s suggestions for social security reforms. Similar events characterized the early years of Spanish transition to democracy including „social/electoral pacts‟ between the PSOE and the UGT (The General Workers‟ Union) that favored the working class. In

34 addition, the PSOE developed policies toward the middle classes who had traditionally supported the right-wing parties. The PSOE was able to change this with targeted policies and won 52 percent of the white collar vote in 1982 (Ruiz 2001). 7 Not surprisingly, Spain reached the highest social spending level among Southern European democracies when it faced great electoral uncertainty during the first elections following the transition to democracy.

New democracies in Europe are not the only countries that use social policies for electoral purposes. In Argentina, Levitsky (2007) argues that in the aftermath of the1985 election, the Peronists have started to restructure their relationship with unions and other groups. Especially under Menem, they implemented policies that appealed to both their natural constituencies and potential supporters in the informal sector. Worried about their loss in previous elections, the PRI in Mexico and the Peronists in Argentina developed policies that appealed beyond their traditional constituencies, especially to the urban middle classes through increasing social benefits. In subsequent elections these two parties have been able to significantly increase their electoral support from the urban middle classes (Gibson 1997).

As discussed above, another consequence of volatility in political party systems is high turnover in government parties, which increases the use of social spending for short-term electoral interest. Unlike one-party government, which may design policies that find common ground for all of its diverse electoral constituencies, coalition parties are accountable to different social groups and are under pressure to implement social policies that reflect the common interest of all electorates represented by parties in the

7 However, the support was temporary. The white collar votes for the PSOE has dropped to 17 percent in 1993 (Ruiz 2001).

35 government. On the contrary, parties in coalition governments target different societal groups and prioritize the most salient issue to their target group and allow their coalition partners to do the same over their most salient issue. As Bawn and Rosenbluth (2006) and

Kemahlioglu (2008) argue, ministries that have lucrative public projects and have significant local branches across the country, such as hospitals and schools, are coveted by the political parties. This will enable the party to use the ministry for patronage purposes. As a result, one may argue that a government of a single-party that is based on different social groups and a coalition government may not be drastically different in terms of social spending.

However, as Bawn and Rosenbluth (2006) show, single party governments that are also composed of „long‟ coalitions in a society, and multi-party coalitions that are composed of „short coalitions,‟ have different electoral accountability.8 The reasoning behind this distinction is that “a party maximizes its marginal contribution to its support groups‟ welfare and externalizes costs not borne by its support groups. Short coalitions of multiple parties in government negotiate less efficient logrolls than long coalitions because policy decisions, which reflect the preferences of the coalition partner that cares most about the policy area, externalizes more costs than would occur within a single- party government” (Bawn and Rosenbluth 2006:262). As a result, multi-party governments have higher public spending compared to one-party governments, even if both represent the same groups.

As noted above, the difference between coalition governments in Europe, where

Bawn and Rosenbluth test their theory and new democracies is that even the „short

8 Bawn and Rosenbluth (2006) refer long-coalition to as loose coalitions of social groups under one political party whereas they refer short-coalitions to as parties of coalition that represent different electoral base.

36 coalitions‟ of the former are more stable. Compared to the latter, it is relatively predictable that the same parties will establish coalition governments. In the former

(long-standing democracies), it is also possible that the incumbent coalition government can be re-elected or come to power again. In contrast to older democracies, high turnover in government and/or parties shortens the life-span of their policies and leads them to develop social policies that prioritize the increase of marginal benefits to their own electoral constituencies. As a result, compared to Germany or Switzerland of long- standing democracies, the life-span of coalition governments in new democracies are more likely to be shorter and thus have strong pressures to allocate public resources to the key constituencies of coalition partners. Each coalition party will be more concerned about increasing the marginal benefit to their own constituencies and will allow other parties to do the same for their own constituencies, increasing targeted spending and thus the cost per vote.

Targeted Spending and Income Inequality Low voter turnout and high volatility in a political party system affect the use of social spending to the extent that it benefits a relatively small percentage of society. As a result, our expectation is that the lower turnout and the higher volatility cause higher targeted spending. If political power is associated with the size of the group that supports governing parties, political parties need to transfer some resources toward these groups to maintain or increase their electoral base (Acemoglu and Robinson 2001). If these groups are considered to be the electoral base of a particular party, then the policy offered should cover this group and if possible other potential groups. As we discussed above, the voting

37 record of the poor, as well as the links between parties, social groups and high electoral uncertainty works against the poor in terms of the allocation of domestic resources. As governments tend to overlook the poor and benefit the middle and upper income groups we would expect higher targeted spending. As the level of targeted spending increases, inequality will increase in new democracies.

As Figure 2.3 illustrates, targeted spending has an effect on income inequality because social spending is clustered around certain social groups, to a large extent ignoring the disadvantaged. This inefficiency in distribution will exacerbate income distribution. As resources are cut from non-targeted spending such as education and health or targeted spending toward the poor, social mobility for these groups will be a difficult task.

[Figure 2.3 about here]

The theory of this study has several contributions to literature, which I will discuss extensively in the Chapter 6. However, here I would like to briefly discuss how it speaks to relevant studies. First, the theory challenges the conventional approach that democracy reduces inequality. The conventional approach ignores the fact that democracy not only empowers the poor but also the middle classes as their voting record and their linkage to parties makes them more valuable for elections. Second, the theory casts some skepticism over Bueno de Mesquita et al (2003) who argue that transition from authoritarianism to democracy results in the higher level of public goods as a result of increased selectorate and winning coalition. To the contrary, our theory and findings show that the record of low political participation by the poor distorts public policies in new democracies.

Third, the theory here offers a more realistic picture regarding the nature of redistribution in new democracies and modifies the median voter theory. It also shows how median voter theory ignores the historical and ideological and organizational linkage between voters and the parties. Fourth, related to the issue above, the theory underlines a problem with the Downsian spatial theories that see voting as exogenous to political party systems and electoral strategies of parties. Fifth, underlining weakly institutionalized party systems this study contributes to studies such as Keefer (2007) and Kapstein and

Converse (2008), who argue that the credibility problem of political leaders in new democracies is a major problem and this promotes clientelistic policies. This study shows that the lack of credibility falls in weakly institutionalized political party systems in new democracies.

The next chapters include large-N analysis and paired case studies. Chapter 3 tests hypotheses derived from our theoretical discussions in European context. Then Chapter 4 takes on postcommunist Europe and further tests our theory in this newly democratized context. Our theory predicts that there will be more targeted spending and relatively high inequality in Poland whereas less targeted spending and relatively low inequality will be associated with the Czech Republic. Chapter 5 includes paired case study in Southern

Europe where Spain, with a relatively high voter turnout and low volatility, serves as a candidate for low inequality. Turkey represents an interesting case with its relatively high voter turnout and high volatility.

Table 2.1a Turnout of the Poor Across European Democracies Poor (%) Percentage of the Poor Among Non-Voters in the Sample (%) Italy 28 42 Sweden 26 39 Poland 32 37 Greece 29 34 Denmark 19 32 Norway 21 32 Czech Rep. 23 30 Hungary 20 30 Luxembourg 21 30 Austria 20 30 France 24 29 Slovenia 24 28 Finland 19 27 Switzerland 22 26 Germany 13 25 UK 22 23 Spain 19 22 Belgium 15 20

Data come from European Social Survey (2002) T-test indicates that only for the UK, Spain and Slovenia the difference between the poor and the non-poor in abstention of voting is not statistically significant. Poland and Switzerland are significant at p <.1.

Table 2.1b Turnout of the Poor Across European Democracies. Poor (%) Percentage of The Poor Among Non-Voters in the Sample(%) Poland 29 35 Sweden 23 35 Slovakia 30 35 Greece 24 31 Spain 24 31 Hungary 19 29 Norway 18 29 Luxembourg 18 28 UK 23 27 Denmark 18 27 Belgium 14 25 Germany 15 25 Austria 16 24 Slovenia 19 24 France 18 22 Finland 18 22 Ireland 14 20 Netherlands 13 20 Switzerland 16 20 Portugal 16 19 Czech Rep 17 19 Iceland 17 18 Estonia 13 16 Turkey 23 25

Data come from European Social Survey (2004).T-test indicates that only for Slovakia and Iceland the difference between the poor and the non-poor in abstention of voting is not statistically significant.

Table 2.1c Turnout of the Poor Across European Democracies. Poor (%) Percentage of the Poor Among Non-Voters in the Sample (%) Norway 23 34 Sweden 21 34 Switzerland 23 30 Germany 16 29 Denmark 16 28 Poland 24 28 Spain 25 26 Finland 14 22 UK 18 20 France 16 19 Slovakia 16 19 Slovenia 14 18 Portugal 13 16 Belgium 10 14

Data come from European Social Survey (2006). T-test indicates that only for UK, Spain, Slovakia and Belgium the difference between the poor and the non-poor in abstention of voting is not statistically significant.

Table 2.2 Governments in Europe, 1990-2006.

Long-Standing Democracies New Democracies

Germany UK Czech Republic Poland Spain Turkey CDU + CSU + FDP Conservatives ODS,KDU-CSL,ODA UD,WAK,KLD,PL,CD,PPP PSOE ANAP CDU + CSU + FDP Convervatives ODS,KDU-CSL,ODA SLD,PSL PSOE DYP,SHP SPD + Die Grünen Labor CSSD,KDU-CSL,US-DEU AWS,UW PP RP, DYP SPD + Die Grünen Labor ODS, small parties SLD,PSL PP DSP, ANAP,DYP CDU + CSU + SPD Labor ODS, KDU-CSL,SZ PiS, LPR, SRP PSOE, PNV and UiC ANAP DSP MHP PO, PSL AKP

Germany: Christian Democratic Union (CDU), Christian Social Union (CSU), Free Democratic Party, Social Democratic Party (SPD), The Green Party (Die Grunen). Czech Republic: Civic Democratic Party (ODS), Christian Democratic Union - Czechoslovak People's Party (KDU-CSL) Civic Democratic Alliance (ODA), Czech Social Democratic Party (CSSD), Freedom Union (US), Democratic Union (DU) Poland: Democratic Union (UD), Catholic Electoral Action (WAK), Liberal Democratic Congress (KLD), Peasant Alliance (PL), Polish Beer-Lovers’ Party (PPP), Christian Democracy (CD), Law and Justice Party (PiS), Civic Platform (PO); League of Polish Families (LPR) Spain: Spanish Socialist Party (PSOE), Popular Party (PP), the Basque Nationalist Party (PNV) and the Catalan Convergence and Union (CiU). Turkey: Motherland Party (ANAP), True Path Party (DYP), Social Democrat Popular Party (SHP), Welfare Party (RP), Democratic Left Party (DSP), Nationalist Action Party (MHP), Justice and Development Party (AKP).

Figure 2.1 The median voter versus median likely voter and redistribution.

Note: Y-axis refers to the density of eligible voters.

Figure 2.2 Volatility Scores across Regions.

Figure 2.3 Illustrating the Theory.

Chapter 3

Testing the Theory In the previous chapter, we posed our research question and then offered a new theory which encompassed two interrelated arguments. This chapter will test these arguments and present our empirical models. The first section discusses the operationalization of our main dependent and independent variables as well as includes a brief discussion on our control variables. After discussing the sample and methodology, the chapter continues to present the results and ends with conclusion.

In the last chapter, we theorized that low voter turnout and weak political party institutionalization are likely to increase targeted spending. The former suggests that groups that constitute (potential) electoral bases of political parties and those who have higher turnout records benefit more from the social policies of governments. Social programs, like pensions, unemployment benefits, maternity and child benefits, and forms of social assistance, become a tool for parties in electoral struggles. In particular, cash payments seem most commonly deployed in electoral campaigns and have had more salience for voters and more space in party programs (Lynch 2006; Rueda 2008). Usually these policies are aimed at labor market insiders. Although spending aimed at the poor does exist, secondary sources and data suggest that it is a fairly recent phenomenon and that its substantive size is very small (Haggard and Kaufman 2008).

Educational and health spending are more universal in nature, covering both the well-to-do and the poor alike. Some authors suggest that the middle and upper classes benefit disproportionately from these policies because they are more likely to obtain secondary and higher education and benefit from subsidized education and health (Rudra

2004; Ross 2006). Although this idea carries some merit, most of the funding that goes to

47 primary education and subsidized secondary and higher education gives opportunities to the lower class. To sum up, education and health spending are more universal in their coverage in comparison to other forms of social spending even when there is bias against the lower classes. There is empirical evidence to support this contention. Rudra (2004) finds that spending on education and health has reduced the income gap between the poor and the rest of the population and that the resultant effect reduces inequality as countries become more open economically. In addition, Stasavage (2005) showed that after democratization, governments in Africa have increased primary education in order to obtain electoral majorities. Therefore, while we regard as public cash expenditures as targeted spending, we consider spending on education and health as a non-targeted benefit.

To reiterate, our theory in the previous chapter suggests that electoral volatility increases targeted spending while voter turnout reduces it. We assume that lower turnout refers to low participation by the poor (Lijphart 1997). In addition, our theory suggests two different scenarios. One includes low turnout in an electoral system with high volatility and another does high turnout in a similar electoral environment. In the former, we predict higher targeted spending while the latter foresees less targeted spending because we assume that an increase in turnout occurs as a result of participation by the poor. To summarize, we have three main hypotheses to test for targeted spending:

H1: As electoral volatility increases, targeted spending will increase.

H2: As turnout increases, targeted spending will decrease.

H3: The effect of volatility will be conditional upon the level of turnout. As turnout increases, the effect of volatility on targeted spending will diminish.

The second stage of our theory suggests that since targeted spending diminishes social spending that ameliorates the conditions experienced by the poor, it will have a negative effect on income equality in a given country. The reason is that the labor market insiders and pensioners receive a disproportionate portion of social spending while the disadvantaged are largely excluded from this distribution.9 As labor market outsiders, the disadvantaged do not have resources to join social insurance programs and they cannot benefit early retirement, which absorbs a significant percentage of social spending expenditures. As the market insiders have higher life expectancy and are courted by political parties as (future) pensioners, this further exacerbates the diversion of social spending away from the poor. Therefore, the main hypothesis for this part of the analysis is:

H4: As targeted social spending increases, inequality increases.

In the next section, we will operationalize our main dependent and independent variables for first targeted spending and then inequality model. It will also briefly outline a set of control variables and what the literature predicts regarding their effect on spending and inequality will be.

Model for Targeted Spending

Dependent Variable: Targeted Spending Our dependent variable is targeted spending. In order to calculate it, we take the ratio of public cash spending over all social spending. Then, to make its interpretation

9 However, this study does not argue that all pensioners or workers are non-poor. For example, a small percentage of pensioners receive payment that keep them just above poverty levels, and their funds mostly come from noncontributory funds.

49 easier, we multiply it by 100 to make it a percentage. All social spending refers to the sum of public cash spending, educational, and health spending. Current and previous labor market insiders receive a significant portion of these funds. When these groups receive the lion‟s share of outlays from social insurance programs, governments are left with fewer resources to invest in human capital and the general well-being of society.

Specifically, if targeted spending is high, governments will have fewer resources for public spending toward education and health. For a robustness check, we also measure targeted spending as the ratio of public cash spending divided by the sum of public health and education spending. Both operationalizations confirm our hypotheses.

Social spending data is rarely complete. There are often missing observations or they sometimes differ in the types of programs included. The data on social spending used here is also imperfect but more comprehensive than those used in existing studies.

In order to increase the reliability of the data, we take into account items that constitute social spending and use consistent sources as often as possible. For example, data for postcommunist countries comes from the dataset created by Branko Milanovic that specifies public cash transfers and spending on education and health. Data for OECD countries comes from the OECD Social Expenditure Dataset, which details social policy programs but excludes spending on education. For this reason, we gather health and education data from the WDI and check their consistency across other datasets including the ILO one. In the final analysis, we use health and education spending from the WDI while public cash spending come from the OECD for long-standing and Southern

European new democracies.

As we discussed above, the dependent variable is the percentage of public cash spending divided by all social spending. In this case, the mean value was 56, which suggests that 56 percent of social spending is targeted spending. This figure ranged from

32 percent to 73 percent in the dataset. The alternative measure, the ratio of public cash spending divided by the sum of public health and education spending, had a mean value of 1.36 and ranged from .47 to 2.70.

Main Independent Variables

Volatility Volatility is a well-established measure of party system stability. The institutionalization most commonly measured by the Pedersen index is a measure of the percentage of the votes or seats that moves from party to party. The index is the half of the sum of the absolute values of all the differences in the share that individual parties capture from election to election. In this paper, we use seat share volatility as most appropriate to measure the institutionalization of party system. While a score of 0 means that no party lost or gained a seat share, a score of 100 means that that existing parties did not win a seat. The mean volatility score in our dataset was 23 while the maximum score was 52.1 in Russia in 1999, and the minimum was 3 in Greece in 1990. The volatility score between two subsequent elections was used to fill in the years to come after the current election. For example, the volatility score between 1997 and 2001 for Poland was used for the post-2001 until the 2005 election. If the election took place the first half of the year, volatility score was also filled in the election year. If the election took place in

51 the second half of the year, the score was filled in one year after the election year.

Similar procedure was applied to the use of voter turnout in the dataset.

Turnout Our data concerning the percentage of voter turnout by the voting age population come from IDEA. The mean value was 70.7. It ranged from 41 percent (Poland 2006) to

93 percent (Czech Republic/Slovakia in 1990).

Control Variables

There are two major theories with regard to the effect of economic factors on the social policies of governments. These are compensation theory and efficiency theory, which propose contrasting views on the effect of increased economic openness on social spending.

Proponents of the compensation perspective argue that trade liberalization and capital mobility increase volatility in a nation‟s economy and threaten real wages and jobs, especially when a country is in recession or crisis. Under such circumstances, companies will often restructure themselves in the face of fierce trade competition, leading to job losses. Consequently, fearing popular reactions to rising economic problems, governments increase their compensation packages such as increased wages and benefits (Rodrik 1997).

On the other hand, proponents of the efficiency hypothesis argue that economic competition drives governments to adopt neoliberal policies, which leads them to reduce

52 social expenditures (Amin 1997; Ohmae 1995). This is because competition for export markets, attracting foreign direct investment, puts pressure on governments to reduce labor costs, wages, and payroll taxes, in turn depressing the economic revenue base for traditional social security contributions (Huber and Stephens 2003).

While the compensation theory poses that targeted spending will increase as a result of social spending aimed at the most mobilized segment of society, the efficiency approach argues that openness decreases overall social spending, thereby reducing targeted spending as governments had to cut the most inefficient aspects of their social policies.

There are empirical evidences for these lines of reasoning. Avelino, Brown and

Hunter (2005) found that trade openness reduced social spending in Latin America. In her study on 59 developing countries, Rudra (2005) showed that some developing countries increased social safety net programs along with more open trade policies. In addition, she found that the countries that did this also became more democratic.

Trade openness is operationalized as the sum of import and export divided by

GDP of a given country. This data was obtained from the World Development Indicators

(WDI) resulting in a mean value of 83 with a minimum score of 26 and a maximum of

174 (World Bank 2009).

Economic Factors There is no doubt that economic factors are crucial importance when it comes to social policy programs. We expect that as the level of development, performance, and unemployment rate of an economy show improvement, they will have important affects on targeted spending. In particular, “Wagner‟s Law” states that as an economy develops

53 public expenditure will increase, suggesting that social insurance is income elastic

(Iverson and Soskice 2005). This means that as economic development increases, demand for social insurance gets higher. In addition, as unemployment increases in the active labor segment, there will be more spending on those sectors which will increase targeted spending. Avelino, Brown and Hunter (2005) found that unemployment increased social spending in Latin America in their nearly two-decade study from 1980 to

1997. Further, Hicks and Misra (1993) found a similar effect on unemployment in

Western Europe as well.

Inflation is another factor to take into consideration when addressing targeted spending. Especially in new democracies, high inflation depreciates the value of social spending transferred.

Data for GDP per capita, economic growth, and inflation come from the WDI.

Because of missing data problems for the postcommunist part of the sample, the unemployment data in WDI were supplemented with figures from Transmonee for postcommunist countries (Transmonee 2008). To insure the compatibility of this data we checked for major discrepancies for observations contained in both Transmonee and the

WDI. None were found for our sample.

Partisanship Studies suggest that political parties alter their social policy budget in accordance with their ideological leanings. Left parties are associated with higher spending because these parties derive many of their supporters from blue collar workers and low-income groups. Left-leaning governments tend to restrict means-testing of benefits and guarantee universal social assistance (Hicks and Misra 1993).

However, not all agree that left parties increase social spending compared to the right-wing governments. Studies on developed countries show that economic decline in the 1970s led parties of all ideological leanings to follow similar policies, cutting social spending substantively. Huber and Stephens conclude that as a result of dramatic change in world economy, “governments found themselves with dramatically fewer options, changing the rule of the game” (Huber and Stephens 2001:221). Some found that as the economy declines, partisan effects on expenditure levels diminish (e.g., Ross 2000;

Castles 1998). Cook and Orenstein (1999), who explore the relationship between social welfare changes and left-party politics in Russia, Poland and Hungary, found that leftist parties were successful in implementing ideological goals in two out of those three cases.

On the other hand, Lipsmeyer‟s findings (2002) contradict not only Cook and Orenstein‟s conclusions on ideological goals, but also their ideas about the positive effects of leftist parties as well. She argues that as the ideological positions of the governments in postcommunist countries move from the left to the right, social spending decreases.

Most of the studies discussed above used different left-right measures, and as a result it is not odd that their findings as a whole are inconclusive. Lipsmeyer in her large-

N study, for example, had to use three broad ideological categories (left, right and center) when she analyzed the effect of ideology on social spending. The newly released policy mapping II dataset could overcome these difficulties and present an invaluable resource for this and other studies to test the impact of left-leaning parties on the social policies of

Europe (Klingemann et al 2006). The mean score for Manifesto II is 3.89, which suggests that the conservative governments were in charge most of the time. It ranges from -28 to

41. In other words, far right and far left governments came to power throughout the

1990s in Europe.

Demographic Effects Huber, Mustillo, and Stephens (2008) found that a percentage of older people in the population had a positive effect on social spending in the Latin American context. We expect that as an aged population increases, there will be greater pension spending, and a corresponding increase in targeted spending. In order to control the effect older people have within a population, we use an indicator from the WDI: percentage of people above

65. The mean value was 13 percent and the percentage of those 65 and older ranged from

4 percent to 18 percent.

We expect also that in countries with a higher percentage of young people both educational and health spending will be higher. This should reduce the percentage of targeted spending (Huber, Mustillo and Stephens 2008). In this case too, the data come from the WDI.

Urbanization The literature also suggests that urbanization leads to a concentrated labor force in cities that requires particular kinds of social programs. As the urban population increases, there will be greater spending directed toward education and health for two reasons. First, such countries need more skilled labor and better health coverage for economic development. Second, compared to rural inhabitants people in urban areas are better organized and will be better able to demand social programs from the government. These

56 data also come from the WDI. The mean value for urbanization is 62.7. Portugal had the minimum percentage of people living in urban areas with 60 percent in 1974. Spain had the highest score of urbanization with 77 percent in 2006.

Electoral Systems Studies argued that politicians in majoritarian systems tend to favor locally targeted expenditures, whereas those in PR systems are more redistributive in their public policies (Verardi 2005; Verardi and Ricardo 2003; Austin-Smith 2002). 10 However, in our dataset for new democracies, only Ukraine has a majoritarian system but with merely a few data points due to the scarcity of targeted spending data. Its inclusion does not change the results. As a result, we have dropped this variable from our models.

Election Year During election years governments tend to distribute more, or at least promise to distribute more if they are elected. They may increase targeted cash spending on pensions or other benefits (Ames 1987). In order to control for this effect we created a dummy variable for election years.

10 Lizzeri and Persico (2001) made a similar argument about PR systems and redistributive programs, whereas majoritarian systems promote local public good expenditures. The redistributive nature of PR systems confirmed by Iverson and Soskice

(2006) in a sample of developed democracies.

Model for Income Inequality

Dependent Variable: Income Inequality In this model, the main dependent variable is income inequality, measured by gini coefficients. Although it is true that ginis are not always adequate to capture the dynamics of social redistribution, it is most widely used and the one that it helps to compare the finding of this study with earlier ones (Acemoglu and Robinson 2006; Boix

2003; Anderson and Beramendi 2008). Income inequality data come from the newly prepared Standardized World Income Inequality Database (SWID 1.1). Unfortunately, we cannot utilize the Luxembourg Income Studies because it only includes a few of the postcommunist countries (Poland, Hungary, the Czech Republic and Estonia), but excludes others. 11 The advantages of the SWID are its comprehensive compilation and imputation of Gini coefficients for a temporarily and geographically rich sample of countries including the postcommunist region. 12 In the sample, the minimum gini score is

22.5 (Slovenia) and the maximum score is 43.6 (Russia). High scores represent greater economic inequality.

Main Independent Variable: Targeted Spending In the previous section, we discussed the measurement of targeted spending. We continue to use our measure of targeted spending, as a percentage of all social spending.

11 http://www.lisproject.org/techdoc.htm (Accessed on August 11,2009).

12 Frederick Solt, 2008-09, "The Standardized World Income Inequality Database", IQSS

Dataverse Network, Harvard University, http://dvn.iq.harvard.edu/dvn/dv/fsolt/faces/study/StudyPage.xhtml?studyId=36908&rvn=5

(accessed May 19, 2009).

We present the first model in our tables. Following other studies (e.g. Franzese 2002), we expect that the immediate effects of spending may not be realized but there will be the lagged effect of public cash spending on income distribution in the country. Therefore, we used lagged targeted spending as well.

Control Variables The literatures on social spending and inequality make use of many of the same control variables -- globalization, economic level and performance, and some political variables. Therefore, the inequality model will rely on many of the same controls utilized in the targeted spending models above. Below we present the rationale of using these and variables only as the determinants of inequality briefly and then discuss their operationalization and data source.

Economic Variables Kuznets (1955) argues that economic development has a U-shape effect on income inequality. Kuznets‟ curve suggests that undeveloped states are relatively inegalitarian, and when economic development begins, inequality starts to increase.

However in the long-run as development proceeds it begins to diminish inequality. Many studies, including Rudra (2004), show that the curvilinear relationship discovered by

Kuznets continues to hold for less developed countries. In order to control this, we use gdp per capita and gdp per capita squared in the inequality model.

We also control for trade openness. Studies on globalization point out that trade openness forces countries to restructure their economies, changing income distribution dramatically. Economic liberalization creates opportunities for some groups for social

59 mobility. In particular, those who have skills and knowledge benefit more than those who do not (Avelino, Brown and Hunter 2005).

Unemployment is expected to increase inequality because even when there is a social safety net in place the unemployed lose substantial income. We also control for inflation because it most strongly affects the economic well-being of low income households and has been shown to be strongly correlated to inequality (Easterly and

Fischer 2001; Albanesi 2007). All three of these variables are measured just as in the spending models.

Non-Economic Factors Although this study endeavors to explain why democracy has not reduced inequality, the effect of democracy on inequality may be conditional upon the number of years that a country has been democratic. In order to control this, we include a measure of democracy years (Cheibub 2007).

As in the spending models we include controls for urbanization, and the population of elderly and the young. Iverson and Soskice (2005:174) argued that female labor participation is likely to affect inequality because their participation entitled them to receive wages, unemployment benefits “for which they otherwise be ineligible.”

Moreover, lower paid female workers tend to support the left which is more likely to pursue redistributive policies. The models thus include a control for female labor participation whose data come from the WDI.

Sample Europe is the testing ground for our theory. As discussed in Chapter 1, there are three main reasons for this. First, this region hosts most of the democratizing countries since 1974, and most of these countries have remained democratic after their transition.

This enables us to follow their path of targeted spending and inequality. On the other hand, other regions, especially Latin America, have had similar experiences but are limited in terms of number of countries. In addition, new democracies in Europe allow us to control unobserved heterogeneity across countries. The region includes countries which all started democratization around the same time: The new democracies in the sample made their transitions in the period from 1974 to the early 1990s. Finally, the region provides a better quality data for our variables than any other. Our analysis for new democracies in Europe covers from their transition to democracy to 2003.

Here is our sample for new democracies: Southern Europe includes Greece,

Portugal, Spain and Turkey. Postcommunist Europe includes cases such as Bulgaria,

Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Russia,

Slovakia, Slovenia and Ukraine. As for long-standing democracies, Austria, Belgium,

Denmark, Finland, France, Germany, Iceland, Ireland, Italy, Luxembourg, Netherland,

Norway, Sweden, Switzerland and UK are in the sample.

Methodology The data structure for large-N analyses is time-series cross-sectional. Due to the lack of data availability, our data range from 1980 to 2003 for 31 countries. Data structure is subject to heteroskedasticity and serial correlation (Stimson 1985). The standard regression assumption of independent, identically distributed errors is not likely

61 to hold. Preliminary analyses also show that in fact heteroskedasticity (Breusch-Pagan test), and autocorrelation exist (Durbin Watson test for fixed effects model by Nunziata13)

(Stimson 1985).

Beck and Katz (1995) argue that the panel corrected standard errors can correct both panel heteroskedasticity and spatially contemporaneous autocorrelation. In addition, a first order autocorrelation across panels for problems of serial autocorrelation can be considered. However, in this method the use of lagged dependent variable causes endogeneity problems. The lagged dependent variables will also be correlated with lagged economic and political variables, causing bias. Further, it is possible that current values may be endogenous to the lagged values.

In order to correct for this endogeneity problem, we take the first differences of all variables, which removes the fixed effects. Therefore we use Arellano-Bond for targeted social spending and inequality models. The models of Arellano-Bond use first- difference. For a robustness check, we run our analysis with panel corrected standard errors and fixed effects with lagged dependent variables. Both models for robustness check, on the other hand, take into account „levels of variables‟.

Results

Findings for Targeted Spending We first start with our descriptive statistics to show how our variables of our main interest vary in new and long-standing democracies. First we start voter turnout. Looking at turnout in new democracies we see that its mean is about 70 percent. Voter turnout ranges from 40 (Poland) to 91 percent (Turkey) in new democracies. On the other hand,

13 http://www.decon.unipd.it/personale/curri/nunziata/software/xtdw.ado

62 the average turnout is larger in long-standing democracies (average turnout= 76). Voter turnout data range from 38 (Switzerland) to 95 percent (Italy).

As for electoral volatility, new democracies have high volatility of 23, ranging from 3 (Greece) to 100 (Turkey). As for long-standing democracies, volatility in our dataset is 10. It ranges from .5 (Austria) to 37 (Italy).14

What is the implication of turnout and volatility on targeted spending on new democracies and long-standing democracies? Our descriptive analysis provides preliminary support for our theory. On average new democracies have higher level of targeted spending (57 percent) compared to long-standing democracies (53 percent). In the former, it ranges from 43 (Lithuania) to 73 (Poland) percent while in the latter, it varies from 29 (Iceland) to 68 percent (Luxembourg).

Our overall results show that low voter turnout and high electoral volatility facilitate targeted spending. However, the effect of volatility is moderated by turnout level. We find support for the argument that volatility accompanied by increasing participation by the poor reduces targeted spending. Overall our results confirm our theoretical expectations.

Now we present our findings from our multivariate statistics, as shown at Table

3.1. Our dependent variable for this model is targeted spending, measured by percentage.

For instance, if targeted spending is .65, this means that 65 percent of all spending goes to targeted spending.

14 However, we should note that comparisons of means come from our yearly based datasets. Otherwise, the difference in average volatility between new and long-standing democracies is much higher.

[Table 3. 1 about here]

Our first independent variable that we seek to gauge its effect is voter turnout.

The coefficient of this variable shows that as turnout increases, targeted spending decreases. Substantially speaking, a one percentage increase in voter turnout reduces targeted spending by .22 percent. In other words, ten percent increase in voter turnout leads to a 2.2 percent decrease in targeted spending. As for our second main independent variable, the effect of electoral volatility is statistically significant. This variable has a coefficient of .20, which suggests that a ten point increase in electoral volatility increases targeted spending 2 percent. Any significant change in the party system, like that of

Poland in the 2005 election with around 40 percent volatility, leads to increase in targeted spending of about 8 percent.

For new democracies, government ideology (partisanship variable) is another factor with which targeted spending is associated. We found that the ideological position of a government has a statistically significant effect on targeted spending. The findings suggest that the right-wing governments tend to increase targeted spending while the left- wing governments tend to increase non-targeted spending. This is consistent with Cook and Orenstein (1999) that the left governments increase spending for low-income groups.

It also challenges Lipsmeyer‟s finding (2002), but this may be due to her own coding of ideology of governments. In this study, we could make use of a new dataset, which was not available before. The finding for government ideology may have some important implications on social policy literature which does not distinguish different social policy programs or does not elaborate how social spending is distributed. In this respect, it

64 questions Tavits and Letki (2009)‟ finding that the right-wing governments increase government, education and health-care spending. However, she does not distinguish targeted and nontargeted spending and the ratio between the two. It is possible that right- wing governments increase all three but when you compare targeted spending, the left governments are better at increasing non-targeted spending that benefits the poor.

As for the economic variables, we found unemployment has strong positive and significant impact on targeted spending. This suggests that said governments are more concerned with previous and current labor market insiders and prefer to decrease spending on education and health. Economic growth and inflation also have a diminishing effect on targeted spending. However, the reasoning may be different for the latest two factors. While economic growth may increase share for social spending across all groups and in particular the poor, inflation may reduce the value of social transfers, having more effect on targeted spending rather than nontargeted spending.

Other factors in our models also have weak effects on our dependent variable. We found that the percentage of 15 years old and below, and the percentage of 65 and above, urbanization, level of economic development, and trade openness had insignificant or inconsistent effects on targeted spending. Variation in urbanization and level of economic development do not vary significantly in our sample, which composed of mostly middle-income countries. This may explain why these variables‟ coefficients are not statistically significant. In addition, the results in our sample indicate that neither compensation nor efficiency theory explains the level of targeted spending as globalization affects national economies.

In order to test our third hypothesis to see whether the effect of volatility is moderated by level of turnout, we created an interaction variable. We expected that in a country with high volatility, lower turnout would benefit more organized groups with high records of participation. However, as turnout gets higher, this means that previously demobilized groups, e.g. the poor, will participate in elections, forcing parties to take pro- poor positions. The findings support our third hypothesis: the level of voter turnout moderates the effect of volatility.

Long-Standing Democracies: Our theory argues that high volatility is peculiar to new democracies and that it has a significant effect on social policies. In order to determine whether this is true or not, we gathered data from long-standing democracies in

Europe and ran a similar analysis. For long-standing democracies, we expected that volatility was a lesser concern and that there would be less variation in volatility scores due to strong party institutionalization in Western European democracies. As the right side of Table 3.1 that shows the results for long-standing democracies, turnout and volatility have no statistically significant effect on targeted spending. This suggests that political parties in new democracies operate under different electoral environment and use social policies, compared to long-standing democracies.

The effects of control variables on targeted spending for long-standing democracies vary. The share of 65 years and above and above increases targeted spending while GDP per capita reduces it. The finding regarding for the former may be as a result of high share of retired population in Europe, which mitigate redistribution. In addition, the share of 15 and below reduces targeted spending, which is expected. As the share of young population increases, governments need to invest more in education and

66 health-care. As for other variables, the coefficients of the rest of economic and political variables do not show up any statistical significance.

As Table 3.2 suggests, it seems that turnout moderates the effect of volatility on targeted spending in long-standing democracies as well. The interpretation of interaction variables is tricky. Above we found that the interaction variable for both new and long- standing democracies is statistically significant. However, this raises the question of whether the effect of volatility on targeted spending is conditional upon voter turnout in all democracies in Europe. In order to make the interpretation of interaction variables easier we created a marginal effect for our dependent variable in Figure 3.1 by using the grinter command, written by Frederick Boehmke.15 First, we present our results for new democracies and then those of long-standing democracies.

[Table 3.2 about here]

Figure 3.1 above displays the marginal effects of the voter turnout and volatility, which clearly indicates that voter turnout moderates the effect of volatility. Substantively speaking, when we move from a voter turnout of 50 percent to mean turnout of 72 percent, the marginal effect of volatility decreases from 0.7 to around 0.3 percent.

Substantially speaking, while the marginal effect of turnout for Poland is around .7, this becomes smaller as we move toward the Czech Republic, Spain and Turkey, whose turnout is much higher than Poland. The diminishing effect of volatility continues until voter turnout is around 79 percent. After this point, the marginal effect of volatility on targeted spending becomes ambiguous as confidence interval of the slope suggests.

15 http://myweb.uiowa.edu/fboehmke/methods.html

However, we should note that we have a few cases beyond turnout of 80s. In a situation close to the ideal, all votes reduce targeted spending, albeit in a small way.

[Figure 3.1 about here]

Overall, this figure suggests that high voter turnouts have regressive effects for the effect of volatility on the level of targeted spending, increasing more non-targeted spending. In countries with high turnout, the effect of volatility revolves around zero (0).

[Figure 3.2 about here]

We create a similar figure for long-standing democracies. Figure 2 suggests that even though volatility and voter turnout have no statistically significant effect on targeted spending independently, the interactive model suggests the effect of volatility is conditional upon level of voter turnout. However, first, notice that the marginal effect of volatility on targeted spending is low. It is only .22 for voter turnout of 40 (e.g.

Switzerland) and it reaches to .06 when voter turnout is at its mean (70.8 percent). As voter turnout reaches to 80 percent, the line for marginal effect becomes 0. Nevertheless, confidence interval of the slope suggests that the marginal effect of volatility by turnout is ambiguous; it may be positive or negative. In other words, we cannot find supporting results for long-standing democracies.

Findings for Income Inequality Similar to the targeted spending model, we start with discussing brief descriptive statistics across new and long-standing democracies. As discussed in the earlier sections,

68 targeted spending in new democracies is much higher than long-standing democracies.

The implication of this high targeted spending is detrimental to new democracies.

Average inequality (gini coefficient) in new democracies is about 32 while this is only 27 for long-standing democracies. Income inequality ranges from 19 (Slovakia) to 48

(Turkey) for new democracies and it varies from 19 (Sweden) to 36 (Italy) for 31 for long-standing democracies. Basically, descriptive statistics suggest that high targeted spending is associated with high inequality. However, multivariate statistics may confirm whether this is the case or not.

Table 3.3 presents our results using all three statistical techniques. Overall the findings support our conclusion from descriptive statistics and the theory that targeted spending has an adverse effect on equality. Targeted spending has a lagged effect on inequality, it seems that the immediate effect of targeted spending is positive; however it is statistically insignificant. Our main finding suggests that as targeted spending increases, inequality goes up, controlling for other factors, which supports our theory.

Table 3.3 also presents the same models for long-standing democracies, which shows that targeted spending does not have any statistical significance on inequality in these industrialized democracies. This may be because of the high labor market coverage and because public cash spending covers most of the population through pensions, unemployment and other benefits. In addition, primary and secondary education levels are very high in these countries, which suggest that most people benefit from nontargeted spending. Overall these results suggest that new democracies have a different pattern and this findings support our contention that that increasing targeted spending in new democracies must be taken into account in the inequality studies.

Following Franzese (2002), we use lagged inequality variable to deal with endogeneity in the pcse and fixed effect models. The finding suggests that our result above is robust over these two techniques, showing that the lagged inequality has a positive effect on inequality. Substantively speaking, as targeted spending increases one percent, inequality increases .09 point. If it increases 12 percent, inequality will increase

1 point. In addition, the results suggest that inflation and urbanization increase inequality, which goes along with the findings of relevant literature. As for economic growth, it reduces inequality. As economic performance improve, we may see some positive effect of it on income distribution in new democracies. We also find in new democracies that the effect of economic development is curvilinear.

[Table 3.3 about here]

As for democratic age, we find that it has a weak effect on inequality. Two of three models, Arellano-Bond and fixed effects models yield similar results. As for female labor participation, it has a statistically significant and positive effect on inequality. This odd finding may be caused by two reasons. First, female labor participation increases public cash spending such as pensions, unemployment, maternity and child benefits.

Secondly, the results may be driven by some outliers such as Southern European countries where female labor participation is low, especially in the late 1970s and 1980s while postcommunist countries have higher female labor participation at the initial years of transition. Finally, it may be possible that single parent housing by women and lower female wages may cause higher inequality in new democracies.

As for long-standing democracies, only lagged inequality has a consistent significant effect on inequality level. Other variables do not show significant impact.16

Robustness Checks

For robustness checks, we ran the models using panel corrected standard errors and fixed effects estimations. Our results show that the finding is robust with these two other estimation techniques. Table 3.1 includes these two alternative models in which our two main variables, volatility and turnout appeared to be statistically significant. In all three models, the results for volatility and turnout are significant at p=.1 or lower. Lagged targeted spending and inflation are other two consistent findings in our analysis that it reduces targeted spending. Economic openness has a significant inverse relationship to targeted spending in these two models.

As for long-standing democracies, we found that voter turnout was only statistically significant in the panel corrected standard errors model and surprisingly has a positive effect on targeted spending. We conclude that although volatility has a significant effect on social policy in new democracies, but that this is not the case for long-standing democracies in Europe. This confirms the contention that new democracies show a different pattern of determinants for targeted spending.

16 The coefficients for the constants are expected to be similar for fixed-effects and

Arellano-Bond models assuming that both models have the same number of observations.

However, observations and the coefficients vary due to missing data. Nevertheless, most of these coefficients are very similar.

For the interaction effect, we have run similar sensitive analyses. As Table 3.2 shows, our interaction variable has a statistically significant impact in both the panel corrected standard errors (pcse) and fixed effects models. The volatility variable has consistent significant effect on targeted spending in both models while turnout is statistically significant only in the former (pcse) model. However, when we calculate the marginal effects, we see that confidence intervals for the long-standing democracies fall in both positive and negative zone, which suggest that the effect is ambiguous. Overall the results show that in long-standing democracies, high turnout does not moderate the effect of volatility.

Conclusion

Do turnout and electoral volatility have a significant effect on targeted spending, and targeted spending regresses income equality in new democracies? Our theory offered affirmative answer to these two interrelated and important questions. This chapter presented empirical analyses for the theory and also showed that voter turnout moderates the effect of electoral volatility on targeted spending, which suggests that high turnout improves income distribution even under the weak political party institutionalization context. This suggests that the mobilization of the poor by the left parties and the populist parties may have some positive effects on their well-being. The parties may launch public policies such as increasing health-care spending and investment in education. Empirical evidence from populist governments such as Turkey and Venezuela suggest that populist leaders, rather than resorting to clientelistic relations, may use the health-care and education to increase their appeal in lower income groups.

We also find that our theory cannot explain level of targeted spending and inequality in long-standing democracies. This may be due to several factors. First, comparing level of volatility within long-standing democracies we find that compared to new democracies, the average volatility is small and there is less variation within and across countries in long-standing democracies. In other words, the difference may be coming from the size of and change in the magnitude of volatility. As for turnout, on average, they have similar level of voter turnout. However, this similarity comes from the fact that initial high level of turnout increases average turnout in new democracies.

Similar to volatility, we see low level of variation in turnout in long-standing democracies compared to new democracies.

Secondly, it is also possible that most of populations in long-standing democracies are participants of labor market and through their public interest groups they can exert influence on the social policy design. While this checks political parties‟ use of targeted spending in long-standing democracies, the lack of strong public interest groups make it less difficult for parties to use targeted spending for electoral purposes. However, these are tentative explanations that need to be tested.

Next Chapter In order to present causal relationship better and at the same time why the interactive relationship between volatility and turnout show different pattern depending on the percentage of voter turnout, we resort to two paired case studies in Postcommunist and Southern Europe. The next section will elaborate more about our case selection and lay out the mechanisms in which causal relationship in our theory works.

Table 3.1 Weak Party Systems, Turnout and Targeted Spending in Europe.

NEW DEMOCRACIES LONG-STANDING DEMOCRACIES Arellano-Bond PCSE Fixed-Effect Arellano-Bond PCSE Fixed-Effect

Lagged T.Spending 0.3672 *** 0.5778 *** 0.3928 *** -0.3001 0.9945 *** 0.5289 * 0.1230 0.0800 0.1158 0.3761 0.0314 0.2691 Lagged Inequality 0.4640 -0.1547 ** 0.0556 0.7947 ** 0.0152 0.0701 0.1960 0.0606 0.1860 0.3693 0.0496 0.2932 Volatility 0.1984 ** 0.0787 * 0.1756 ** 0.0234 0.0272 0.0263 0.1004 0.0505 0.0858 0.0420 0.0250 0.0403 Turnout -0.2228 *** -0.1307 *** -0.1621 *** -0.0476 0.0208 *** 0.0483 0.0814 0.0373 0.0670 0.0614 0.0089 0.0573 Government Ideology 0.1112 *** 0.0267 0.1123 *** -0.0108 -0.0005 0.0016 0.0390 0.0191 0.0385 0.0198 0.0063 0.0217 Election Year -0.5122 -0.5864 -0.7291 0.0408 -0.1883 -0.0097 0.6476 0.5455 0.6248 0.2159 0.2051 0.2394 65above -3.0145 -0.1831 -2.2419 -1.5169 * 0.0951 -0.9000 1.9404 0.3675 1.8213 0.8571 0.0996 * 0.8042 Popul15 -1.4759 -0.0539 -1.2779 -3.0839 * 0.1559 -1.8916 1.1806 0.2281 1.1101 1.6779 0.0903 1.6416 Urbanization -0.4667 -0.0415 0.2561 1.6000 -0.0218 * -0.2401 1.0630 0.0445 0.8405 0.9875 0.0129 0.5126 Openness -0.0253 -0.0356 *** -0.0647 ** 0.0591 -0.0031 0.0796 0.0392 0.0124 0.0294 0.0711 0.0096 0.0584 GDPpercapita 0.2155 0.2050 * -0.4350 -2.6310 *** -0.0214 -1.1398 1.2040 0.1238 1.1344 0.8171 0.0454 0.6972 GDPgrowth -0.5178 *** -0.2620 *** -0.4729 *** 0.2103 -0.1486 ** -0.1146 0.1288 0.1015 0.1199 0.1843 0.0604 0.1572 Unemployment 0.2816 0.1641 ** 0.1792 -0.5303 -0.0677 -0.2030 0.2341 0.0680 0.2244 0.2671 0.0947 0.2716 Inflation -0.0107 *** -0.0056 ** -0.0092 *** 0.3651 -0.4264 *** -0.1902 0.0030 0.0029 0.0030 0.3320 0.1159 0.2853 Constant 146.7447 ** 43.5870 *** 86.1716 75.4336 -2.5379 110.7847 * 90.1369 10.4099 70.4345 58.4045 5.0640 54.2830 N 66 83 83 33 46 46

Note: * p < .1, ** p<.05, *** < .01.

Table 3.2 The Conditional Effect of Volatility by Turnout in Europe.

NEW DEMOCRACIES LONG-STANDING DEMOCRACIES Arellano-Bond PCSE Fixed-Effect Arellano-Bond PCSE Fixed-Effect

Lagged T.Spending 0.2259 * 0.5731 *** 0.3402 *** -0.1563 0.8947 *** 0.5995 ** 0.1305 0.0775 0.1207 0.3642 0.0373 0.2485 Lagged Inequality -0.1062 -0.2293 *** -0.0019 0.7494 ** 0.0495 0.1196 0.1960 0.0846 0.1888 0.3466 0.0376 0.2695 Volatility 1.5103 *** 0.2490 ** 0.8541 * 0.3938 * 0.6235 *** 0.5909 ** 0.5269 0.1337 0.4889 0.2470 0.1676 0.2547 Turnout -0.0277 -0.1153 *** -0.0575 0.0216 0.1038 *** 0.1360 ** 0.1092 0.0362 0.0996 0.0733 0.0237 0.0655 Volatility*Turnout -0.0170 *** -0.0029 * -0.0087 * -0.0049 * -0.0074 *** -0.0073 ** 0.0067 0.0019 0.0062 0.0032 0.0020 0.0033 Government Ideology 0.1055 *** 0.0377 ** 0.1098 *** -0.0115 0.0139 ** -0.0019 0.0372 0.0191 0.0381 0.0185 0.0071 0.0199 Election Year -0.2557 -0.5749 -0.6297 0.0608 -0.1148 0.0181 0.6243 0.5531 0.6229 0.2023 0.1843 0.2197 65above -1.9469 -0.3332 -1.6420 -0.9174 0.1749 ** -0.3570 1.8936 0.3904 1.8544 0.8933 0.0833 0.7756 Popul15 -1.2437 -0.2066 -1.2208 -2.2445 0.0055 -1.2730 1.1269 0.2267 1.1008 1.6633 0.0861 1.5291 Urbanization -2.1153 * -0.0490 -0.5636 1.0824 -0.0589 * -0.2625 1.2032 0.0446 1.0161 0.9841 0.0141 0.4697 Openness -0.0499 -0.0433 *** -0.0933 *** 0.0286 -0.0032 0.0524 0.0386 0.0128 0.0353 0.0695 0.0079 0.0549 GDPpercapita 0.6210 *** 0.2141 * -0.3547 -2.1703 *** -0.0043 -0.9144 1.1566 0.1200 1.1256 0.8219 0.0355 0.6466 GDPgrowth -0.5633 -0.3274 *** -0.4961 *** 0.1784 -0.0791 -0.1125 0.1239 0.1128 0.1199 0.1736 0.0611 0.1441 Unemployment 0.3471 0.1826 *** 0.1922 -0.5451 *** -0.0886 -0.2839 0.2242 0.0678 0.2225 0.2500 0.0748 0.2514 Inflation -0.0124 *** -0.0058 * -0.0097 *** 0.2709 -0.3814 *** -0.2546 0.0030 0.0028 0.0029 0.3166 0.0967 0.2630 Constant 232.7020 ** 51.3480 *** 128.9690 * 68.9215 -1.4255 77.6475 92.2290 11.1950 76.1214 54.7756 4.1929 51.8827 N 66 83 83 33 46 46

Note: * p < .1, ** p<.05, *** < .01.

Table 3.3 Targeted Spending and Inequality in Europe.

NEW DEMOCRACIES LONG-STANDING DEMOCRACIES Arellano-Bond PCSE Fixed-Effect Arellano-Bond PCSE Fixed-Effect

Lagged Inequality 0.7089 *** 0.8986 *** 0.6886 *** 0.5525 *** 0.9656 *** 0.4308 0.0623 0.0325 0.0650 0.1506 0.0422 0.1601 Targeted Spending -0.0383 -0.0279 -0.0477 -0.0792 -0.0289 -0.0157 0.0358 0.0315 0.0371 0.1078 0.1013 0.1085 Lagged T. Spending 0.0878 *** 0.0870 *** 0.0821 *** -0.0019 -0.0265 -0.0273 0.0337 0.0330 0.0354 0.1039 0.1065 0.1143 65above 0.2362 -0.0450 0.2576 0.3199 0.0612 0.3408 0.6443 0.0600 0.6230 0.2805 0.1133 0.3160 Openness -0.0195 ** -0.0079 -0.0108 0.0284 -0.0015 0.0553 *** 0.0094 0.0051 0.0088 0.0215 0.0032 0.0215 Inflation 0.0012 *** 0.0018 *** 0.0012 *** -0.1370 -0.0454 -0.0938 0.0003 0.0003 0.0003 0.1162 0.0920 0.1180 Female Labor Force 0.1110 * 0.0858 *** 0.1144 * -0.0827 0.0270 0.0848 0.0632 0.0215 0.0651 0.1595 0.0550 0.1652 Urbanization 0.8358 *** 0.0624 *** 0.8449 *** 0.3286 -0.0049 0.9129 *** 0.2914 0.0208 0.2851 0.4257 0.0095 0.2473 Unemployment 0.0102 -0.0034 -0.0247 -0.0441 -0.1538 ** 0.1753 0.0628 0.0289 0.0644 0.1669 0.0670 0.1639 GDPpcapita 1.8560 *** 0.3280 ** 1.8942 *** -0.6849 -0.3961 0.2470 0.6829 0.1381 0.7031 0.7864 0.3363 0.7950 GDPsquare -0.0883 *** -0.0279 *** -0.0959 *** 0.0069 0.0058 -0.0051 0.0291 0.0105 0.0299 0.0112 0.0050 0.0114 GDPgrowth -0.0543 ** -0.0507 ** -0.0392 * 0.0592 -0.0332 -0.0177 0.0227 0.0236 0.0225 0.0870 0.0572 0.0925 Democratic Age -0.0196 0.0982 *** 0.0001 0.0450 -0.0100 -0.1383 0.1736 0.0381 0.1601 0.1835 0.0068 0.1829

Constant -61.8372 *** -8.4250 *** -61.7767 *** -1.8308 10.2234 -58.7016 *** N 19.6056 3.2324 18.4881 32.1477 7.1932 21.0406

Note: * p < .1, ** p<.05, *** < .01.

Figure 3.1 Marginal Effect of Volatility on Targeted Spending by Turnout in New

Democracies.

on Targeted Spending (%) Spending Targeted on Marginal Effect of Volatility Marginal

Mean of Voter Turnout (%) -.5 50 60 70 80 90 Voter Turnout (%) Dashed lines are 90 % confidence intervals.

Figure 3.2 Marginal Effect of Volatility on Targeted Spending in in Long- Standing Democracies.

on Targeted Spending (%) Spending Targeted on Marginal Effect of Volatility Marginal

Mean of Voter Turnout (%) -.2 40 60 80 100 Voter Turnout (%) Dashed lines are 90 % confidence intervals.

Chapter 4 Inequality and Democracy in Postcommunist Countries: Poland and the Czech Republic

The postcommunist region and in particular the Czech Republic and Poland represent a good testing-ground for social science theories. They enable scholars to control a number of factors that can confound the causal relationship they seek to investigate. In order to understand why the region and specifically these two cases present a unique quasi-laboratory for testing our argument, this chapter first discusses their similarities, the reasons of why they fit most similar system research design, and how to proceed.

Communist regimes dominated the political scene in Central and Eastern

European countries lasting from forty to seventy-years. Its ideology, communism, was pervasive extending to some degree into almost every facet of life. The political and economic institutions built in the Soviet context were replicated in new communist regimes with similar sets of policies. Moreover, by the time of the collapse of the communist regimes in the late 1980s, almost all states had achieved a moderately high level of economic development, uniformly so in Central Europe. What was true of the bloc as a whole was even more so the case for Poland and the Czech Republic. Since these similarities are discussed below in detail, it suffices to say that their past and current level of economic development, interwar experiments with democracy, and forty-years of communist rule mark them as highly similar.

Initially, the communist regimes promised to abolish economic and political injustices and launched policies that promoted a rough economic equality. Communist states were in charge of nearly all the economic institutions, making everyone a state

79 employee. In order to fulfill their promises, they granted their citizens full employment and the benefits associated with them. Official statistics such as zero unemployment and low gini coefficients more or less confirmed the realization of these promises (Milanovic

1998).

Social policies in these regimes were generous. They provided free health and child care, guaranteed pensions and subsidized vacations. As these benefits spread from blue-collar workers to the rest of population, communist regimes developed one of the most comprehensive social welfare systems in the world. Social spending of these countries reached up to 25 percent of their GDP; a similar level to their counterparts in

Western Europe (Cook 2007; Haggard and Kaufman 2008). However, economic problems worsened in the 1980s in most of the communist regimes, which made it difficult to sustain these welfare systems. Growing economic problems and the

Gorbachev‟s failed reforms led to the collapse of communist regimes in Eastern and

Central Europe and the Soviet republics in the late 1980s and early 1990s.

The subsequent transition to a market economy required a comprehensive restructuring of the statist economy. As privatization ensued, unemployment increased, resulting in widespread economic distress (Milanovic 1998). While they were expected to cut social welfare programs, on the contrary, postcommunist countries increased social spending to reduce the negative effects of transition. Nevertheless, they had divergent trajectories in development of their social policies and their level of economic inequality

(Cook 2007).

Of course, external actors should be also taken into account to understand differences in the development of social policies across countries. However, the

80 influence of external factors, especially the EU on the social policies in Poland and the

Czech Republic was minimal compared to the later EU candidates such as Latvia,

Lithuania, and Romania. In the early years of dual transition, the EU was silent and did not use its leverage, especially over whether these countries fulfilled the acquis communautaire (requirements that include political and economic regulations that national parliament has to approve and then their bureaucracy has to implement). The

EU had certain conditions regarding social policy starting in the late 1990s after it accepted Poland, Hungary, and the Czech Republic into open negotiations over membership (Vachudova 2005). The affect of the EU has remained almost the same for both of these actors. Other international actors such as the IMF and the World Bank prescribed liberal social policies, which may have had an effect on some issues, but the major actors remained domestic (Cook 2007).17 In short, while including the affect of international factors/agencies, this study concurs with others that a major part of the answer lies in domestic politics (Cook 2007; Lipsmeyer 2003).

Given these similar developmental trajectories, comparison of the Czech Republic and Poland enable this study to control for confounding factors across two cases, which provide significant variation across the most important independent variables in our theory. These chapters will discuss their divergent paths in post communist social policy and levels of inequality.

17 However, it does not mean that their social security programs were not influenced by other countries, especially Western European countries. See Orenstein (2008) for the affect of international factors.

Adopting the „most similar systems‟ research design within the postcommunist region (Przeworski and Teune 1970; Bennett and Elman 2006; Mahoney 2007; Seawright and Gerring 2008), for each country, I applied within-case analysis so that I could test whether the proposed relationship was causal relationship and not simply correlational.

In tracing causal relationships, I conducted interviews with key Czech and Polish political and economic actors in the government, unions, and business associations. This helped me to see how the interactions of political and economic elites interact and how these interactions affect the outcome of finalized social policy.

The high degree of similarity between these two countries does not mean that they were not different in terms of certain important aspects of their development. The most obvious difference between these two countries was the strength of opposition during the communist regimes as well as the electoral strength of ex-communist parties in the aftermath of transition. For example, the opposition against the regime in Poland was more organized and stronger, forcing Poland to declare a military regime in 1981. On the other hand, the opposition with widespread demonstrations had emerged in the last years before the collapse of the regime in the Czech Republic. The Polish communist party had to sit at the Round Table with the opposition while the Czech communist party resisted negotiating with the opposition until it was too late. In the aftermath of regime change, the social democratization of the postcommunist party in Poland realized and the adoption of a reformist agenda contributed to its staying power. The failure to embrace this path in the Czech Republic led to the filling of that space in the political spectrum by by a traditional social democratic party in the Czech Republic. The Communist Party of

Bohemia and Moravia (Komunistická strana Čech a Moravy, KSČM) remained

82 electorally weak in its early years and though it has regained some strength in recent years. Another important difference was the size of agriculture sector and percentage of labor force in this sector. While only 4 percent of the Czech labor force worked on the agriculture sector, this was 17.4 percent in Poland (WDI 2005).

Even among postcommunist countries the similarity between the Czech Republic and Poland are much stronger than their differences. Past democratic experience in the interwar era, a similar forty year communist legacy , a similar level of economic development, and a nearly identical position in the international system, make these cases highly suitable for a „most similar systems design‟. Furthermore, these two countries exhibit differences in my variables of interest, including voter turnout, volatility level, and targeted spending. By establishing a strong measure of control through this paired comparison, we can explain their divergent outcomes in terms of inequality with a higher degree of confidence.

We expect that Poland, a country with a low voter turnout and high electoral volatility, will exhibit a higher level of targeted spending while the Czech Republic, a country with higher turnout and lower electoral volatility, will produce lower levels of targeted spending. Lower turnout means that the poor are less likely to participate in elections while the more well-to-do, especially the organized section of society, will have a higher level of participation. Given the higher level of volatility in Poland, we expect that parties will tend to use more targeted social spending in comparison to the Czech

Republic. This in turn explains why economic inequality has remained lower in the

Czech Republic than in Poland.

Explaining the causes of a variety of social policies and their affect on inequality requires the presentation of extensive historical background on both countries. Therefore, this chapter consists of three main sections. The first section discusses the welfare policies shared by both countries under communist rule. In the second section I trace how voter turnout, linkages between political parties and social groups, and volatility have affected social spending differently in both countries. Here I will examine levels of turnout by the poor, the linkage between organized interests and political parties, and volatility in the political party system in both countries.

I will make use macro- and micro-level data to show how the causal mechanisms operated. I make use of three rounds of the European Social Survey (ESS), the POLPAN

(a unique panel survey on Poland), and a number of surveys reported on the Czech

Republic to show the linkage between political parties and social groups. In addition, the interviews I conducted with Polish and Czech politicians, bureaucrats, and union leaders during my field work uncover the constraints and incentives under which they operated.

I discuss the interactions between these interests and how this play of interests led to particular policy outcomes. The last section compares Polish and Czech social policies and their affects on inequality.

Social Policy and Inequality under Communism This section discusses common themes and provisions in social policies under the communist regimes while it will briefly discuss the pre-communist social policies as well. In particular, the focus will be on the nature of communist welfare state policies, its

84 coverage, and its affect on inequality in these countries. An overview of communist welfare policies is important, because they had an impact on current social policies.

From their inception, communist regimes expropriated private enterprise rapidly, making almost everyone a state employee with a guaranteed job. The nomenclature and some occupational groups had some privileges, but most scholars agree that social policies of the communist regimes were generous in the sense that benefits were spread widely across population (Szelenyi 1983; Lane 1982). Although differences in wages existed depending on occupation, minimum differentials in wages and the social benefits had an equalizing affect (Milanovic 1998). The majority of the population benefited from the social policies of the regime such as pensions, housing, state-subsidized primary education, and health-care. As a result of the universalistic nature of socialist welfare policies, communist regimes, especially in the Eastern European region, were among the most egalitarian in the world (Milanovic 1998). However, a “workers‟ paradise” was costly. The generous welfare policies of the communist regimes increased financial burdens on their budgets as these regimes devoted a significant portion of their GDP to fulfilling their costly social security and welfare expenditures. Nevertheless on average, the social welfare spending of the postcommunist region was high and inequality was low compared to other regions (Haggard and Kaufman 2008).

As noted above, levels of social spending and inequality varied in the region.

This variance across communist regimes was a product of several factors. First, as stated above, different levels of industrialization and development across countries required different economic and social policies, favoring certain occupational groups (steel workers, miners, military-industrial enterprises etc) over others, especially farmers and

85 less prestigious occupations (Inglot 2008; Kramer 1997; Orenstein and Haas 2005).

Second, their proximity to Western Europe made these countries strategically important.

The communist regimes were concerned that the growing socioeconomic gap between the region and its European neighbors could cause social unrest and undermine the ideology of communism as „the paradise of workers.” Finally, the past welfare policies in these countries put differential pressure on the communist elites of these regimes. In particular, the past legacies were relatively more important in post-communist Europe where pension and sickness benefits covered a subset of the population, especially the former territories of the Austro-Hungarian Empire (Haggard and Kauffman 2008; Inglot

2008).

The Czech Republic, Hungary, and Poland, also inherited social insurance schemes from the interwar era. Pre-communist era insurance schemes were Bismarckian, separate, occupational-based, and financed through payroll taxes. Certain occupations in the state institutions also had privileged benefits (Haggard and Kauffman 2008; Muller

1999). When communist regimes were initially established in these countries, the ruling elite slowly introduced basic social policy benefits tied to wages and incorporated the pre-communist Bismarckian social schemes. Although these factors played a role in the development of social policies, the biggest impetus came from socialist development policies that pushed the state to implement comprehensive entitlements. The communist states eliminated the market and private property; it then had to guarantee jobs for their citizens as the sole employer.

In new communist regimes, social benefits were tied to employment, and wage differentials across occupations also reflected the preferences of these regimes. Workers

86 in industry, especially in heavy, extractive (mining and steel) and defense industry, were privileged compared to other branches of industry and received higher wages (Connor

1997). The pay differentials were also reflected in the policy of social transfers. The communist factory or state institution was more than a place of work where people exchanged labor for wages. Some institutions were privileged and they provided better social services. Nevertheless, the tasks of all institutions included the provision of social services, health care, housing, vacation sanitoria, and food (Connor 1997). Workers were able to access pensions, healthcare, and education through work places. The introduction of this basic social policy had been completed in the early 1950s in almost all communist regimes.

The incorporation of farmers into social policy schemes took longer. Over half of the populations in most postcommunist countries, in 1950, lived in rural areas. The rural population constituted 75 percent of the population in Bulgaria and Romania and 61.3 and 59 percent of population in Poland and Czechoslovakia, respectively. By 1955, the communist regimes were successful in collectivization of 64 percent of arable land in

Bulgaria, 47 percent in Hungary, 43 percent in Czechoslovakia, 26 percent in Romania, and 25 percent in Poland (Spulber 1957). Centralized social security schemes were introduced for collective farms and the coverage of these schemes increased as collectivization proceeded. Like other institutions, these collective farms provided pensions for disability and old age as well as maternity and child supplements (Haggard and Kauffman 2008).

Social insurance schemes, by the early 1960s, extended to the majority of rural areas in most of the communist countries (Haggard and Kauffman 2008). However,

87 some countries were late in adopting such policies. Pension coverage was extended to farmers in Bulgaria in 1975 and Czechoslovakia in 1976, while farmers in collective farms in Hungary were integrated into the general pension system in 1961. Comparing communist pension systems with capitalist countries, Haggard and Kauffman (2008) note that pension differentials favored urban workers in socialist countries, but argue that the socialist pension systems remained highly egalitarian compared to other regions.

With urbanization the incorporation of farmers into pension schemes, the number of pensioners significantly increased. It increased by 143 percent in the Soviet Union between 1960 and 1980. The scope of the welfare state grew as socialist farming encompassed 90 percent in Hungary, Czechoslovakia, Bulgaria, and Romania.18 In

Bulgaria and Czechoslovakia, child support payments constituted around 20 percent of the income for a two-child family (Sipos 1994, 230). By 1988/89, state subsidies had increased to the extent that “social transfers equaled 25.4 percent of gross income in

Czech Republic, 22.4 percent in Hungary 21.2 percent in Bulgaria, and 20.7 in Poland.”

(Haggard and Kauffman 2008:152).

It is interesting to note that workers in the parallel economy, which were semi- illegal small businesses, were also included in these social security schemes. Hungary and Poland had parallel economies where small private enterprises were allowed to function. In Hungary, the 1974 Social Security Act extended family allowances to part- time and home workers who were mostly outside of state enterprises. In Poland, the regime extended the general pension system to small private farmers but contributions of

18 Collectivization in Poland could not be completed. The regime first collectivized almost all farms but then decollectivized in 1956.

88 private farmers to the system were much higher (Connor 1997:35; Haggard and

Kauffman 2008:161).

Starting from the 1960s, communist citizens saw rising real wages and greater attention to the provision of consumer goods. State subsidies for mass consumption reached to a level in which “by 1975 the cost of subsidies on meat and butter amounted to a reported 8.9 percent of Soviet government expenditure” (Connor 1997:27). The regimes started to face growing budget deficits, which made them seek out foreign loans. This then forced countries, such as Poland, to cut their spending. Particularly, the 1980s communist countries were replete with political and economic crisis. The Soviet invasion of Afghanistan in 1979, the coup d‟état in Poland in 1981, as well as growing budget deficits and foreign debt led some communist leaders to explore new ways to solve political and economic problems. In particular, with the rise of Gorbachev as the party secretary of the Soviet Union, reform efforts and growing pressure from below resulted in the collapse of communist regimes in Eastern Europe (McFaul 2001).

This section discussed the communist welfare systems; it briefly explained how it was affected by the pre-communist social policy. Although the relatively generous welfare programs were not sustainable in the second half of the 1980s and the expectation was that they would be cut, these two countries continued to have generous social policy.

The next section will give the political and socioeconomic background for Poland, starting from the pre-communist era to the present before we analyze voter turnout, political party system and social policies.

Poland The reemergence of a Polish state is relatively new. Until 1918, the Polish state had disappeared from the world map over two hundred years and reemerged as a result of a regime collapse of three big empires at the end of WWI (Bernhard 2005). The defeat of

Germany, the disintegration of the Austro-Hungarian Empire, and the Russian Revolution of 1917 resulted in the Polish state making its way back into history again.

In this new state, new constitutional institutions were gradually introduced. First, a provisional government was established in late 1918 and then a new legislature and government were elected under its provisions in 1922 (Bernhard 2005). Similar to its post-1989 era, Poland could not produce stable governments in interwar era. It experienced five different governments. The inability and difficulty of the left or the right parties to form a government had been major causes of political instability along with the institutional choice of the interwar era with weak executive branch. The sovereignty of

Poland continued until 1939 when it was invaded first by Germany and then by the

Soviet Union a short time after the secret Molotov-Ribbentrop Pact between them. At the end of the war, a new provisional government was established by the Polish communists assisted by the Red Army. As Poland was left to the hands of the Soviet Union at Yalta, the communist party was in the process of establishing its totalitarian political system.

Communist Poland The communist regime in Poland, in its first decade, aimed to purge all independent social and political organizations. The target was prewar independent or semi-independent organizations. The regime empowered these organizations through merging into official organizations or disbanding them. Only a few pre-WWII political

90 parties were legalized by new government. Parties such as the National Party (SN,

Stronnictwo Narodowe) and the National Armed Forces (NSZ, Narodowe Sily Sbrojne), which rejected to compromise with the Communists, were repressed. Friszke summarizes the political parties as following: “The Polish Socialist Party (PPS) was forcefully united with the Communist Polish Workers‟ Party (PPR) to form the United

Polish Worker‟s Party (PZPR, Polska Zjednoczona Partia Robotnicza). Three political parties operated during the communist era under the control of the regime: The ruling

PZPR, and its two allies, namely the United Peasant Party (ZSL, Zjednoczone

Stronnictwo Ludowe) that represent landholding peasants and the Democratic Party (SD,

Stronnictwo Demokratyczne) that represent lower-middle class urban elements” (Andrzej

Friszke p. 305).

In the first decades of communism, Poland underwent massive socioeconomic changes. Levels of industrialization and literacy in the country dramatically increased.

Table 4.1 summarizes changes in two indicators of modernization. The rural population decreased from 57 percent in 1956 to 38 percent in 1990. As for educational level, secondary and post-secondary education increased dramatically, up to 3 and 8 percent in

1990 respectively.

[Table 4.1 about here]

Despite the progress on these fronts, political oppression and economic problems continued. The first challenge to the regime came in 1956 when workers of Poznan took to the streets to protest economic measures of government. The response was harsh;

91 more than 10,000 troops and 360 tanks suppressed the protests that turned into a rebellion

(Ekiert and Kubik 1999). During this intervention, 100 people were killed and 900 people were wounded. In order to prevent any further social unrest, the Politburo brought

Władysław Gomulka to power, a highly respected communist leader who fought in the underground resistance movement during the war. Although he promised to reduce prices and increase political freedom, he reneged on his promises after a short period of time and the situation did not improve. Prices for goods increased and the remaining independent organizations were suppressed.

In the 1970s, what was most striking was that whenever prices increased so would, simultaneous, the worker‟s reactions. This was subsequently followed by the government decision‟ rescinding price increases. In the 1960s and early 1970s, we see intellectuals, students, workers, and the Church expressing their grievances separately; there was no concerted effort by all of these groups together against the regime. As the economy deteriorated and social mobility slowed down in the 1970s, dissident movement by the intellectuals had spilled over the rest of the population.

In the aftermath of the June 1976 events, new coalition of workers, intellectuals, students, and the Church started to emerge. In September 1976, a group of intellectuals formed the KOR (Workers‟ Defense Committee), which stimulated the development of other independent groups and organizations across the country. These organizations intended to monitor the state repression and help the victims (Bernhard 1993). Unlike the

1960s-1970s, where protests were led by students and intellectuals, the KOR formed the first seeds of anti-regime movements and contributed to the emergence of Solidarity as it

92 provided intellectual weaponry against the regime (Bernhard 1993; Kubik and Ekiert

1999).

With growing dissatisfaction with the regime, a number of shipyard workers at

Gdansk established an independent union, Solidarity in 1980. A huge wave of protest led by the worker shook the country in the spring of 1980. The second wave started in the summer of 1980, which brought together intellectuals, workers, students, and to a lesser extent the Church. Their demands were political asking for “freedom of association, freedom of conscience, freedom of the press, social autonomy and self-government, equality of rights and duties “(Ekiert and Kubik 1999:39). Anti-regime sentiments grew rapidly. Participation in anti-regime demonstrations was remarkably widespread with one in ten people participating in the rural areas and one in four people participating in urban areas (Ekiert and Kubik 1999).

Incapable of controlling Solidarity and other independent organizations and fearing a Soviet invasion, the communist party declared a martial law on December 13,

1981. Solidarity went underground. While it lost some of its leadership by escaping to the West, most of its leaders were released from detention when the regime restored some basic laws and allowed some semiautonomous nonpolitical organizations to emerge

(Hicks 1996).

However, the ongoing economic crisis worsened in the second half of the 1980s.

Foreign debt and declining productivity were the major factors behind the decline.

Growing income inequality in the country hit people in all occupations. Table 4.2 displays occupational groups and their declining socieconomic status between 1982 and

1988. For instance, it shows that professionals made up 10.7 percent of low income

93 groups in 1988 while this was only .6 percent in 1982. The biggest losers were unskilled workers and private farmers. Their share in low income groups dramatically increased

(from 9.6% to 31.7% for unskilled workers and from 12.8% to 40.8% for private farmers) and their share in high income groups declined (from 6.3% to 2.9% for unskilled workers and 15.3% to 11.7% for private farmers). Increased income in professional, intermediate non-manual, and skilled workers was also noticeable. A comparison of the low income and high income categories between 1982 and 1988 also shows a major decline in income position for skilled workers. On the other hand, as Table 4.2 shows, even though their share increased in low income groups, professionals and intermediate non-manuals were still better off among high income groups during the most economically depressed years of Poland.

In the spring of 1988, strikes and protests erupted again in factories and universities across the country. The second wave spread to the strongholds of Solidarity including Gdansk, which signaled the overwhelming dissatisfaction with regime

(Bernhard 2005:186).

[Table 4.2 about here]

In the late 1980s, as popular mood grew against the regime, member of Politburo in the communist party, led by General Jaruzelski, pushed the idea that party representatives should meet representatives of the opposition. The Roundtable Talks started on February 6, 1989 and resulted in a favorable outcome for Solidarity. The

Roundtable Agreement signed on April 5, 1989 provided legal recognition of Solidarity,

94 partially free Parliamentary elections, and an addition of a second house of parliament named the Senate. According to the agreement, 35 percent of the seats of the Parliament would be elected freely while the rest of the seats were reserved for the communist party,

The Polish United Workers' Party (PZPR), and its political allies. As for the Senate, all seats would be subject to free election. The next election was scheduled for sometime in

1993 (Bernhard 2005:188-189).

However, the 1989 election ended the communist regime. The Solidarity unexpectedly won all 161 contestable seats in the Parliament (Sejm) and 99 out of 100 seats in the Senate. As worked out into advance, Jaruzelski was elected as the President by the parliament. A Solidarity-led government was formed under, Tadeusz Mazowiecki, an intellectual with a long history of opposition.

Having concluded this overview of the political and economic policies during the communist era, which is essential for understanding the emergence of competitive political parties, their electoral base, and the formation of social policy in the post- transition era, we now turn to the post-transition era. Here we will see the legacy of

Post-transition Era The post-communist transition was not easy for Polish citizens.

While they were accustomed to guaranteed employment with universal benefits, the new era increased uncertainty filled with frequent political crisis and economic difficulties.

Except for the PSL, no single party was able to survive this unstable political environment. The ex-communist parties slightly increased their votes due to their

95 organizational strength, but they also faced a significant blow to their electoral significance in the 2005 election.

In January of 1990 the Mazowiecki government “freed prices, imposed taxes on excess wages at state enterprises” and eliminated most of the subsidies (Michta

1997:100), and launched its shock therapy program that overhauled the previous statist economy. The number of private enterprises increased as privatization ensued. As Table

4.3 shows, unemployment levels reached to two digits with skyrocketing inflation.

Economic growth declined severely in 1990 and 1991. In 1992 it recovered, but unemployment and poverty have continued to be a persistent problem since then.

[Table 4.3 about here]

As will be discussed in later sections, political instability dominated the Polish party system as frequent turnovers in governments marked the era. Until 1994, there was a new government each year (Jasiewicz and Jasiewicz-Betkiewicz 2002) due to charges of corruption, disagreements between the parties and the President, and other reasons.

Growing dissatisfaction with new political and economic order increased the electoral chance of ex-communist parties. The PZPR which had been transformed into a social democratic party and allied with other left-wing parties, formed an electoral coalition, the

Alliance of the Democratic Left (SLD) in 1993. The SLD established a coalition government with the Polish Peasant Party (PSL) until 1997 when the Solidarity Electoral

Action (AWS) came to power.

The AWS introduced major reforms of the welfare system, which were not welcomed by the public. Growing unemployment and conflicts among the AWS leadership led to a loss of popularity. In 2002, frequent charges of corruption and sexual harassment advertised in the media led to the replacement of five cabinet ministers damaging the AWS prior to the 2001 election (Jasiewicz and Jasiewicz-Betkiewicz

2002). Different factions within the AWS left the party and established their own political parties. These included the soon to be defunct Solidarity Electoral Action of the

Right (AWSP), a rump version of the old AWS composed of a coalition of three parties.

Lech Kaczynski, a former close aid of Walesa formed the Law and Justice party (PiS).

The popularity of Kaczynski helped the party to get 44 seats (9.6%) in the 2001 election.

Civic Platform (PO) was another splitter from the AWS (as well as the Democratic Union

(UD), the AWS‟s former coalition partner) and was joined by ex-SKL members.

Nationalist and religious elements established the League of Polish Families (LPR). The

LPR accused other parties of betraying nationalist and Catholic interests (Jasiewicz and

Jasiewicz-Betkiewicz 2002, p.1062). These four ex-Solidarity factions ran in the 2001 election, dividing votes and paving way for the SLD‟s victory.

In the 2001 election, the SLD got 41 percent of the votes and established a coalition government with the PSL once more. Between 2001 and 2005, two governments were established with the PSL, the UP and independents. This coalition government faced one of the biggest vote losses in European history. In the 2005 election, the SLD got only 11.3 percent while its small coalition partner lost only 2 percent.

The divide between the post-Solidarity and ex-communist parties had marked the nature of Polish political party system as the in the 1990s, but this ended in the 2005 elections. This election led to the emergence of two new political players, the PO and

PiS, who claimed the legacy of the Solidarity. These two post-Solidarity parties represented a new cleavage in the Polish political party system, between “a liberal

Poland” and collectivistic “Poland of social solidarity” (Jasiewicz and Jasiewicz-

Betkiewicz 2002). Despite the expectation for a PO and PiS government, the PiS established government with other minor parties and independent candidates. The leading figure of the PiS, Lech Kaczynski was chosen to be the President of Poland in

December 2005. The PiS established the government with two extreme parties, one on the left and one on the right. Its coalition government with the extreme left, SRP, and right, LPR, did not last long; Poland had a new election in 2007 that brought PO and his leader, Donald Tusk, to power.

The following section will discuss the change in voter turnout, its sources, the linkage between parties and social groups, and how these factors affect the use of social spending. We expect that low electoral participation by the poor and weak political party institutionalization lead the use of higher targeted spending.

Voter Turnout As Duch (1995) argues, postcommunist citizens will not abandon democracy and embrace antidemocratic and market parties during times of economic chaos, but are more likely to punish incumbents. This is because people have very negative and recent memories of the previous regime and they understand where to apportion responsibility

98 for economic chaos. Nevertheless, the transition had a significant effect on voter turnout.

As a result, an important segment of society was alienated from this transition, which reduced trust in political parties, parliament, and consequently voter turnout (Mishler and

Rose 2001).

Greskovits (1998) offers an explanation on the paucity of protest activities in these countries. Similar to Duch (1995), he points the lack of social unrest in the postcommunist countries to an alternative way of punishing the governments, namely penalizing incumbent governments at the election polls rather than protesting (Greskovits

1998). This explanation is incomplete. It is true that some punished incumbent parties, but at the same time many did not vote at all. In other words, as economic transition created a significant percentage of disadvantaged people, in addition to penalizing the incumbent governments at polls, they simply withdrew from electoral processes.

[Table 4.4 about here]

Table 4.4 presents voter turnout in Poland. It suggests turnout has been low compared to other postcommunist countries. Average voter turnout was 49 percent. Only the first election of 1989 and the 1993 election were well above the average, 62.1 and

52.1 percent respectively. With this record of voter turnout, Poland ranks the lowest amongst all European and postcommunist countries. There are a few potential reasons for this. Some argue that under the communist regime voting was obligatory and did not carry so much meaning, given that the party candidates were the only available options for them. As a result, distrust in formal institutions, including political parties, continued

(Mishler and Rose 2001; Howard 2003). In addition to the regime legacy argument, some

99 emphasized the frequency of elections in the posttransition era. In a period of four years,

Poland had a number of elections: the local election of May 1990, two rounds of the presidential elections in 1991, the parliamentary election of September 1993, and the local election in June of 1994. The frequency of elections along with economic downturn created political apathy. As time passed, voter turnout declined in the first decade following transition. The one exception to this is the 1993 election. On average, high turnout favored the left parties. Turnout declined from its highpoint of 62.1 percent in

1989 to its low of 40.6 percent in 2005, when the SLD collapsed.

Who then were the non-voters? If the first part of my argument is true, most nonvoters should have come from the disadvantaged segment of Polish society. In turn, members of organized groups would be more likely to vote. Previous studies found that the less educated females and the poor were less likely to vote in 1991 and 1993

(Markowski, Cześnik and Grzelak 2006). In contrast, middle-aged and older residents with higher educational backgrounds are more likely to turn out. Markowski et al (2006), using CEU post-election surveys, show that issue of salience is important to understand who the likely voter is. In the 1991 and 1993 elections they found that those who supported privatization and who thought that the state should help the private sector were more likely to vote. In addition, in 1993, those who were concerned about freedom of speech and strengthening patriotism turned out more in elections.

The studies discussed above examined voting behavior in the early elections of

1991 and 1993. In order to test whether there is a difference in voting between the poor and the non-poor and whether education matters in Polish elections, this study analyzes three available European Social Survey (ESS) surveys. Using income question in the

100 surveys, first we calculated five income quintiles. Then we named the first quintile as the poor and the remaining four quintiles as the nonpoor. Table 4.5 tabulates the abstention rate by the poor and the non-poor. The results show that there is a statistical difference between the poor and the non-poor in terms of their abstention rate. The 2002 ESS shows that turnout differences between the poor and the non-poor are about 5 percent.

The last ESS survey conducted in 2006 finds that the difference in abstention (four percent) continued in the 2005 election. In other words, despite the different figures in surveys, there is consistent evidence that the poor disproportionately are less likely to vote in Poland.

[Table 4.5 about here]

In order to see whether pensioners are likely voters we look at ESS and POLPAN which present us with a rich source of data to test these assertions. Using ESS surveys,

Table 4.6 tabulates voter turnout by pensioners and the rest. Difference between pensioners and nonpensioners is statistically significant in the 2001 election. It suggests that while 72.2 percent of pensioners voted in this election, this is only 61.3 percent for the rest of society. A subsequent test also shows that the difference is statistically significant. ESS2 repeats the same question and results in a similar outcome. According to this survey, the difference between pensioners and the remainder is 9.6 percent. The

ESS3, on the other hand, asks whether the respondents participated in the 2005 election.

The difference in turnout decreases slightly, to 6.3 percent. Nevertheless, the difference is still statistically significant, suggesting that pensioners are more active in elections than the rest of population. The POLPAN survey conducted in 2003 substantiates these

101 results. Table 4.7, based on POLPAN, shows that the difference between pensioners and non-pensioners is 15 percent.19

[Table 4.6 about here]

[Table 4.7 about here]

Table 4.8 shows that union members are also likely to vote more frequently.

According to ESS1, while 77.1 percent of members participate, only 60.2 percent of nonmembers are voters. ESS2 also confirms a significant difference between these groups, finding a difference of 19.6 percent. As it happened in the case of retired people, the 2005 election seemed to mobilize non-union members as well. While 70.4 percent of members voted in this election, the percentage of voting by nonmembers increased to 64 percent.

Nevertheless, the union members‟ votes were higher, by 5.6 percent.

[Table 4.8 about here]

The effect of religion on voting decision is also important in the Polish context.

We find that attendance in religious services significantly affects one‟s participation in elections. As Table 4.9 suggests, as one‟s attendance in religious services (Church) increases from none-attendance to once a week the turnout increases from 49.3 percent to

69.6 percent. POLPAN inquires regarding Catholic Church membership. The result shows that even though some do not attend in any religious service, they see themselves

19 However, according to another survey, POLPAN, voter turnout is 73 percent while this is 61.9 percent. The latter seems to be closer to the real voter turnout (46.2). The difference between the results, based on the reported turnout and survey results, are well documented in the literature and their sources will not be analyzed here.

102 as a member of the Catholic Church. Those who participate in Church activities or services are more likely to turn out in elections.

[Table 4.9 about here]

In summary, we see that the results presented here show the strength of certain social groups such as the non-poor, educated, pensioners, union members, and those who participate in their religious activities. These groups constitute an important segment of voters in Poland.

Political Parties, Social Policy and Electoral Volatility This section analyzes the linkages between political parties, Solidarity, and other pro-democratic groups versus ex-communist political parties. It discusses the volatile nature of the party performance and their fluctuating electoral bases. Our expectation is that a very volatile political environment makes it difficult to have the stability of certain groups‟ party choice. Nevertheless, this makes the Polish party system different from the

Czech one. This also helps one understand how social policy of governing parties and targeted social spending change.

Political Parties and Their Constituencies In order to understand their social policies and their affect on redistribution, we had better analyze the political configuration in government and parliament in the aftermath of transition. In addition, tracing the nature of government parties and their social bases would enable us to seek out the linkage between political parties and their

103 social policies. However, it should be noted that this linkage includes a dynamic relationship between political parties and socioeconomic groups. In a political party system where parties die out and new parties emerge, some electorates may switch their allegiance to new parties in the same ideological family or entirely different ideological parties.

We can divide the political parties of Poland into two camps, the post-transition

Solidarity parties and the post-communist parties, until the breakdown of the political party system as a result of the 2005 election (Jasiewicz 2008). However, since the 2005 election, a new cleavage was more predominant in Poland. This cleavage revolved around „liberal Poland‟ and the „Poland of social solidarity‟ (Jasiewicz 2008). The former is composed of those who are ex-Solidarity supporters and defends a more liberal economic approach. The latter composed of the supporters of the pre-SLD but also of other groups that emphasize the role of the state in economics. The next section discusses the use of social policies by these parties for electoral purposes in a highly volatile Polish electoral environment.

In addition, the Polish Peasant Party (PSL) occupies a special position as the party that was able to form governments with the Solidarity parties and the SLD. As the representative of peasants, the PSL was the only party that had gained seats in all post- transition parliaments.

In the first elections Solidarity parties drew support from all groups who had supported the opposition, including the working class, dissident intellectuals, and devout

Catholics. The dual character of Solidarity, during this era, worked against the electoral success of Solidarity‟s affiliated parties. This was because Solidarity was both a union

104 that protected the interests of its workers as well as the force behind governments that implemented the marketization measure which damaged the welfare of a large number of workers.20 As we saw during the second election, some Solidarity supporters and sympathizers, including workers and retired people, did not vote or supported the SLD. In order to see party preferences of union members, we need to look at the surveys.

However, the survey is limited to the post-2000 era due to the absence of surveys covering our questions on union membership and voting behavior.

[Table 4.10 about here]

[Table 4.11 about here]

[Table 4.12 about here]

In order to track the voting patterns of social groups, we use the ESSs. As Table

4.10 shows, in the 2001 elections, most of the current or previous union members voted for the SLD, while deserting the rightwing remnant of the Solidarity party, the AWSP.

The latter got around 11 percent of current and previous union members. The other ex-

Solidarity parties, such as the PO, the SRP, and the LPR also garnered small shares of union votes. However, as the SLD garnered more than half of the union members, the remaining votes were shared by the four Solidarity parties.

ESS2, conducted in 2004, again asked whether one voted in the 2001 elections

(Table 4.11). Although there was a significant change in PO‟s share in union member votes, overall it substantiated the previous results by showing that organized labor voted for the SLD. During SLD‟s term, an ongoing unemployment problem and other economic problems alienated the SLD/PSL, reducing their vote share significantly

20 Interview with ex-member of the Solidarity during the ILO 2009.

105 amongst members. Table 4.12 indicates that the SLD was able to hold on to 13 percent of union members‟ vote while the rest went to two ex-Solidarity parties, the PO and the

PiS.

[Table 4.13 about here]

The PO represented the market liberal wing of the Solidarity movement. The PiS, on the other hand, advocated increased state intervention and focused on the ethno- religious character of Polish identity. While the educated strata of Polish society voted for the PO, the less educated strata went for the PiS. For example, Table 4.13 tabulates party choice by educational level and presents evidence to us that the PiS was very strong amongst those who studied until upper secondary school. The reverse was true for the

PO. People with postsecondary and higher educational levels were usual voters of the

PO. The nationalist Self-Defense (SRP) was successful in getting the votes of less educated people through its nationalistic and religious party platforms.

[Table 4.14 about here]

[Table 4.15 about here]

[Table 4.16 about here]

Analyzing change in preferences for parties, Table 4.14-16 show that pensioners for example, switched from the SLD to the PiS when the Polish political party system was shaken in the 2005 election. On the other hand, a small percentage of retired workers (18%) voted for PO while this was 48.4 percent for the PiS. The ESS asked what the major source of household income was. Tables 17-19 suggest that if the major source of household income was pensions, their votes went to the PiS. The PiS received

106 significant votes from fixed-wage groups, the self-employed groups and rural areas where farming was widespread. The PO also appealed to fixed-wage groups and the self- employed.

[Table 4.17 about here]

[Table 4.18 about here]

[Table 4.19 about here]

As the PiS defended the role of the state in the economy and offered populist solutions, it was able to appeal those who were concerned about a growing inequality. As

Table 4.20 presents, those who defended the role of government in reducing inequality voted for the PiS; 51.9 percent of voted to be precise. Those who disagreed with the state intervention in reducing inequality tended to vote for the PO.

[Table 4.20 about here]

As many argue, Catholicism played a significant role in Polish politics. Political parties pursued the support of religious clergy, most famously the owner of Radio

Maryja. As we suspected, the PiS received most of the religious votes as Table 4.21 suggests. Over half of those who attended Church, at least once a week or more, voted for the PiS. Another political party that did well amongst religious voters was the LPR.

This party got the support from the Radio Maryja and was successful to get religious votes. In the 2005 election, the LPR got significant votes amongst those who frequently attended religious services. The PO also appealed to religious voters, but with less

107 success. It got around 20 percent of the votes in the most three religious categories. The

PO and the SLD on the other hand were strong amongst the less-religious voters.

[Table 4.21 about here]

In summary, this section showed that the electoral bases of the Polish political parties were fragile as Poles had a low party attachment. In order to survive and maximize their electoral chance, parties faced difficult dilemmas. Over pursuing long- term policies, parties chose policies that will help them survive and gain more votes. The next section will elaborate this point regarding social policy. We expect that targeted spending will increase as a result of low turnout and weak political party institutionalization.

Social Policy and Volatility Do political parties respond to the preferences of voters on social policy? We have a couple of important reasons to believe that social policy is a crucial policy arena which matters to voters. Firstly, social policy is among a few policy areas where a sizeable segment of citizens receive direct benefits from the government, either by pension or unemployment benefits (Roberts 2003). Although it is also true that governments provide certain incentives or subsidies to certain industries, subsidies are electorally less important because only a narrow group will benefit from them. Secondly, there is a strong reason to believe that parties will respond to the preferences of voters in

Eastern Europe because for decades citizens were accustomed to receiving welfare benefits as basic rights. These previous policy legacies persisted as they also created

108 expectations that they will continue, among their recipients (Pierson 1996). Thirdly, transition politics dictates political parties to provide economic and social benefits to those who supported respective political groups during transition, whether pro- democratic groups or pro-regime groups.

[Table 4.22 about here]

In order to see the level of volatility in the Polish political party system, we gather

(seat) volatility scores. As seen in Table 4.22, the Polish political party system is highly volatile. It, at least, quadruples the average volatility of European countries and doubles of the Czech Republic. The volatility score of the 1993 election was 55. Volatility decreased in 1997. The highest volatility score was 58.05 for the 1997-2001 elections.

The 2005 election, when new political actors emerged, had a volatility score of 39.55.

Nevertheless, volatility remained high in all elections.

High electoral volatility has an impact on the structure of governing parties.

While we do not see frequent and dramatic changes to coalition structures in developed democracies, the Polish party system witnesses significant changes in its coalition structure. From one election to another, changes in governing parties were frequent

(Kaminski 2001:295). Table 4.23 illustrates this point. From 1989 to 2006 Poland had twelve cabinets each led by different prime ministers. Considering the many overhauls and turnovers in Polish governments, remaining in one‟s governmental position was difficult (Jasiewicz and Jasiewicz-Betkiewicz 2002).

[Table 4.23 about here]

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Under such a highly uncertain electoral environment, Polish governments were coalition governments that made policies which would benefit their own electoral base.

They also targeted the likely voters in the same ideological camp. In particular, the post-

Solidarity parties and the SLD sought the votes of workers and pensioners while using social policy issues in their electoral campaigns. This is not surprising because social policy issues moved up in terms of their salience for voters, as survey results suggest

(Markowski et al 2006). As we see in the previous section, an important sector of workers and pensioners switched to the SLD in the 1993 election. Also, new governments were composed of different political parties competing for survival and acquiring power.

This instability in governments was impeding policy continuity by allowing new parties in governments to play around with the indexation of pensions or unemployment benefits. They were also allowing their coalition partners, such as the PSL, to use it for their rural electoral constituency. As a result, when the PSL was part of the coalition governments for most of the 1990s, it extended the coverage of social insurance programs. It passed a bill providing noncontributory pensions to around 2 million peasants (Inglot 2008; Kramer 1997).

In such a volatile electoral environment, likely voters became more important.

Before discussing the social policy of governments, we will discuss why pensioners were important in the Polish context. There were a couple of reasons. First, their strength first came from their numbers. Although the Czech Republic had a higher percentage of people above 60 than Poland, 16.7% and 14.1% of people over 65 and 13% and 11% respectively (Greskovits 1998; WDI 2005), the latter had higher percentage of

110 pensioners. This is because post-transition governments in Poland through early retirement and disability pensions disproportionately increased the number of pensioners

(Sachs 1995; Milanovic 1998). As Table 4.24 indicates, the percentage of 60 years and older in the Czech Republic was higher than Poland, whereas pensioners constituted about 32 percent of the adult population in Poland (Sachs 1995).21

[Table 4.24 about here]

Another power of pensioners was that they were likely voters and it made sense to appeal to likely voters for political parties. As we discussed the findings of ESS and

POLPAN22 surveys, pensione rs were more likely to vote compared to the rest of population. Due to methodological differences, the figures vary across the ESS and

POLPAN, but both led to the same conclusion. According to POLPAN, Table 4.7 clearly shows that pension recipients have higher percentages of turnout in the elections. In

1993, when turnout was relatively higher (53%), around 86% percent of pensioners went to polling stations. In the 1997 elections, this difference increased about one percentage and became 18 %.23 In the 2001 elections, around 85 percent of pensioners reported going to polls. This was a contrast to those who did not receive pensions, whose turnout remained around 69 percent.

In summary, given that pensioners were a sizeable portion of the electorate, not surprisingly, the Polish political parties were trying to capture these constituencies through pension policies. Next we will analyze social policy by governments, starting with the first few posttransition governments.

21 This was only 21 percent in the US. 22 I am indebted to Dr Joshua K. Dubrow for providing this dataset. 23 The figure is different from the ESS, but its substantial interpretation is the same.

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Social Policy in the Early Years of Transition In the early years of the transition to democracy, as Polish governments eliminated most state subsidies, prices were also freed from state support. To cushion the affect of transition, governments instead used social policies, which led to significant increases in social spending. Table 4.25 suggests that as subsidies decreased, social spending skyrocketed in Poland and Hungary. On the other hand, the Czech Republic experienced a modest increase in social spending.

[Table 4.25 about here]

As prices of goods were freed, the Minister of Labor under Mazowiecki‟s government offered various packages to offset any backlash from society, especially the workers. The Solidarity governments loosened requirements for early retirement and disability benefits, making middle-aged people pensioners. In addition, they increased the replacement ratio (from 57 to 66 percent) so that it would appeal to those occupations undergoing economic difficulties (Cain and Surdej 1999). “Pensions in particular were extended to “the victims of layoffs, with no provision for withdrawing them when people found new work. As a result, many middle-aged people claimed benefits and continued to work” (Orenstein and Haas 2002:19). These generous policies helped the Solidarity governments to gain the support of workers and pensioners, while they aimed to prevent those disadvantaged groups from supporting the SLD (Vanhuysse 2006).

The economic cost of these policies was high. The number of pensioners increased by one million in 1991 as many wanted to save themselves from the mass layoffs due to privatization or closures (Inglot 2008). As we will discuss, this decreased

112 the system dependency ratio, which is to say there were less workers to support the current pensioners. As a result, the system dependency ratio declined to 1.75 from 2.49, which put social security schemes into a dire financial situation.

Under the first Mazowiecki government, proponents of economic reform „favored a relatively quick and radical transformation of social insurance into several independent funds liberated from monopolistic government control (Inglot: 2008:258). As the economic reforms increased uncertainty that neither the public nor policy-makers expected, radical changes in social policies were hard to accept (Cook 2007). Inertia among policy-makers, bureaucrats, and politicians led the continuation of previous policies. However, the social insurance deficit in 1990-1991 led policy-makers, especially the president of the Polish Social Insurance Institution (ZUS) Wojciech

Topinski, “ to offer reconstruction of the existing PAYG (Pay-As-You-Go) structure into a more independent system with „funded‟ individual accounts to be invested in the financial markets” (Inglot 2008:258). This proposal, based on the Chilean example, was quickly dismissed by not only governments but also the ZUS itself. In particular, while inflation skyrocketed and unemployment soared, it would be very difficult to convince coalition parties to approve this plan.

What about unions? What kind of roles did they play in this era? Despite the claims that unions were passive during the Solidarity governments (Ost 1992, 2000 and

2001), Ekiert and Kubik note that unions, including those linked to Solidarity, ran some massive strikes against government policies that ran against the interest of the working class. When we look at Table 4.26, we see that workers and public state sector employees made up the majority of protest participants. These were the groups most affected by

113 government policies, whether on wage increases or social benefits. Public servants and workers were the ones most unionized and they targeted national authorities to fix their problems (Ekiert and Kubik 1999).

[Table 4.26 about here]

In December of 1992, unions launched a massive strike in the coal mines with around 180,000 miners throughout the country. This was followed by another strike of hospital workers and teachers. When the government did not respond to the union demands of teachers and health workers, a parliamentary vote of no-confidence (staged by the Solidarity trade union delegation in the Parliament) brought down the Solidarity supported government of Hanna Suchocka in 1993.

In this era, pension funds were a key topic of debate. The dispute was on whether future pensions should be voluntary or mandatory. Solidarity first wanted them to be mandatory. Then in 1992 Solidarity proposed a new tier social security scheme, based on voluntary-Chilean system. Their proposal was to divide the Social Insurance Fund into three separate autonomous funds supervised by the parliament. Nevertheless, the policy was subjected to extensive criticism and fell short in parliament (Inglot 2008).

The inertia gained over the transitional year (1990-1993) was a product of the fact than none of the five governments that served in the first four years could overcome certain structural constraints. There were two main reasons for this. First, the preexisting structure was vulnerable to well-entrenched insiders (Cook 2007). Farmers, miners, the police, steelworkers, war veterans, and the military resisted all attempts to restructure the existing system in ways that could diminish their privileged status. These groups were not

114 able to completely paralyze efforts to reform social policy, but they demonstrated that such actions would have costs both on the streets and in elections (Inglot 2008; Ekiert and Kubik 1999). Second, the huge budget deficit led the bureaucrats of the ZUS and the

Ministry of Finance “to reclaim tight control over the financial assets of the state and utilizing preexisting fiscal mechanisms and extensive regulatory powers of the executive branch, including those of the Minister of Labor” (Inglot 2008:261). After the

Mazowieczki government, subsequent governments could not reform social policies. The most striking example was Hanna Suchocka‟s government. Her reform policy, that may have reduced the increasing share of social spending in GDP, was turned down by the

Solidarity politicians and union leaders.

In the 1993 election, the SLD led a campaign that emphasized the injustice of transition. Economic problems, growing inequality, and other socioeconomic problems brought social policies to the forefront in the first early years of transition. For example, while increasing pensions and benefits were not salient issues for voters, it became an important issue for most voters later on. Polls found that increasing pensions and social benefits had been a number two issue for voters as support for it had increased from 17 % in to 27 % in 1993 (Markowski et al 2006).

The SLD appealed to the workers, pensioners, and those who were unhappy with economic reforms. As a reformed postcommunist social democratic party, it wanted to expand its potential electorate toward middle income groups such as professionals and self-employed people. A comparison of the 1991 and 1993 elections may show the success of the party‟s transformation. The SLD‟s electorate in 1991 were mostly the retired, former nomenclature, and the dissatisfied, but not workers. However, by 1992,

115 the SLD was in the process of reforming itself. Before and during the 1993 election campaign, it appealed to managers, workers, and pensioners as well as the new voters. As a result, amongst its electorate, the white collar vote went from 12% to 24%, workers from 6% to 19%, managers from 8% to 17%, and the retired from 11% to 22%

(Grzymala-Busse 2002).

The first prime minister of the SLD-PSL coalition government was the PSL leader, Waldermar Pawlak. He blamed the previous Solidarity governments for the lack of comprehensive social policy that could have acted as a pill for people suffering from their economic policies. His Labor Minister, Leszek Miller, defended the maintaining and extending of retirement benefits and privileges to select groups of employees (Inglot

2008). Given that his core support was coming from the elderly and lower class people

(Dubrow 2003, 2005), the government was generous toward these groups, the peasants and the electoral base of its coalition partner, the PSL. The government also increased all minimum pensions; particularly those of the 2 million farmers who received either the legally guaranteed minimum pension or disability pensions. The SLD government offered generous benefits to the military and police. Miller himself stated that “ in case when the salaries in the military and the police are too low it is acceptable to use pension privileges as an incentive” (Miller 1995:12; excerpt from Inglot 262). In other words, given the dire financial situation of the country, the SLD-government did its best to appease nine million pensioners (Inglot, 2007).

The role of the unions should not be forgotten in this era. The communist union,

All-Poland Alliance of Trade Unions (OPZZ) supported the SLD during the election campaign; its ties to the SLD had made the union weaker in terms of demanding more

116 rights to workers as the SLD embraced the transformation to capitalism.24 The OPZZ changed its electoral rhetoric to be more in line with the SLD government. It was more reticent and sometimes defensive of “the dismantling of social services and reductions in pensions “(Kubicek 2004:82). As the OPZZ was compromised in the eyes of the workers,

Solidarity was able to organize large-scale demonstrations by mobilizing teachers, health workers in 1994-1995, miners, and steel workers in 1997.

The reform in social policy was not impossible for all issues. The only area that the Ministry of Labor, Ministry of Finance, and trade unions were able to agree was to reform family benefits. Due to the overlapping nature of social policies, the SLD-led government in 1995 wanted to change it from universal social insurance benefit to a means-tested program. In return, unions gained a “series of concessions in the area of old-age pensions” (Inglot 2008:273). The number of persons who were able to get family benefits declined from 12.5 to 10.5 million. As a result, spending on family benefits declined from 2 percent of the GDP in 1989 to 0.8 percent in 1995.

On the other hand, sick pay and disability pensions continued to be an area that governments kept faltering. As the expenditures on sick pay by the ZUS significantly increased, governments designed policies to discourage sick leave such as abolishing sick pay for the first day of work absence. However these policies resulted in people taking 7 days or more off for sick leave. Unlike with family benefits, unions were able to lobby

24 The OPZZ representative that I interviewed said that the union mobilized their members to support the SLD because the SLD government was the best government for the working class.

117 against the governments to keep benefits for sick leave. As a result, sick pay stayed at its course, 1.1-1.3 percent of the GDP between 1994 and 1999 (Inglot 2008).

Another area that the governments failed to make major changes in was in the area of disability pensions. Similar to sick pay, the figures did not change much. Unlike sick pay, disability pensions constituted a significant portion of all pensions, 4 percent of the GDP in 1999. This is because of two main reasons. First, disability pensions included not only those who cannot work, but also the partial invalids who could earn up to 70 percent of an average wage. Second, many used this option in the early 1990s to retire early as its payment was higher than average wage and just little lower than the old-age pensions (Inglot 2008).

During the Solidarity and then SLD‟s governments, there were other initiatives to reform the welfare system. In particular, the successor of Miller who was the acting

Minister of Labor, Andrzej Baczkowski, accelerated reform of social policy. Although his sudden death slowed down the reform process, negotiations over it resulted in some changes. A final agreement in the Parliament established mandatory participation in the new private pension funds for all who were born after January 1, 1969. It also kept the benefits and privileges of current pensions and those who had previous social insurances during the communist era. This package allowed those who had the most privileged and expensive entitlement and early retirement provision (for many professions such as the steel industry, the military, police, etc.) to continue. Another the benefactor of the package was insured farmers, because of their separate and heavily subsidized pension system and institution (KRUS- Social Insurance Institutions for Farmers) was left intact.

118

We should keep in mind that the hierarchy in Polish social policy did not start in the aftermath of transition to democracy. On the contrary, the Solidarity governments and the ex-communist governments tried to create a uniform social policy. Unlike neighboring Czechoslovakia or Hungary, Poland could not unify its social insurance system. As a result, pensioners received vastly differentiated payment under quite

Byzantine entitlement rules (Inglot 2008:166).

The AWS came to power in the 1997 election based on a strategy that combined economic grievances and religious rhetoric. The AWS government continued market reforms that curbed unionization in the public and, especially, the private sectors. The established tripartite system that brought the government, unions, and business organizations together was not functioning. Both the OPZZ and Solidarity unions accused the Ministry of not listening to them and maintaining a “take-it-or-leave-it” attitude (Kubicek 2004:84). The AWS reformed the welfare systems to balance the budget deficit; this alienated the party from its core constituency, which promptly deserted it in 2005 election.

Before we end our discussion of the social policies of the Polish government, we should note that governments cannot always deliver benefits to their own supporters.

They can often take away the privileges of groups which are not in their natural constituencies. For example in the first parliament, the Solidarity government passed a bill against the former security apparatus. Additionally, the parliament took away privileges of military veterans (army) who played a role in crushing protests against the government in the 1950s.

119

In contrast, the government extended benefits to occupational groups that were adversely affected by reforms that supported the Solidarity during the transition or were seen as critical social groups that needed to be kept happy. For example, Inglot notes that

“in 1999, the ZUS paid 280,000 miners” pensions with an average payment equal to 117 percent net average wage in the country. The average age of a newly retired miner that year was forty-seven (p.271). Farmers, miners, railroad workers, the military and the police, as well a significant number of veterans were able to maintain their privileged positions.

In summary, this section showed that low turnout by the poor and the volatile nature of parties and social groups increased targeted spending. We also underlined hierarchical nature of Polish social policies. Our analysis showed that early retirement laws that targeted the social base of the Solidarity increased social spending significantly.

Then the frequent coalition governments made it difficult to reform social policies in the early years of the 1990s.

The next section discusses the Czech Republic case, starting with the pre- communist era. First, it discusses political and economic background up until present politics. Then it analyzes voter turnout, linkage between parties and social groups, and the social policies of the Czech political parties.

The Czech Republic The type of Round Table Negotiations that marked the end of the communist regimes in Hungary and Poland did not take place in Czechoslovakia. The regime resisted the calls for reform from the growing opposition until it was too late. Eventually,

120 the regime abdicated in the face of pressure for democratic elections, in which the opposition, the Civic Forum (and Public Against Violence in Slovakia) won a resounding victory. It received almost half of the votes and more than 60 percent of the seats. The ex-communist party (KSCM), on the other hand, only got around 13.2 percent. The irony was that before the communist takeover in 1948, the communist party was the largest party with about 39 percent of votes in the 1946 election, reflecting its popularity then in society (Olson 1992). In order to understand this irony and the two legacies of communist era on the postransition politics, we first discuss the interwar and then communist era.

The end of World War I led to the breakup of the Austrian-Hungary Empire and the creation of several new states, including Czechoslovakia. A provisional government with a unicameral assembly in 1918 was replaced with a bicameral democratic system in

February 1920. This new democratic state was ethnically heterogeneous; according to the national census, there were 7 million Czechs, 2 million Slovak and around 2-3 million

Bohemian Germans, and 750,000 Hungarians and other small ethnic groups such

Ruthenians and Poles (Dowling 2002). Previous grievances between ethnic groups did make the functioning of democracy difficult. Disagreements over distribution of administrative positions and political violence against minorities increased distrust especially amongst two main ethnic groups, Czechs and Slovaks as well as the third largest ethnic group, Germans. However geopolitical reasons, especially the irredentist

German threat, kept this inconvenient marriage intact (Kopstein 1997; Roshwald 2000).

1938 was a fatal year for Czechoslovakia. Hitler used the purported mistreatment of Bohemian Germans as a pretext to annex Czechoslovakia in the aftermath of the

121 infamous Munich Agreement between Nazi Germany and Britain and France. Later on, the legacy of this sell-out worked to the advantage of the communist party. In the 1946 election, the communist party, as the only party that did not recognize the Munich

Agreement used the failure of the West to protect the interwar democratic state against the Nazi Germany in the electoral campaign against pro-west parties. In the postwar election of 1946, the Communist Party of Czechoslovakia won 39 percent of votes but the government was established in coalition with parties with more democratic credentials. Soon after, well-organized communist groups launched street-level collective actions as well as created a cabinet crisis that resulted in establishing the one-party government (Dowling 2002)25. After the communist party acquired power, their members engaged in various political maneuvers that aim to discredit their potential rivalries and increase their public support. Finally, in 1948, the party dissolved the national assembly and declared itself as the sole political authority in the country.

There were two main pre-communist legacies that affected postcommunist governments. First, in interwar era of 1918-1938, the Czech Social Democratic Workers

Party became the winning party with 25.7 % of votes in the 1920 election. This party was a strong competitor in the interwar democratic era, garnering support from industrialized part of the country. Banned by the communist regime, it continued to operate in exile during the cold war. In the aftermath of the collapse of the regime in 1989, it reemerged again amidst conflicts between the leaders of the party in exile and those inside who wanted to revive it. The CSSD has become one of the rare parties in postcommunist region whose history goes back to the pre-communist era.

25 In order to go to new election, governing parties‟ ministries decided to resign; their numbers were not enough to overthrow the government. The president assigned the Communist party to establish the government in 1948.

122

The second legacy was its well-functioning social security and welfare system.

Interwar Czechoslovak social policy was advanced in terms of coverage, comparable to

Germany and the UK at the time (Dowling 2002). In the early years of democracy, the government had passed a number of bills that provided generous health and accident benefits. Old age pensions for white-collar workers passed in 1926. The law required employers and employees to make equal contribution to the fund, which was readopted in the post-transition era. This was in contrast to Poland and Hungary, where employees did not contribute to mandatory pension schemes. Lastly, workers were given pension rights after the age of 65 or after 35 years of service and pensions were set at half of their salary

(Dowling 2002:30).

Communist Czechoslovakia After the communist party dismissed the parliament in 1948, it claimed sole political authority in war-torn Czechoslovakia. Unlike the war-torn countries of Western

Europe, the Soviets compelled them to reject participation in the Marshall Plan. As the economic crisis endured, some leading communist party members wanted more autonomy to economic units and less collectivization. The proposals, including some private initiative or work autonomy, reflected disagreements in the Czech Politburo on the nature of economic policies. The 1960s were decisive years for the future of the regime. In particular, the reformists led by Alexander Dubcek pushed for a reduction in censorship and a greater degree of decentralization in the country (Alekseev 2008;

Heimann 2008).

123

After Dubcek was chosen as the party leader, he initiated a reform program dubbed „socialism with human face‟ that led to concerns of contagion in the neighboring states of Hungary, Poland, East Germany, and in particular the Soviet Union. Although

Dubcek‟s reforms were largely welcomed by the public, other communist countries accused the Dubcek government of “treason” and “contaminating the leading role of the party” (Heimann 2008). The leaders of these countries, including Polish leader Gomulka, urged the Soviet Union to intervene. Dubcek tried to assure Moscow that

Czechoslovakia would stay on the socialist path, but his attempts were unsuccessful. In the end, Moscow saw reforms that gave more autonomy to economic enterprises and relaxed censorship as incompatible with socialism.

On the night of August 20, 1968, a Warsaw Pact army, composed largely of

Soviet troops but with the symbolic participation of units from all members save

Romania, invaded Czechoslovakia and put an end to the Prague Spring. A new era of

„normalization‟ reversed the reforms, and reestablished a hard-line Soviet-type regime.

Dubcek was first stripped of his duties and then removed from power completely. Gustav

Husak replaced him as the party leader while Soviet troops remained in the country up until 1991 as „a sword of Damocles.‟ Under Husak, thousands of people, amounting to one-third of its total membership were purged from the party and many former high- ranking officials were demoted to manual jobs. Ideological orthodoxy was re-imposed on educational institutions. For example, twenty-one academic institutions were closed and nine hundred university lecturers were fired (Dowling 2002:123).

The Soviet invasion marked the end of the popularity of socialism in the country.

The polls taken in 1968 suggested around an 80 percent support for a Dubcek-type of

124 socialism just before the Soviet invasion (Alekseev 2008). However, the foreign invasion started to change the perception of socialism in public eyes. Socialism was now more equated with the Soviet invasion and Soviet socialism. The first reaction to the Soviet- backed normalization came from intellectuals. Vaclav Havel and nine other intellectuals wrote a letter, „Ten Points‟ addressing the high communist party organs. The letter urged the communist party to respect human rights and increase freedom in the country. As a response, the party increased surveillance and oppression of intellectuals.

The Czechoslovak economy performed better in the 1970s and avoided foreign debt which its neighbors suffered compelled them to later implement austerity programs.

The party pursued consumer-goods oriented economic policies to buy public quiescence, even though the oil crisis in the mid-1970s slowed economic growth. In the post-1968 era, the regime offered a relatively strong social contract to the public in return for their consent. Full employment and well-developed social policy helped the communist regime to attain calmness and some support in society. Somewhat different from Poland, the party here favored the rural areas over urban areas as wages in the former was higher most of the time than urban areas (Dowling 2002). Full collectivization and its favored policies made rural populace the bedrock of the communist regime. While social policies in the work place were not different from Poland, its economy was much more developed and its shelves were full. However, in the presence of foreign troops and stagnant economic conditions, this was not enough and the political demands did not cease.

Furthermore, confidence in the regime began to erode as awareness of the economic well- being of neighboring capitalist states became part of the public‟s awareness (Pittaway

2004: Dowling 2002).

125

On the political front, the anti-regime opposition grew. Intellectuals established

„Charter 77‟ in 1977 to defend human rights in the republic and increased their voice against the brutality of the regime (Pittaway 2004). With Gorbachev coming to power in

1985, they expected reforms similar to of glasnost and perestroika. However, in contrast to Poland and Hungary, the Czechoslovakia communist party was deaf to reform calls

(Olson 1992).

As the regime was unwilling to reform itself in the presence of political and economic instability, public protests gained momentum. Street demonstrations at the twentieth anniversary of the Soviet Invasion on 21 August 1988 gathered significant protesters. Later in the year the protests became more frequent, as 80 percent of the population stopped working, 38 percent of people were on strike for a full two hours, and

24 percent of the public participated in street demonstrations (Dowling 2002). While the regime‟s political and economic capabilities were largely discredited, the communist party had to agree to go to elections because it believed that it had high support in rural areas and amongst older people.

The next section briefly discusses the socioeconomic and political context that the political parties operated in. It suggests that in the early years of transformation of the

Czech Republic, dual transition did not create political instability, compared to Poland.

Postcommunist Era The transition started with the election of two leading actors of the opposition.

The election of Alexander Dubcek and Vaclav Havel as the speaker of the Parliament and

President respectively, heralded the beginning of new era. Seven months after their election, the first democratic parliamentary election in July of 1990 resulted in a

126 devastating outcome for the ex-communist party, now the KSCM, and an overwhelming victory for the Civic Forum. Contrary to their expectation, the election result showed that rural voters did not support the KSCM either.26

The first Civic Forum government of Czechoslovakia was dominated by the

Forum‟s social democratic wing. The new government followed more cautious economic policies in the period of 1990-1992. In this era, the market‟s liberal wing of Civic Forum formed Civic Democratic Party (ODS) and its conservative wing formed the short-lived party, Civic Democratic Alliance (ODA). The 1992 election brought the liberal ODS‟

Vaclav Klaus‟ to power, which pursued neoliberal economic policies.

The absence of significant foreign debt, high FDI inflow, and good economic performance created a different economic situation in the country from Poland.

Moreover, through the Velvet divorce from its Slovak part, the Czech Republic has been a industrialized country in the region. While Poland used austerity measures to fix the

26 Urban-rural cleavage did not play a significant role in the first and subsequent elections as it diminished as a result of increasing urbanization in the communist period. The size of rural areas reduced from 40 percent of the first years of the communist period to 12 percent in 1990. This declined to only around 6 percent in the mid-1990s. Similarly atheistic education and propaganda diminished the importance of religious cleavage that existed in the interwar era. Ethnic cleavage that dominated interwar politics deteriorated as most ethnic Germans and Hungarians were deported to Germany or Hungary in the mid-1940s. In the absence of religious, ethnic, or urban-rural cleavage, scholars first noted the salience of authoritarian/liberal cleavage in the first election of the Czech

Republic after it became a separate republic on January 1, 1993.

127 economy, the Czech Republic was able to pursue its economic policies independent of

IMF or other international organizations. Table 4.27 below summarizes development in economic arenas in the 1990s. It shows that the first Klaus government (1992-1996) achieved low unemployment, low inflation, and continuous economic growth. Along with these good indicators, the Klaus government was also able to defend market reform and create a relatively strong middle class that became its electoral base. However after

1997, the Czech economy started to show a declining trend in some economic indicators.

Growing unemployment, economic contraction as well as widespread perceptions of corruption turned voters toward the leftist parties, leading to a CSSD victory in 1998.

In summary, the Czech dual transition came with relatively low unemployment and the emergence of historical parties, namely the CSSD. The unreformed communist party did not have any chance to come to power in the 1990s. The political and economic stability in the 1990s create a different climate, which had more of a stabilizing affect on social policy as well.

[Table 4.27 about here]

As we see in this section, the Czech political party system has two major parties, the ODS and the CSSD. Compared to other postcommunist countries, the economic transformation did not hit the Czech citizens in the early years as the high voter turnout below suggests. However, increasing unemployment and political crisis led to a significant drop in turnout, but not as much as Poland‟s. The next section will discuss the

128 linkage between parties and social groups and how the ODS and the CSSD formulated social policies.

Voter Turnout In moments of great „drama‟, as O‟Donnell and Schmitter (1986) have argued, postauthoritarian citizens filled with great optimism and hope that individuals could shape the course of events to follow. This initial enthusiasm produced high participation in the first election, but was destined to diminish as the new order underwent new redistribution of resources and roles which alienated some segments of the population. As dual transition eroded an optimism regarding market reform in the postcommunist countries, citizens started to exercise a new freedom, the freedom to abstain (Mishler and

Rose 2001).

[Table 4.28 about here]

As Table 4.28 suggests, voter turnout showed great variance over time. In the

Czech Republic, voter turnout was 96.3 percent in the 1990 election. This was high compared to other postcommunist countries, especially to Poland with a turnout of 63 percent in its first election. As transformation continued, the abstention rate increased.

Voter turnout in the second election of 1992 declined to 84.7 percent and it reached a low point of 58 percent in 2002.

An increasing abstention rate suggests that liberal economic policies did not make everybody happy with new political actors. The Czech sociologist Vecernik (1999) found

129 that that the support for the market economy had significantly dropped from 60 to 34 percent. As a result, the disaffected citizens either did not vote or voted for the parties that supported state intervention in the market (Vecernik 1999; Dubrow 2005).

In the Czech Republic too, using the ESSs, we expect that those from the lower income brackets were more likely to abstain than richer citizens. It seems that economic adversity affected their willingness to participate in elections (Rosenstone 1982).

According to the ESS1, conducted just after the 2002 election, as Table 4.29 indicates there was a statistically significant difference of 7 percent in the abstention rates between the poor and the non-poor. ESS2 conducted in 2004 again for the 2002 election indicated two percentage statistical differences as well.

[Table 4.29 about here]

[Table 4.30 about here]

As for religion, attendance in religious service raised participation in elections. As

Table 4.30 shows, as we move toward high attendance in religious services the percentage of voting increased. While those who attended once a week had 51.9 percent of participation, the percentage is much higher, 63.5 percent, for the more than once-a- week attendant.

What about union members and pensioners? Remember, our theory predicts that their turnout will be higher than the rest of society. In order to see whether this is the case for the 2002 elections, we look at ESS1 and ESS2 again. ESSs ask whether one is a current member or previous member of a union or non-member. Table 4.31 presents the

130 percentage of voting by membership. It shows that 69.9 % of current members went to the polling station in ESS1 while only 28.8 percent abstained. On the other hand, 58.7 percent of nonmembers voted in the same election. More than a ten percent statistically significant difference suggests union members as likely voters. In the second ESS survey, we find a similar pattern. While 62.9 percent of current members voted, this was only for

40.1 percent for others.

A similar pattern can be observed amongst retired people. As Table 4.32 shows, pensioners were more likely to go and vote in the elections. A significant difference between retired and non-retired people exists. For example, our findings on the ESS2 suggest that the difference between retired and the rest of population reached up to 14.1 percent. The difference was around 4.3 percent in the ESS1. These findings suggest that the CSSD and the KSCM were able to mobilize retired people in this election which led to an increased vote share for both parties (see next section).

[Table 4.31 about here]

[Table 4.32 about here]

In short, our findings suggest that absentees were in lower income groups, those who were less likely to join in unions or other organizational activities, and people with less attendance in religious services.

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Political Parties and Constituencies The linkage between policies and public demands constitute one of the core pillars of democratic theory, reflecting a correspondence between citizen preferences and public policies. Political parties preserve or adopt policies that appeal to most of the electorate in general and to their electoral constituencies in particular. This was also true as transitional politics was an important factor in creating an electoral alliance between social groups and political parties (Mayhem 1974; Przeworski, Stokes and Manin

1999:8). This section will discuss this linkage and how parties use social policies for electoral purpose.

This electoral alliance can be seen more easily in stable political party systems like in the Czech Republic. The country has had an institutionalized political party system that revolves around two main political parties. The Civic Democrats (ODS) was the largest party to emerge from the break-up of the Civic Forum. Table 4.33 presents election results. The 1990 election the Czechoslovak elections provided the Civic Forum with a powerful mandate. It received 67 % of the seats in the Parliament whereas the left block of the SKCS, the LB and the KSCM, only got around 15 percent of the seats. The conservative Christian Democratic Party-Czech People‟s Party (KDU-CSL) and the

Movement for a Self-Governing Democracy-Society for Moravia and Silesia (HSD-

SMS) each received 9%. The Civic Forum formed a government drawn from all factions of the opposition, including Czechs and Slovaks, as well as ex-communists, social democrats, and liberals.

The ODS won the 1992 and 1996 elections and led the next two governments.

The party of the left, the CSSD, the heir of historical Czech social democracy, performed poorly in the first two elections (1990 and 1992). In 1996 it increased its vote from 6.5 %

132 in 1992 to 26.4. In 1998 that grew to 32.3%, a plurality that allowed a government to form.

[Table 4.33 about here]

Table 4.34 shows occupational bases of the political parties. It suggests that the

ODS resembles Christian Democrat parties in Western Europe. This party became successful in receiving votes from white collar workers as well as the upper strata. We see that the ODS increased its vote share among professionals (31.7% to 36.2%) and the self-employed (42.7% to 44.8%) and kept its vote share amongst the retired (27.1% to

27.5%). On the other hand, it saw a small decrease amongst routine non-manuals.

[Table 4.34 about here]

On the other hand, the CSSD resembled to social democrats parties of Europe in terms of some characteristics of their electorates. However, we also see change in the electorate preferences. Skilled and unskilled workers with high propensity and the self employed with low propensity switched toward the CSDD between 1992 and 1996 elections (Mateju and Rehakova 1997). The CSDD quadrupled its vote share from 1992 to 1996. It has been successful in appealing to voters unhappy with change from almost all groups. As Table 4.34 suggests, between the 1992 and 1996 elections, it increased its vote share amongst professionals (7.2% to 22.3%), routine non-manuals (7.3% to 29.9%), workers (7.1% to 35%), the retired (6.2% to 21.4%), and even the self-employed (2.4% to

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17.7%). Nevertheless, the CSSD got its largest vote from workers, while the ODS got its largest share from the self-employed (Mateju and Rehakova 1997).

[Table 4.35 about here]

Table 4.35 explains this shift in preferences. It shows that the typical preferences of the ODS and the CSSD on the role of the state in reducing income inequality. The respondents are asked to evaluate following question: “The government should take measures to reduce differences in income levels.” The supporters of the ODS are supportive of policies that deemphasize the responsibility of the state. Only 18.2 percent of those who agree strongly with this statement come from the ODS supporters. On the other hand, supporters of the CSSD emphasize the role of state in reducing income inequality. 41.3 percent and 42.4 percent of those who agree and strongly agree come from the CSSD supporters.

Another factor was in the 1990s in differences in educational levels. “Voters who completed secondary and university education were more likely to vote for the ODS.

Vocational and secondary school graduates were likely to vote for the CSSD. Voters with primary education or lower disproportionally supported the KSCM and the SPR-RSC.

Urban voters preferred the ODS and the ODA, while rural voters preferred the CSSD, the

KSCM, and the KDU-CSL (INFAS Exit Poll‟96)” (Seidlova 2000:76).

Despite this shift in electoral preferences, it seems that the electoral base of the political parties, especially the CSSD and the ODS, did not substantially change in 2000s.

Nevertheless, we saw votes switching between parties that neighbor ideologically. For

134 example, the ESS1 suggests that some supporters of the CSSD voted for the KSCM in the

2002 election and that the ODS gained votes from conservative-liberal parties.

In order to see how some groups voted, the voting patterns of union members, retired people, and household by major income groups may also be used to illustrate voter switching. Table 4.36 presents party choices of union members. Meanwhile 49.5% and 35.5% of current and previous union members respectively voted for the CSSD. On the other side of ideological spectrum, ODS was able to hold its votes amongst union members. ESS2 gave a similar interpretation with different figures.

[Table 4.36 about here]

Table 4.37 shows that retired people were more likely to vote for the leftist parties, the CSSD and the KSCM. Their votes were shared by two left parties in the country. While almost 40% of the retired voted for the CSSD, the KSCM was able to hold its vote share amongst the retired by 12.7%. The ODS was able to get one-quarter of union members. Again ESS2 produced different figures, but a substantial finding shows that union members tended to vote for the left parties.

[Table 4.37 about here]

Religion played a less important role in party choice in the Czech Republic.

Except for the Christian Democrats (KDU-CSL), all parties overlooked religion in their party programs and election campaigns (Kitschelt 1995; Gryzmala Busse 2002). The electoral base of the KDU-CSL was of older and traditional Catholic background in

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Moravia, which explains its strength among pensioners. Its coalition partner in 2002 was the Freedom Union, which had an urban electoral base.

ESS1 and ESS2 also examined the religious preferences of voters in the 2002 elections. ESS1 found that the CSSD drew support across different levels of religiosity, but that it had a stronger appeal amongst less religious segments than the rest of political parties. As expected, the Christian Democrats and Freedom Union coalition did better than other parties amongst very religious voters. In terms of Church attendance, the results were similar. The KSCM performs better amongst non-religious voters. Thirty nine percent of the religious voted for the CSSD, whereas the ODS and the KDU-CSL/

Freedom Union coalition received only 20.9 and 20.5 percent respectively. The KSCM followed them with 12.5 percent votes. The results of the ESS2002 survey had very similar results for religious voters.

Vecernik (1999) argues that the Czech population became more „paternalistic,‟ that it favored increased government intervention in the economy. With growing dissatisfaction with the economic transformation, the CSSD had gained more electoral.

Voters dissatisfied with dual transformation clustered around the CSSD. While the vote- share of the unreformed and ostracized KSCM ranged from 11 percent to around 15 percent across the 1990s; the rise of the CSSD suggested that voters, unhappy with the performance of the right-wing ODS government, looked to the left parties that ran campaigns that stressed the injustices of market transition (Grzymala-Busse 2002).

Not surprisingly, many of those who wanted government to intervene to reduce inequality voted for the left parties. In the 2002 elections, the CSSD and the KSCM received the support of more than half of those who favored government involvement

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(see Table 4.38). This shows that those sectors that were affected deeply by the economic transition saw the CSSD and the KSCM as the solution to their existing political and economic problems. As the results above show, these sectors were not necessarily the economically most vulnerable sectors. For example, pensioners, union members, and wage earners constituted the major of constituency for these two parties.

On the other hand, those who subscribed to the liberal economic model and despised government intervention continued to be the core constituency for the ODS. As Table

4.39 shows, two thirds of the self-employed voted for the ODS in the 2002 elections while the rightist ODS, the leftist CSSD, and the KSCM shared the votes of wage earners. On the other hand, those who relied on pensions as a major income source continued to support the two leftist parties.

[Table 4.38 about here]

Nevertheless, despite its neoliberal policies, the ODS continued to garner significant votes from pensioners, union members, the poor, and the less-educated. As we will discuss later, the ODS offered special pension systems for self-employed people, as well as social wage (minimum income for the poor) for the very poor. Its economic and social policies did not alienate the party, but on the contrary helped to appeal to the less well-off groups.

[Table 4.39 about here]

This section showed that a stable political party system existed in the Czech

Republic along two major political parties. These two parties formed the government and

137 dominated the political scene up until the present. While the CSSD received votes from the working class, lower income groups and pensioners, small and medium size company owners, and those who supported more liberal economic policies remained the core electoral base of the ODS. The other small parties continued to operate and participate in rare coalition governments. Nevertheless, the Czech party system was considered the most stable system in postcommunist countries. As we will see in the next section, this had a stabilizing affect on social policy formation.

Volatility and Social Spending As we discussed above, the Czech political party system was associated with high party institutionalization compared to other postcommunist democracies. It witnessed the disappearance of political parties in parliament and in government, but only a few. These included the right-wing liberal party, the ODA, that formed a coalition government with the ODS between 1992 and 1996, the Rally for the Republic-Republican Party of

Czechoslovakia (SPR-RSC - a party of the far right), and Movement for Self-Governing

Democracy-Society for Moravia and Silesia (HSD-SMS). After the initial elections, the party system coalesced around four major parties: the ODS, the CSSD, Christian

Democratic Union /(Czechoslovak People‟s Party (KDU-CSL), and the KSCM.

Essentially the Czech Republic was ruled by two major parties in the post- transition period. The ODS ruled the country from 1992 to 1998 (including a caretaker government). Then the CSDD was in power from 1998 to 2006. While the electoral base of the ODS was made up of people with pro-market tendencies, the CSSD and the KSCM were supported by those who wanted more government intervention in economy.

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However, since the KSCM was still unreformed, neither the ODS nor the CSSD agreed to form a government with the KSCM (Gryzmala-Busse 2002). This exclusion led many voters concerned with market reforms to support Czech social democrat party, the CSSD.

Stability in electorate for the parties in the Czech Republic helped the parties to refrain from costly social policies such as early retirement or providing privileges to certain groups of pensioners. In this country, the major parties were not under threat of extinction or staying out of the parliament. As a result, social policy became a less salient issue in electoral campaigns compared to Poland. Moreover, this also cut the possibility of the emergence of populist parties that could utilize instability in the system or push the parties to spend more on social policies. Instead, the governing parties were able to distribute their resources to creating more jobs. For the lowest socioeconomic section of society, the social minimum wage was able to cover those under the poverty line.

In addition, the high probability of participation in coalition governments led the parties to be more cautious about electoral promises regarding social policies. As the

KSCM was ostracized, coalition possibilities revolved around the ODS, the CSSD, the

KDU-SCL, or the ODA (before its extinction). Since governments were established by one of the major parties, they were able to exercise more control over their junior partners. However, it does not mean that junior partners were completely ineffective. In

1997, the Klaus government faced collapse because of a disagreement over retirement age. The Christian Democrats threatened the ODS to withdraw from the government if retirement age was raised from 60 to 65 (Lipsmeyer 1999).

[Table 4.40 about here]

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Like we did for Poland, we calculated Pedersen index for volatility scores. The

Pedersen index shows the change in vote share from one election to another. Volatility scores in Table 4.40 reflect stability in the party system. Volatility (using Pedersen index) was 26 from 1992-1996, 18 from 1996-1998, 13 from 1998-2002, and 16.5 from 2002-

2006 (Bernhard and Karakoc 2008). After the small shake-up of the political system in

1996 when the CSSD emerged as a strong political opponent, the Czech party system stabilized, coming to resemble its western neighbors more than other postcommunist countries. This was in contrast to Poland where high volatility encouraged political parties in government to play more with social policy. This stability in the political party system reflects itself in the stability in the level of social spending as well. The government was able to curtail the hierarchical privileges of specific sectors, even with regard to pensions. In addition, the absence of organic link between unions and governing parties in the Czech Republic made it impossible even though they were claimed to be the losers of the transition.

Social Policy and Governments In the early years of democratic Czechoslovakia, there was an intense fight between two camps. The reformers in the Ministry of Labor and Social Affairs defended existing social policy while others were pushing for social democratic welfare programs

(Inglot 2008:226). The social policy that emerged in this era was dubbed the „socio- liberal model‟ and reflected the diverse forces that formed. Unlike Poland, the unions did not play a significant role in designing social policy in the Czech Republic. This may be because, unlike Poland, they did not have any direct link to any political party. Although

140 a tripartite system was established in 1990 by the Council of Economic and Social

Agreement, the unions remained inactive until the CSSD came to power in 1998.27

The weakness of unions was a product of their docility during the transition to democracy and a record of ineptitude in the early post-transition. In the absence of strong organized interest, the Civic Forum and the ODS were able to abolish the privileged pension benefits enjoyed by various social groups, including the miners (Orenstein and

Hanes 2005). By doing so, they created a more egalitarian and relatively uniform pension system. While Polish social policy was composed of many overlapping benefit systems that privileged some occupations, the Czech social policy was much simpler as a result of the revocation of social benefits to some privileged classes (Inglot 2008).

Aware of the social repercussions of ignoring social policy in the post-1993 era, the ODS leader, Klaus pursued a low unemployment policy by providing subsidies to state and private companies as well as providing a „social minimum wage‟ for everybody below poverty line. In addition to social insurance, the establishment of a voluntary pension system was prepared (Vecernik 1999, 2005).

The growth of the private sector, the influx foreign direct investment, and other positive economic developments in the initial years left the impression that the Czech

Republic did not need to radically reform its social policy. There was no gap between contributions and expenses in social policy programs and it seemed that the government would continue to support a generous social policy. Furthermore, as unemployment was low and benefits were related to employment, the initial years did not witness the sort of budget deficit problems that Poland experienced (Vecernik 2008).

27 Interview 16. The interviewee underlined that although unions are not powerless, most of the time the governments found a way to sideline their proposals during the Tripartite Negotiations.

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Although its electoral base lay in the middle class, the ODS was able to garner support from low income groups (e.g. pensioners) by its „minimum social wage‟ and its policy of keeping employment high through subsidies. The ODS was able to sustain support for the new democratic order because the coverage of its social policies was wide ranging and social policy allowed for marketization to proceed while minimizing the redistribution of income. This was in contrast to Poland and Hungary, where “social transfers have not been well targeted toward the poor and have sometimes, locked in politically poor but financially costly commitments” (Kaufman 2007: 112).

We argued that we see more extensive and stable social policy programs in the

Czech Republic. The Czech case also helps us to understand how the parties behave if they are forced to cut social spending. This case shows that if cuts in social spending are necessary, the governments will cut policy that affects social groups that matter less to them. In 1997, the second Klaus coalition government initiated some reform in social benefits for those, the government argued, who did not make sufficient contributions to their earnings-related pension. As a result, the reform reduced the benefit for these lower income groups, which had been less likely to vote for the ODS. Nevertheless, this change helped to stabilize social spending temporarily (Inglot 2008).

While cutting the benefits for some, the Klaus government extended full pension rights to a growing number of the self-employed. Since 30 percent of new pensioners paid no social insurance tax (Inglot 2008:236), this heightened the burden on the budget.

In addition, the Klaus government offered new options to those with middle to high income, such as voluntary social insurance schemes.

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The Klaus government pursued a classic strategy – they reduced social spending to those who are electorally less relevant and extend benefits to their supporters even if it was costly to the budget. The „minimum social wage‟ and „other forms of pension systems‟ and social benefits, in the aftermath of transformation, helped the ODS to create its own constituency among pensioners or workers who generally vote for left parties

(Kraus 2003). As a result, one quarter of pensioners voted for the ODS in the 1996 election.

The CSSD, during the electoral campaigns and its rule, on the other hand appealed to those who suffered as a result of the economic transformation. Its relationship to the unions improved and the party pursued policies that assisted workers and low-income groups. The unions, especially the biggest Czech-Moravian

Confederation of Trade Unions (CMKOS) (540,000 members in 2007), was a vocal actor in the debate on pensions and benefit reforms starting in the mid-1990s. In 1998 the

CSDD-led government revived regular tripartite consultations with the unions and the association of employees, which indicated that the government and unions were more in contact with any changes in social policy.28

The Tripartite Council linked the social democratic party and its biggest supporters in organized groups (Potucek 2004). The CMKOS was generally more silent in streets when the CSSD was in power. However, its loose ties to the CSSD did not prevent it to challenge CSSD governments when the latter tried to curb social spending in

2002. In other words, the loose linkage between the CSDD and the unions gave more leeway for the unions to press on even the CSSD government.

28 However, my interviews with Czech labor representatives disputed the benefit of these meeting to the workers. He argued that the Czech governments disregard their concerns.

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As discussed above, the parties shun policy changes that would hurt their electorate even when the budget put pressure on them to cut social spending. The governing parties may resist such attempts or proposals other coalition partners or international actors such as the IMF may demand. For example, the 1998 election brought a minority government led by the CSSD. The party, defending socially sensitive market economy could not implement its social policies due to the budgetary constraints and legislative delays. However, at the same time, the party resisted any attempt to cut social benefits. Similarly in the aftermath of 2002 elections, the CSSD was able to resist any cuts despite the fact that the austerity programs dictated. It was able to increase social spending despite its coalition partners, the Christian democrat KDU-CSL and liberal US

(Potucek 2004).

Since the ODS and the CSSD receive significant support from pensioners, pension policy was a high-salient issue in their party programs. However, we see less enthusiasm for unemployment benefits and family benefits in the programs of these two parties. Even pro-CSSD voters were against high unemployment benefits because it was considered a burden on active workers who tend to vote for the party. As a result of low salience of unemployment policies in the 1990s, the ODS and the CSSD kept the unemployment benefit low. As for other types of policies such as family benefits, similarly the lacks of organized groups or support for family benefits lead both parties to decrease it.

In conclusion, in the early years of transition, a stable political party environment and low unemployment policies of Klaus governments kept social spending low.

Moreover, the ODS resorted to „minimum social wage‟ polices toward low income

144 groups and expanded pensions over low income groups and those who supported the party, especially small business owners. The CSSD supported social policies that defended the interests of low income pensioners, the working class, and low income groups. In addition, the relative absence of a hierarchical social security system in the

Czech Republic enabled political elites to devote social spending over lower income groups, including the unemployed and rural labor force.

The next section will compare targeted spending and inequality in more detail, showing how targeted spending affects inequality.

Social Spending and Inequality This study argued that low voter turnout and high volatility in a political party system facilitate the use of social spending to the extent that it benefits a relatively small percentage of society. As a result, our expectation is that the lower turnout and the higher volatility cause higher targeted spending. If this is correct, there will be more targeted spending and relatively high inequality in Poland whereas less targeted spending and relatively low inequality will be observed in the Czech Republic.

In order to test whether this is the case I calculated average turnout, average volatility scores, average rate of targeted spending (cash transfers, pensions, sickness, maternity, family, unemployment benefits, etc.), overall spending (in-kind transfers including health and education), and inequality level in the 1990s. Table 4.41 displays these indicators for both countries. As we expected, Poland had a higher rate of targeted spending; 80% of its spending went to targeted spending, mostly pensions (see also Table

4.43 and 44 for pensions). On the other hand in the Czech Republic, the average turnout

145 is 22 percent higher than in Poland and volatility is less than half of Poland. Targeted spending in Poland has significantly over time, up to 73 percent of all spending (.73) while it has remained stable in the Czech Republic, around 32 percent.

Pension payments absorb most of social spending in both countries, but more clearly in Poland. A study on Poland gives us a more detailed story of distribution of social benefits, which indicates that social policies benefited near-poor or non-poor but skipped most of the poor. Braithwaite, Grootaert and Milanovic (1999) showed that in

Poland only a small percentage of households received social assistance; however it constituted an important portion of the expenditures that families received.29 Hausner

(1999) estimated that up to 24 percent of workers benefited from generous retirement conditions as well as social benefits. Poland had three distinct pension systems: one for workers, one for farmers, and one for the police services and military. The farmer‟s scheme, known as KRUS, covers a few million. Farmers‟ contribution was small, ranging from 30 to 10 percent in the 1990s. As for the uniformed services, the state budget paid off their pensions with more generous benefits (Muller 1999a).

[Table 4.41 about here]

In addition to the hierarchical pension system and its benefit system that favored some groups over others, the Polish pension system does not cover almost one third of its labor force. Polish governments incorporated some important groups such as farmers, workers (early retirement and disability pensions) into the system for electoral purposes.

29 Grootaert (1995:44) notes that “63 percent of households who receive pensions would become poor without them. The figure is of course higher for pensioners (79 percent), but even among farmers and mixed households over 40 percent of recipients of pension would slide below the poverty line without them.”

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Slovenia and the Czech Republic had a higher percentage of coverage (of labor force),

86% and 85% respectively. Latvia and Poland had the lowest percentages with 60.5% and 68%, respectively (Orenstein 2005). Orenstein notes that since high incomers were more likely to be part of the pension system and received benefits, many of the poor were excluded from the system. The difference in both countries‟ social spending was the fact that the Czech social spending was able to collect contributions from its participants, while the collection rate in Poland was much smaller. Table 4.42 illustrates this point very clearly. While social security contributions made up 17.3 % of GDP in the Czech

Republic, this was only 10 % in Poland.

[Table 4.42 about here]

Recalling that we find that compared to the Czech Republic targeted spending was higher in Poland and that likely voters and social bases of political parties benefit disproportionately. In order to show the change in the rate of spending in these two countries with weak and stable political party systems respectively, we need to look at the change in time since around the time of transition to democracy. For this purpose, we used two different datasets. First, we used Milanovic (1998) datasets on Poland and the

Czech Republic with varying time coverage. Our expectation is that targeted spending will be higher for Poland and less for the Czech Republic. In order to make our point clear, we also calculate the ratio of pensions over health (plus education) to compare the changes in the major targeted and non-targeted spending item.30 Then we use the OECD

Public Social Expenditure Dataset that included social security and welfare expenses as well as public health care spending. However, this did not include spending on education.

30 Any analysis on IMF data (albeit with many missing data) gives us the same substantial result.

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Table 4.43 and 45 present the level of social expenditure and welfare, health care, and education spending based on the Milanovic data (1998). These data were based on national statistics and included certain items that did not match up with the OECD dataset. For example, it did not include Housing or a few other small social policy programs. Nevertheless, it provides us a unique opportunity to compare these two countries in terms of major social spending policies. Unfortunately, data for Poland reaches up to 1996 while Czech Republic is more extensive up to 2001, but with a number of missing data during some years.

[Table 4.43 about here]

Table 4.43 clearly shows that level of pensions in particular and social security and welfare expenditure more than doubled, reaching to 15% and 19% of GDP in Poland.

On the other hand, spending on health care shows some increase, but not with the same rate. The table 43 also suggests that targeted spending increased significantly since transition. While targeted spending was about 0.56 in 1989, it reached to 0.73 in 1996.

Looking at the ratio of pension spending over health care and education spending illustrates our argument that pensions in Poland became the biggest item. While the ratio of pension over health and spending was around 0.94 in 1989, it became 2.19 in 1996.

What about the Czech Republic? Our expectation is that targeted spending will be lower and show less variance across years. Table 4.44 presents similar spending items along targeted spending and the rate of pensions over health care and education, and confirms our expectation.

[Table 4.44 about here]

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In 1989, spending on pensions made up only 8% of its GDP. Over the years, the country kept its level of spending on pensions low. Similarly, the Czech Republic‟s spending on overall social security expenditures and welfare expenses remained stable.

Spending on health in particular showed a significant increase, from 5% in 1989 to 6.7 % in 2001. When we look at the targeted spending, unlike Poland, we see significant stability over the level of targeted spending and the ratio of pensions over spending on education and health care. Targeted spending was around 0.32 in 1989 and remained almost the same. As for the rate of pensions over two non-targeted items, it remains almost the stable around 0.84. This was a pretty low ratio with small variation compared to Poland‟s whose targeted spending and rate of pensions over education and health spending increased significantly, 30 percent and more than 100 percent respectively.

In order to check the robustness of the results, we also use spending levels from the OECD Public Social Expenditure dataset. In this dataset, as a result of the content of social policy items, the level of spending is different; this widely used dataset, through its more detailed social policy items, enables us to compare these two countries.

Table 4.45 presents our results from the OECD dataset for Poland. Unlike the previous tables, targeted spending was calculated as the level of public cash transfers over health spending. This is because the OECD dataset does not include spending on education. In 1990, when the dataset started, the ratio (public cash spending/ health spending) for targeted spending was 2.3 and reached 3.4 in 1991. Over the years, the ratio for targeted spending hovered between 3.79 to 4.57. The pension rate over health spending gives us more of a striking picture. For example, the pension ratio was 0.92 in

1990; however, over time it reached 2.52 in 2003. Comparing the level of spending

149 shows that while health spending remained around 4.5% of GDP, pension payment increased over time from 4.15% of GDP in 1990 to 11.38 % of GDP in 2003.

[Table 4.45 about here]

In addition, we gathered data from Transmonee for health and education spending. Please note that health spending of Transmonee is almost identical to the

OECD data. We calculated the targeted spending by dividing public cash spending over the sum of public health and educational spending. In addition, we calculated the ratio of pensions over the latter to see the relationship between the biggest item of targeted spending and more universal spending. Table 4.46 suggests that the results tend to confirm that not only targeted spending and pensions were high but they also had a tendency to increase over time. There was a persistent increase in the ratio of pensions over health and educational spending. For example, its rate over health and education spending doubled from the early 1990s to 2003.

[Table 4.46 about here]

The targeted spending ratio increased from 1.68 in 1991 to 1.89 in 2003.

However, we should also note that the 1996 and 1997 reforms stabilized targeted spending, but nevertheless the weaker political party system in Poland tends to block reforms. When the AWS passed a welfare reform bill, it suffered severe consequences and disappeared from the political scene. Targeted spending was much higher for pensions. There was a persistent increase in the ratio of pensions over health and educational spending. For example, its rate over health and education spending doubled from the early 1990s to 2003.

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In the Czech Republic, Table 4.47 shows targeted spending based on only the

OECD Public Social Expenditure data. It shows a declining trend for targeted spending from 1990 to 2003. Although public cash transfers increased from 11% in 1990 to 12.5% in 2003, increase for health care was more substantial. From 1990 to 2003, health spending increased by almost 50%. Overall public social expenditures increased from

16% in 1990 to 21.13% in 2003, mostly due to health spending and other in-kind spending. As for the rate of pension over health care, we see a similar trend; the rate remained pretty stable, mostly ranged from 1.14 to 1.29.

[Table 4.47 about here]

Similar to Table 4.46, we gathered data from Transmonee and calculated new targeted spending using the sum of health and educational spending as well as pensions.

Table 4.48 shows that on average targeted spending based on public cash transfer and pensions in the Czech Republic were smaller than Poland. Even regarding the former country, targeted spending declined compared to the first three years. This was also true for old age pensions. Its ratio over health and educational spending remained the same,

0.62 and 0.68. In the same period, the ratio for pensions doubled from 0.68 to 1.22.

[Table 4.48 about here]

The Eurostat report (2008) confirms our findings on the OECD data that the

Czech governments were able to transfer some of their social spending in-kind benefits.

In particular, they were able to invest in health care, education, vocational training, job- search assistance, and other kinds of social benefits. While cash benefits were composed of 82.1 % of all benefits in Poland, this was only 62 percent in the Czech Republic. As for pensions, they made up 66.1 % and 44 % of all benefits (Eurostat 2008). On the other

151 hand, Poland spent mostly on pensions and other kinds of cash benefits. In summary, we show a clear difference in levels of social spending in Poland and Czech Republic, which resulted from the different levels of inequality in these countries.

As a result, we see varying degrees in their level of inequality in the Czech

Republic and Poland. Table 4.49-51 include these two countries‟ gini coefficients. Data come from the WIID2b which has comprehensive data in terms of time and number of countries. It includes all available data and ranks them depending on the reliability of gini coefficients based on Household Surveys. All data are based on disposable income and it covers all populations and regions. In summary, the survey characteristics are the same for all chosen ginis, unless it is noted otherwise. It provides better data especially on the

First and Second Wave democracies. It also includes reliable data on Poland and the

Czech Republic for most of the years the multivariate analysis of this study covers.

[Table 4.49 about here]

[Table 4.50 about here]

Table 4.49 suggests that starting from the first year of transition Poland faced an increasing level of inequality. In 1989, gini was around 25. Then in, gini continued to show a substantial increase. Regardless of the data source, whether the LIS or European

Commission, we find that the gini increased significantly. For example, from 1991 when the first free election was held up to 2005, gini increased from 23.2 to 35.2. According to

LIS, the increase in gini is less, but still substantial with a 3-point rise in seven years.

The WIID2b had a better coverage of gini for the Czech Republic based on an unadjusted gini. According to unadjusted gini coefficients at Table 4.50, gini increase in the Czech Republic became very small, around 3 points. This was very small compared

152 to Poland. Except for the initial increase in inequality, the Czech Republic was able to keep its inequality level low.

For a robustness check, we use Solt‟s standardized gini coefficient data (Table

4.51). He created a new dataset based on standardized coefficients. Its reliability is higher for postcommunist countries given that the same institutions, whether the

European Commission or the LIS, use transparent methodologies. This dataset also leads us to the same conclusion. As Table 4.51 below shows, while gini coefficients increased by 9.5 points in Poland, it was only 4.5 points in Czech Republic. In other words, while gini coefficients have increased around 40 percent in Poland, this was only 22 percent in the Czech Republic. This increase put Poland into medium-high inequality country category while the Czech Republic remained as a low inequality country despite some increase in inequality.

[Table 4. 51 about here]

Conclusion The case studies above provide compelling evidence for our theory. This chapter discussed the divergent path of social spending and inequality in two postcommunist countries that fit „most similar research design.‟ Using cross-case and within-case study techniques we find that the high abstention rate by the poor, a weak political party system facilitated targeted spending. High participation by the poor, especially through the

CSSD as well as pension policies of the ODS, lead to less targeted spending and better distribution of social policies in the Czech Republic. On the other hand, low turnout and high electoral volatility in Poland increased the targeted spending, having a negative effect on income inequality. Next section on two cases in Southern Europe provides further evidence for our theory.

153

Table 4.1 Demographic Change in Poland under the Communist Regime.

1956 1970 1990 Population (%) Rural 57 48 38 Urban 43 52 62

Level of Education (%) Primary 80 74 44 Secondary 17 21 47 Post-secondary 3 5 8 Source: Polish Central Statistical Office

154

Table 4.2 Occupational Groups and Change in Income in the 1980s

Occupations Years Low Income High Income

Professionals 1982 0.6 21.6 1988 10.7 27.7

Intermediate Nonmanual 1982 4.3 8.5 1988 15.1 18.7

Skilled Workers 1982 9 8.1 1988 23.5 10.1

Unskilled Workers 1982 9.6 6.3 1988 31.7 2.9

Private Farmers 1982 12.8 15.3 1988 40.2 11.7

Source: Milanovic 1998.

155

Table 4.3 Economic Indicators in the Early Years of Transition in Poland

1989 1990 1991 1992 1993 1994 1995 Change in GDP 0.2 -11.6 -7 2.6 3.8 6 7 Inflation 251.1 585.8 70.3 43 35.3 33.2 27.8 Unemployment Rate 0.1 6.1 11.8 13.6 15.7 16 14.9

Source: Kramer 1997:62.

156

Table 4. 4 Voter Turnout in Sejm Elections

Election Year 1989 1991 1993 1997 2001 2005 2007

Turnout 62.1 43.2 52.1 47.9 46.3 40.6 48.7

Source: IDEA.

157

Table 4.5 Abstention Rate by the Poor and the Non-Poor (%) in Polish Elections.

Survey Year Non-Poor Poor

ESS1 2002 32 37 ESS2 2004 29 35 ESS3 2006 24 28 Source: European Social Survey, 2002, 2004 and 2006.

158

Table 4.6 Turnout by Pensioners in 2001 and 2005 Elections.

Turnout by the Retired and Non-Retired (%), 2001 Elections. Voted Abstained Retired 72.2 27.8 Non-retired 61.3 39.7 Source: ESS1,N:1557

Turnout of Retired and Non-Retired (%), 2001 Elections. (%)ESS1 Voted Abstained Retired 73.0 27.0 Non-retired 63.4 36.6 Source: ESS2, N:1961

Turnout by the Retired and Non-Retired (%) 2005 Elections. Voted Abstained Retired 70.1 29.9 Non-retired 63.8 36.2 Source: ESS3, N:1610

159

Table 4.7 Difference in Turnout, Pensioners, and Non-Pensioners (%).

Election Year 1993 1997 2001 Abstained Voted Abstained Voted Abstained Voted No 18.5 68.6 33 64.9 30.7 15.4 N 189 702 338 665 367 829 Pension Recipients Yes 8.7 85.7 16.5 82.7 69.3 84.6 N 37 363 68 350 63 345

Source: POLPAN 1993-2003.

160

Table 4.8 Union Membership.

2001 Elections Voted Abstained Member 77.1 22.9 Non-member 60.2 39.8 Source: ESS1, N:1958

2001 Elections Voted Abstained Member 77.5 22.5 Non-member 57.9 42.1 Source: ESS2, N:1610

2005 Elections Voted Abstained Member 70.4 29.6 Non-member 64.0 36.0 Source: ESS3, N:1603

161

Table 4.9 Turnout and Religious Attendance, 2005 Elections.

Voted Abstained

Every day 69.6 26.1 More than once a week 75.0 19.8 Once a week 67.0 26.2 At least once a week 61.1 33.1 Only on special holy days 52.1 43.8 Less Often 45.3 43.8 Never 49.3 45.2 Data: ESS3.

162

Table 4.10 Union Membership and Party Choice (%).

Political Parties Currently Previously Non- Member Member Member PO 3.5 5.8 10.1 PiS 4.4 6.1 5.5 SRP 7.1 8.3 8.6 SLD 52.2 49.6 45.9 PSL 8 8.6 11.8 LPR 7.1 5 4.6 AWSP 11.5 11.1 6.5

Data: ESS2, 2001 Election.

163

Table 4.11 Union Membership and Party Choice (%).

Political Parties Currently Previously Non- Member Member Member PO 23.2 11.5 16.7 PiS 9.8 6.2 9.1 SRP 4.9 9.3 13.3 SLD/UP 35.4 53.7 36.3 PSL 8.5 4.8 6.8 LPR 7.3 6.2 7.7 AWSP 3.7 5.7 3.5

Data: ESS2, 2001 Election.

164

Table 4.12 Union Membership and Party Choice (%).

Political Parties Currently Previously Non- Member Member Member PO 31.1 26.7 31.5 PiS 29.2 45.8 42.6 SRP 1.6 9.6 9.4 SLD 13.1 12.1 7.7 PSL 1.6 2.9 3.2 LPR 1.6 1.7 2.6

Data: ESS3, 2005 Election.

165

Table 4.13 Level of Education and Party Choice (%).

Political Parties Incomplete Primary Incompleted Upper Postsecondary First Stage Second Stage Primary School School Secondary Secondary School Tertiary Tertiary PO 16.7 13 25.3 36.7 18.2 48.3 46.7 PiS 33.3 53.2 48.2 41.2 50 31 31.7 SRP 33.3 18.2 12.2 5.1 4.5 0 1.7 SLD 11.1 5.8 7.3 9.9 20.5 6.9 11.7 PSL 0 3.2 4.9 2.2 2.3 3.4 1.7 LPR 5.6 5.2 2 0.3 0 6.9 3.3 Others 0 1.4 0.1 4.6 4.5 3.5 3.2

Data: ESS3, 2005 Election.

166

Table 4.14 Retired and Party Choice (%).

Political Parties Retired Non-retired PO 2.9 10.4 PiS 4.9 5.9 SRP 9.5 7.7 SLD/UP 50.3 46.6 PSL 11.3 9.9 LPR 6.1 4.5 AWSP 11.6 7.2

Data: ESS1, 2001 Election.

167

Table 4.15 Retired and Party Choice (%).

Political Parties Retired Non-retired PO 8.3 19.1 PiS 5.8 9.4 SRP 12.4 10.4 SLD/UP 44.4 40 PSL 7.9 5.8 LPR 12 4.8 AWSP 5.8 3.6

Data: ESS2, 2001 Election.

168

Table 4.16 Retired and Party Choice (%).

Political Parties Retired Non-retired PO 18.6 36 PiS 48.4 41.6 SRP 12.2 7.5 SLD 13.1 7.1 PSL 3.5 2.8 LPR 2.9 1.9

Data: ESS3, 2005 Election.

169

Table 4.17 Major Income Source and Party Choice (%).

Political Parties Wages/ Income from Pensions Salaries Self-Employment PO 10.7 10.8 2.8 PiS 6.1 4.6 5.2 SRP 6.4 11.5 10.2 SLD 49.5 36.2 49.5 PSL 7.3 20.0 11.7 LPR 3.8 5.4 6.8 AWSP 8.6 3.8 10.5 Others 7.6 7.7 3.3

Data: ESS2, 2001 Election.

170

Table 4.18 Major Income Source and Party Choice (%).

Political Parties Wages/ Income from Income from Pensions Salaries Self-Employment Farming PO 18.8 27.0 0.0 8.9 PiS 8.9 11.1 9.5 5.9 SRP 8.6 14.3 38.1 11.9 SLD 43.5 28.6 14.3 44.9 PSL 4.4 3.2 23.8 8.9 LPR 5.5 1.6 9.5 11.0 AWSP 3.6 3.2 4.8 5.5 Others 6.7 11.0 0.0 3.0

Data: ESS2, 2001 Election.

171

Table 4.19 Major Income Source and Party Choice.

Political Parties Wages/ Income from Income from Pensions Salaries Self-Employment Farming PO 36.1 42.6 10.5 18.3 PiS 40.9 39.7 44.7 50.0 SRP 5.4 7.4 26.3 11.1 SLD 8.4 5.9 2.6 12.7 PSL 2.7 0.0 10.5 3.3 LPR 1.4 0.0 5.3 3.3 Others 5.1 4.4 0.1 1.3

Data: ESS3, 2005 Election.

172

Table 4.20 Role of Governments in Inequality by Party Choice (%).

Political Parties Agree Agree Neither Disagree Disagree Strongly (Dis)Agree Strongly PO 22.5 28.6 33.3 54.4 66.7 PiS 51.8 45.8 39.3 17.8 16.7 SRP 10.2 9.8 6.0 5.6 0.0 SLD 9.2 8.5 10.7 11.1 16.7 PSL 3.9 2.5 6.0 0.0 0.0 LPR 1.8 2.9 1.2 1.1 0.0 Others 0.6 1.9 3.5 10.0 0.0 N 284 448 84 90 12

Note: ESS3 asks following questions: “Government should reduce differences in income levels.”

173

Table 4.21 Religious Attendance and the Party Choice (%).

Political Parties Every day More than Once At least once Only on special Less Never once a week a week a week holy days Often PO 7.1 20.6 23.7 35.3 43.8 37.5 51.4 PiS 64.3 57.1 52.5 37.4 27.1 29.2 14.3 SRP 7.1 4.8 9.2 11.8 9.7 4.2 2.9 SLD 7.1 4.8 6.3 8.6 14.6 16.7 28.6 PSL 0.0 3.2 3.9 2.7 2.1 0.0 0.0 LPR 14.3 6.3 2.8 0.5 0.7 0.0 0.0 Others 0.1 3.2 1.6 3.7 2.0 12.4 0.0 N 14 63 459 187 144 24 35 Data: ESS3, 2005 Election.

174

Table 4.22 Volatility in Polish Party System.

Election Years Volatility 1991-1993 55.0 1993-1997 36.7 1997-2001 58.1 2001-2005 39.5 Average 47.3

Source: Bernhard & Karakoc (2008)

175

Table 4.23 Polish Governments, 1989-2006.

Source: Jasiewicz (2007:93-94)

176

Table 4.24 Percentage of Pensioners In Poland, 1993.

Total Population (%) Adult Population(%) Labor Force(%)

All Pensioners 22 32 18 Retired 16 23 34 Disabled 6 9 14

Source: Sachs (1995).

177

Table 4.25 Subsidies and Social Expenditures in Central Europe, 1989-1995.

Subsidies Social Spending 1989 1995 1989 1995 Poland 16.6 3.8 17.5 20.5 Czech Republic 10.7 3 19.8 31.8 Hungary 12.9 1.8 10 25.8

Source: Kramer (1997:72)

178

Table 4.26 Protest Participation Across Social Groups (%).

Protestors 1989 1990 1991 1992 1993 Total

Workers 36.9 11.5 32.2 45.2 35 35 Farmers/Peasants 4.8 11.1 10.6 8.6 13.6 9.6 Service Sector 14 4.6 7.9 9.9 3.6 8.2 Public state sector 24.9 22.8 24 25.2 24.8 23.7 Youth/Students 11.1 14.4 8.2 10.8 6.8 10.5 Other 10.8 13.7 15.1 15 20.4 14.7 Data Unavailable 6.4 26.1 7.5 11.5 16.8 13.6 Source:Ekiert and Kubik, 1999, p. 123

179

Table 4.27 Economic Indicators of the Czech Republic, 1991-1999.

1991 1992 1993 1994 1995 1996 1997 1998 1999 Change in GDP (%) -11.5 -0.5 0.1 2.2 5.9 4.8 -1.0 -2.2 -0.8 Unemployment (%) 4.1 2.6 3.5 3.2 2.9 3.5 5.2 7.5 9.4 Government Balance / GDP -1.9 -3.1 0.5 -1.1 -1.4 -0.9 -1.7 -2.0 -3.3 Change in Consumer Prices ( % ) 56.6 11.1 20.8 9.9 9.1 8.8 8.5 10.7 2.1 External Debt/GDP 26.4 23.8 24.3 26.0 31.8 36.0 40.6 43.1 42.6 Source: EBRD-Transition Report 2002.

180

Table 4.28 Voter Turnout, the Czech Republic.

Election Year 1990 1992 1996 1998 2002 2006 Turnout (%) 96.3 84.7 76.3 74 57.9 64.5

Source: IDEA

181

Table 4.29 Abstention Rate by the Poor and the Non-Poor.

Survey Year Non-Poor Poor ESS1 2002 23 30 ESS2 2004 17 19

Source: ESS1 and ESS 2.

182

Table 4.30 Religious Attendance and Voter Turnout (%).

Every day More than Once At least once Only on special Less Never once a week a week a week holy days Often Voted 72.7 63.5 64.4 51.9 55.8 56 49.2 Abstained 27.3 30.8 29.9 43.5 40.2 40.6 46 N 11 52 174 131 425 443 1704 Note: 4.6 % of the sample are ineligible to vote.

Data: ESS2, 2002 Election.

183

Table 4.31 Current and Previous Union Members and Turnout (%).

Voted Abstained Current Member 69.9 28.8 Previously Member 64.5 35.2 Non-member 58.7 36.6

Note: ESS1; N. 1320.

Voted Abstained Current Member 62.9 36.5 Previously Member 65.9 34 Non-member 40.1 51.1

Note: ESS 2; N. 2788.

184

Table 4.32 Turnout and Retired, 2002 Elections (%).

Voted Abstained Retired 65.7 34.3 Non-retired 61.4 35.5

Note: ESS1; N. 1320.

Voted Abstained Retired 63.4 36.6 Non-retired 49.3 50.7

Note: ESS 2; N. 2788.

185

Table 4.33 Elections Results.

1992 1996 1998 2002 2006 Party Vote Seats Vote Seats Vote Seats Vote Seats Vote Seats

Civic Democratic Party (ODS) 29.7 76 29.6 68 27.7 63 24.5 58 35.9 81

Coalition (KDU-CSL+US-DEU) ------14.3 31 - -

Fredoom Union (US) - - - - 8.6 19 Coalition 9 - -

Christian Democratic Union- Czechoslovak Peope's Party (KDU-CSL) 6.3 15 8.1 18 9 20 Coalition 22 7.2 13

Civic Democratic Alliance (ODA) 5.9 14 6.4 13 ------

Czech Social Democratic Party (CSSD) 6.5 16 26.4 61 32.3 74 30.2 70 32.3 74

Communist Party (KSCM) 14.1 35 10.3 22 11 24 18.5 41 12.8 26

Republicans (SPR-RSC) 6 14 8 18 ------

Society for Moravia & Silesia- Movement for Self-Governing Democracy (HSD_SMS) 5.9 14 ------

Liberal Social Union (LSU) 6.5 16 ------

Green Party ------6.3 6

Source: http://www.essex.ac.uk/elections/

186

Table 4.34 Occupational Groups and Party Choice (%).

Vote for ODS Occupations 1992 1996

Professionals 31.2 36.2 Routine Nonmanuals 33.7 29.8 Self-employed 42.7 44.8 Workers 22.8 18.9 Retired 27.1 27.5

Vote for CSDD Occupations 1992 1996

Professionals 7.2 22.3 Routine Nonmanuals 7.3 29.9 Self-employed 2.4 17.7 Workers 7.1 35 Retired 6.2 21.4

Source: Mateju and Rehakova 1997

187

Table 4.35 The Role of Governments in Reducing Inequality.

Neither Agree Agree Strongly Agree nor Disagree Disagree Disagree Strongly

CSSD 41.3 42.4 37.8 31.8 17.6

ODS 18.2 25.3 23.6 32.5 43.5

KSCM 18.9 9.2 12.6 5.1 1.2

Coalition 15.4 12.9 15.7 19.7 30.6 Note: The ESS asks the respondents: “the government should take measures to reduce differences in income levels.”

188

Table 4.36 Union Members and Their Party Choice (%). Political Parties Currently Previously Non- Member Member Member CSSD 49.5 35.5 34.7 KSCM 13.7 9.7 8.6 ODS 21.1 26 30.6 Coalition 11.6 20.1 14.9 Source: ESS 1.

Political Parties Currently Previously Non- Member Member Member CSSD 33.3 32.1 23.2 KSCM 19.3 19.1 12.5 ODS 32.5 26.2 43 Coalition 7 12.7 10.7 Source: ESS 2.

189

Table 4.37 Retired People and Party Choice (%). Political Parties Retired Non-retired CSSD 39.0 35.5 KSCM 12.7 7.9 ODS 20.9 30.8 Coalition 20.5 15.4 Others 6.9 10.4 Source: ESS 1.

Political Parties Retired Non-retired CSSD 32.0 26.6 KSCM 25.7 10.8 ODS 19.4 42.2 Coalition 15.1 9.2 Others 7.8 11.2 Source: ESS 2.

190

Table 4.38 Party Supporters and Support for the Role of Government in Reducing Inequality.

Political Parties Agree Agree Neither Disagree Disagree Strongly (Dis)Agree Strongly CSSD 30.8 30.5 28.8 28.1 13.6 KSCM 27.8 20.1 10.1 5.9 1.7 ODS 22.5 26.6 34.8 49.2 62.7 Coalition 10.3 11.9 12.6 11.4 12.7 Others 8.6 10.9 13.7 5.4 9.3 N 360 403 198 185 118

Source: ESS 2. Question: “Government should reduce differences in income levels.”

191

Table 4.39 Major Income Source and Party Choice (%). Political Parties Wages/ Income from Pensions Salaries Self-Employment CSSD 28.8 12.0 31.8 KSCM 11.3 4.0 26.4 ODS 39.6 66.7 18.2 Coalition 9.7 6.7 14.5 Others 10.6 10.6 9.1 N 680 75 488 Source: ESS 2; N. 1283.

192

Table 4.40 Volatility in the Czech Republic.

Election Years Volatility 1992-1996 26.0 1996-1998 18.0 1998-2002 13.0 2002-2006 16.5 Average 18.3 Source: Bernhard and Karakoc (2008)

193

Table 4.41 Comparing Poland and the Czech Republic.

Poland Czech Republic

Mean Turnout(%) 48 70 Mean Volatility (Pedersen Index) 47 20 Change in Targeted Spending (%) 55-73 32-32 Change in Inequality (Gini Coefficients) 24.6-34.0 20.5-25

Source: IDEA, Bernhard and Karakoc (2008), WIIDER2b

194

Table 4.42 Social Security Contributions.

% % of total of GDP tax revenue Poland 10.0 29.4 Czech Republic 17.3 43.8

Source: Inglot (2008:231, 256)

195

Table 4.43 Social Spending (% GDP) and Targeted Spending in Poland

Targeted Pension/ Year SocExpWel Education Health Spending Pension Health+Education 1987 8.580 3.585 3.196 0.559 7.253 1.070 1988 8.766 3.411 3.029 0.576 6.936 1.077 1989 8.660 3.670 3.189 0.558 6.495 0.947 1990 10.998 4.776 4.161 0.552 8.094 0.906 1991 17.406 4.219 4.713 0.661 12.352 1.383 1992 19.323 4.360 4.966 0.674 14.691 1.575 1993 18.901 4.137 4.578 0.684 14.889 1.708 1994 19.896 4.428 4.523 0.690 15.793 1.764 1995 18.941 4.365 4.591 0.679 15.511 1.732 1996 18.625 2.288 4.602 0.730 15.110 2.193 Data: Milanovic (1998); Social Expenditure and Welfare includes family allowances, sick leave, unemployment benefits,social assistance and others such as scholarships.

196

Table 4.44 Social Spending (% GDP) and Targeted Spending in the Czech Republic.

Targeted Pension/ Year SocExpWel Education Health Spending Pension Health+Education 1987 11.285 4.787 4.620 0.319 7.983 0.849 1988 11.119 4.577 4.820 0.314 7.935 0.844 1989 11.560 4.898 5.010 0.322 8.312 0.839 1990 11.108 - 5.480 - 7.270 - 1991 10.602 - 5.370 - 7.436 - 1992 11.547 - 5.420 - 7.559 - 1993 10.696 3.666 7.610 0.287 7.217 0.640 1994 10.796 3.278 7.820 0.291 7.121 0.642 1995 11.374 3.721 7.310 0.307 7.943 0.720 1996 11.669 - 6.500 - 8.294 - 1997 12.140 3.998 6.600 0.332 9.042 0.853 1998 13.478 3.623 6.536 0.373 9.397 0.925 1999 12.750 4.259 6.525 0.347 9.359 0.868 2000 13.443 4.118 6.573 0.366 9.375 0.877 2001 11.882 4.278 6.738 0.321 9.320 0.846 Data: Milanovic (1998); Social Expenditure and Welfare includes family allowances, sick leave, unemployment benefits,social assistance and others such as scholarships.

197

Table 4.45 OECD Social Spending (% GDP) and Targeted Spending in Poland.

Targeted Old-Age/ Year SocExpWel PubSocExp Health Spending Old-Age Health 1990 10.195 15.139 4.522 2.255 4.158 0.920 1991 16.206 21.520 4.645 3.489 6.574 1.415 1992 19.621 25.532 4.734 4.144 7.755 1.638 1993 19.152 24.910 4.386 4.367 7.958 1.815 1994 18.589 23.782 4.065 4.573 7.870 1.936 1995 17.912 23.129 4.084 4.386 7.744 1.896 1996 17.598 23.277 4.396 4.003 7.610 1.731 1997 17.358 22.700 4.123 4.210 7.880 1.911 1998 16.413 21.514 3.937 4.169 7.484 1.901 1999 16.645 22.234 4.161 4.000 7.612 1.829 2000 16.352 21.155 3.976 4.113 9.943 2.501 2001 17.412 22.411 4.318 4.033 10.835 2.509 2002 17.709 23.040 4.668 3.794 11.195 2.398 2003 17.612 22.928 4.515 3.901 11.388 2.522 Data: OECD Public Social Expenditure Dataset. Third column includes public cash transfers while he fourth column includes all expenditures such as in-kind as well as health spending.

198

Table 4.46 Targeted Spending by OECD and Transmonee in Poland (% GDP).

Targeted Old-Age/ Year SocExpWel PubSocExp Health Education Spending Old-Age (Health and Educ) 1990 10.195 15.139 4.5 4.8 1.10 4.158 0.449 1991 16.206 21.520 4.6 5.1 1.68 6.574 0.680 1992 19.621 25.532 4.7 5.4 1.94 7.755 0.767 1993 19.152 24.910 4.4 5.4 1.97 7.958 0.818 1994 18.589 23.782 4.1 5.3 1.99 7.870 0.842 1995 17.912 23.129 4.1 5.2 1.93 7.744 0.836 1996 17.598 23.277 4.4 5.4 1.80 7.610 0.776 1997 17.358 22.700 4.1 5.5 1.81 7.880 0.822 1998 16.413 21.514 3.9 4.6 1.92 7.484 0.876 1999 16.645 22.234 4.2 4.7 1.88 7.612 0.857 2000 16.352 21.155 4.0 4.7 1.87 9.943 1.139 2001 17.412 22.411 4.3 5.1 1.86 10.835 1.156 2002 17.709 23.040 4.7 5.0 1.82 11.195 1.150 2003 17.612 22.928 4.5 4.8 1.89 11.388 1.220 Data: OECD Public Social Expenditure Dataset for SoxExpWel and PubSocExp. Health and Education Data come from Transmonee

199

Table 4.47 Targeted Spending in the Czech Republic.

Targeted Old-Age/ Year SocExpWel PubSocExp Health Spending Old-Age Health 1990 10.925 16.038 4.579 2.386 5.239 1.144 1991 11.758 17.270 4.777 2.461 5.739 1.201 1992 11.718 17.606 4.872 2.405 5.847 1.200 1993 10.690 18.065 6.395 1.672 5.408 0.846 1994 10.584 18.086 6.458 1.639 5.235 0.811 1995 10.955 18.240 6.362 1.722 6.359 0.999 1996 11.229 18.310 6.166 1.821 6.614 1.073 1997 12.016 19.098 6.102 1.969 7.394 1.212 1998 11.713 19.475 6.097 1.921 7.550 1.238 1999 12.115 20.012 6.048 2.003 7.765 1.284 2000 12.326 20.327 6.029 2.044 7.798 1.293 2001 12.202 20.412 6.267 1.947 7.792 1.243 2002 12.544 21.014 6.525 1.922 7.917 1.213 2003 12.487 21.130 6.778 1.842 7.759 1.145 Data: OECD Public Social Expenditure Dataset. Third column includes public cash transfers while he fourth column includes all expenditures such as in-kind as well as health spending.

200

Table 4.48 Social Spending (% GDP) and Targeted Spending in the Czech Republic.

Targeted Old-Age/ Year SocExpWel PubSocExp Health Education Spending Old-Age (Health and Educ) 1990 10.925 16.038 4.6 4.1 1.27 5.239 0.607 1991 11.758 17.270 4.7 4.1 1.32 5.739 0.645 1992 11.718 17.606 4.9 4.5 1.25 5.847 0.622 1993 10.690 18.065 6.4 5.2 0.93 5.408 0.468 1994 10.584 18.086 6.5 5.2 0.90 5.235 0.448 1995 10.955 18.240 6.4 5.1 0.95 6.359 0.553 1996 11.229 18.310 6.2 5.2 0.98 6.614 0.580 1997 12.016 19.098 6.2 4.6 1.11 7.394 0.682 1998 11.713 19.475 6.1 4.0 1.16 7.550 0.747 1999 12.115 20.012 6.0 4.3 1.18 7.765 0.753 2000 12.326 20.327 6.0 4.0 1.23 7.798 0.777 2001 12.202 20.412 6.3 4.2 1.17 7.792 0.744 2002 12.544 21.014 6.6 4.4 1.14 7.917 0.720 2003 12.487 21.130 6.8 4.5 1.11 7.759 0.687 Data: OECD Public Social Expenditure Dataset for SoxExpWel and PubSocExp. Health and Education Data come from Transmonee

201

Table 4.49 Gini Coefficients, Poland, WIID2b.

Year Gini Source Quality 1987 25.6 Milanovic 1998 3 1989 25.0 Transmonee 2004 2 1990 26.8 Transmonee 2004 3 1991 23.2 Transmonee 2004 2 1992 29.3 Luxembourg Income Study 1 1992 24.0 Transmonee 2004 3 1993 28.4 Milanovic 1998 2 1993 31.5 Transmonee 2004 1 1994 32.6 Transmonee 2004 1 1995 32.2 Transmonee 2004 1 1996 32.9 Transmonee 2004 1 1997 34.0 Transmonee 2004 1 1999 31.9 Luxembourg Income Study 1 1999 33.1 Transmonee 2004 1 2000 34.2 Transmonee 2004 1 2001 34.0 Transmonee 2004 1 2002 34.9 Transmonee 2004 1 2003 35.19 Transmonee 2005 1

202

Table 4.50 Gini Coefficients, The Czech Republic, WIID2b.

Country Year Gini Quality Czech Republic 1989 19.3 3 Czech Republic 1990 19.7 3 Czech Republic 1992 20.3 3 Czech Republic 1993 21.5 3 Czech Republic 1994 22.0 3 Czech Republic 1996 22.9 3 Czech Republic 1997 22.6 3 Czech Republic 1998 22.6 3 Czech Republic 1999 23.8 3 Czech Republic 2000 23.8 3 Czech Republic 2001 22.8 3 Czech Republic 2002 23.2 3 Czech Republic 2003 22.79 3

Source: WIID2b, unadjusted gini coefficients.

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Table 4.51 Standardized Gini Coefficients, 1990-2006.

Year Poland Czech Republic 1990 24.642 20.503 1991 26.054 21.827 1992 27.482 20.709 1993 28.704 22.975 1994 30.257 24.403 1995 31.811 25.191 1996 32.572 25.900 1997 33.137 25.566 1998 32.450 25.370 1999 31.297 25.252 2000 32.253 25.081 2001 32.837 24.935 2002 33.583 24.840 2003 33.966 24.977 2004 34.255 25.000 2005 34.343 25.261 2006 34.027 25.031

Source: SWIID (2009).

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Chapter 5 Inequality and Democracy in Southern Europe: Turkey and Spain This section investigates two cases in Southern Europe and discusses the divergent outcomes in economic inequality. Taking into account a number of shared similarities such as the imperial legacy, the European Union (EU), the dominant role of the military in politics, the traditional family as a social safety net and other factors, compared to other potential pairs, Turkey and Spain fit the criteria necessary for „most similar systems‟ research design. Below, this section discusses the reasons why they fit

„most similar systems‟ research design. Then it lays out a plan of how to proceed in the rest of the chapter.

Some of their socioeconomic and political similarities for Turkey and Spain come from the pre-transition era. The successors of two former imperial states, the Spanish

Kingdom and the Ottoman Empire respectively, Spain and Turkey had their militaries as dominant players in domestic politics for most of the 20th century. Similarly, both countries aspired to be part of the European Community/European Union (EU) for decades and launched various reforms to fulfill the membership requirements of the EU.

Both countries have faced ethnic uprisings against their central governments and pursued rigid ethnic policies, including the banning of minority languages. Furthermore, traditional families in these countries, where larger segments of the labor force are employed in rural areas, are still important and serve as a social safety net (Gunther et al

1986; Gunther et al 2004; Ercarnacion 2008; Kalaycioglu and Carkoglu 2007; Tugal

2007; Ozbudun 1988; Insel 1986).

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Their similarities continue in the aftermath of transition when both countries adopted economic and political liberalization policies: In Spain, the Union of

Democratic Center (UCD), winner of the first two post-transition elections of 1977 and

1979 initiated partial economic and political reforms. In Turkey, the Motherland Party

(MP) of Turkey followed similar footsteps by winning the first two elections of 1983 and

1987. The party initiated an export-led economy and launched limited political and economic liberalization.

Nevertheless, these two countries are dissimilar in a number of factors as well.

Most importantly they differ in the mode of transition, pacted versus transition from above, and levels of socioeconomic development (O‟Donnell and Schmitter 1986; Sunar and Sayari 1986; Heper 1994). In addition, the Spanish military was put under civilian control after the 1981 coup attempt, whereas the Turkish military continues its guardian role in the country. The Catholic Church in Spain has remained a significant actor and aligned with the right-wing governments in both authoritarian and democratic era. In contrast, the single-party regime and the veto player in Turkish politics even under democracy, the military have embraced secularist policies in which religion and religious symbols have been excluded from public sphere. Finally, Spain joined the EU in 1986 whereas Turkey‟s quest for joining the EU has been continuing up to the present.

Taking into account these (dis)similarities, significant variations in variables of interest, -namely voter turnout, social spending, and inequality levels- exist in Turkey and

Spain, which provide us significant leverage to determine whether the proposed causal relationship exists. With significant variations in our key variables, these two countries come closest to fit for the use of „most similar systems‟ research design compared to

206 other cases in Southern Europe (Bennett and Elman 2006; Mahoney 2007; Seawright and

Gerring 2008).

Furthermore, for each country, this study performs a process-tracing analysis to test whether the proposed relationship between voter turnout, volatility, targeted spending, and inequality are not only correlational, but have a causal relationship

(Mahoney 2007; Seawright and Gerring 2008). Turkey represents a country with a high electoral volatility/inequality; Spain is a country with a low electoral volatility/low- medium inequality in Southern Europe. One expects that Spain, a low-volatility country, practices low-targeted spending, while Turkey, a high volatility country, relies on more targeted spending.

The second variable of interest is high voter turnout moderating the level of targeted spending because of an increase in participation by the poor. In particular, the expectation is that high turnout will skew redistribution toward the poor. However, the picture is more complicated for Spain and Turkey, compared to postcommunist countries.

Turkey has high voter turnouts and high volatility in its party system. While the expectation is for a high turnout/high volatility political context leading to more targeted spending than low volatility/high turnout, the level of targeted spending depends on which groups are mobilized. If mobilization comes from the middle class (while lower- income groups demobilize), turnout will exacerbate targeted spending, which is the case for Turkey during 1987-1992. Mobilizing the poor especially by the left, as in Spanish case, reduces targeted spending by making public policies that benefit the poor.

Nevertheless, the social spending pattern in Spain may very well resemble that of the

Czech Republic with a stable spending rate, while high volatility in Turkey will create

207 more incentives for political parties to use targeted spending. As a result, inequality does not significantly improve despite a significant increase in social spending, while low targeted spending has a positive effect on inequality in Spain.

In line with the theory, in order to explain the causal link clearly, this section will follow theoretical arguments by examining three main factors that affect social spending:

Turnout by the poor/disadvantaged, the linkage between organized interests and political parties, and volatility in the political party system. Similar to the previous chapter on the post-communist region, I use macro and micro data to show how the causal mechanisms work. In addition to the European Social Survey (ESS) on Turkey and Spain and other publicly available surveys, I designed an original survey that was conducted by a polling agency in Turkey in November of 2008. I tabulated voter turnout by a number of indicators such as education, income, occupation, and disaggregate support for political parties by social/occupational groups. These surveys enable me to test our assumption, whether groups such as pensioners, union members, and workers are the most likely voters in these countries. In addition, the interviews I have conducted with Turkish and

Spanish politicians, including the current and previous Minister of Labor and Social

Security ministers, high-ranking bureaucrats, and union leaders during my field work present constrains and dilemmas that these actors face in shaping social policies. Finally, the last section compares Turkish and Spanish social policies along other variables of interest and their effects on inequality.

Turkey This section discusses the Turkish transition to democracy during the past three democratic episodes: 1950-1960, 1961-1971, and 1971-1980. Also discussed are social

208 policies in these earlier democratic episodes due to their legacies on the post-1983 era.

This section explains the socioeconomic and political background in which political parties operate and develop social policies. In particular, it intends to present constrains and incentives that political actors face in their particular environment.

Unlike Southern European countries, such as Italy, Greece, Portugal, and Spain, transition to democracy in Turkey was single-handedly supervised by the politicized military elites, the praetorian guards of the regime. Similar to earlier coups, the 1980 coup had deleterious consequences on institutionalization of the political party system.

In each case the military engineered electoral rules and introduced a new constitution in the hope of creating a stable political system in which political actors function as loyal subjects. By November of 1983, when the first post-coup election was reintroduced, the military elites had finished reshaping the political party systems, including the addition of new electoral rules along with new a constitution.

Turkey during the Second Wave of Democracy This section discusses the authoritarian past of Turkey and earlier episodes of democracy with a brief description of social policy in these eras. Discussing social policy in these eras is important because it shows how authoritarian legacies and effects have influenced the post-1983 politics, such as the linkage between social groups and political parties and later social policy. In addition, the hierarchical nature of Turkish social policies can be understood better by analyzing them. In particular, this helps to trace the social policies of ideologically different political parties in the new democratic era.

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The Republican People‟s (or Popular) Party (RPP)31, established by Mustafa

Kemal Ataturk, the leader of the War of Independence between 1919 and 1923, was the vehicle for political and ideological legitimacy for a new, secular regime. Under the new single-party rule, Ataturk launched a series of political and economic reforms in line with his vision of a modernized/westernized Turkey.

Unlike authoritarian/totalitarian regimes in Europe, the Kemalist elites evaded mass mobilization to legitimize the regime, but preferred modernization through social control (Sunar 1974). The regime brought several important social groups into its coalition. The most important ones were the military and the bureaucratic elites, which were traditionally the most modernized people in society at that time. The regime also allied with the newly emerging capitalist class and adamantly pursued its creation

(Yalman 2002). Lastly, the Kemalist regime established vertical ties to local notables

(landlords) that kept rural people under control, and obviated the political participation of the peasantry, allowing the RPP to control the peasantry without allocating substantial resources (Tunc 2005). The members of the parliament in the single-party structure were drawn from urban, upper middle class, bureaucratic, and local notables.32

While consolidating power in urban areas, the regime had difficulty penetrating the countryside. Influenced by Mussolini‟s Italy, the Kemalists opened local branches and created social and political associations linked to the party. Through local branches and associations such as People‟s Houses, the regime attempted to instill secular values into the rural periphery. For this purpose, they opened a number of „the Village

31 Literature uses both translation for the RPP‟s name. 32 Although the regime tested the multiparty system by allowing some (friendly) opposition parties in the past, it disbanded them as these parties were becoming a hotbed of regime opponents.

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Institutes‟ that aim to modernize rural areas by recruiting their children to train in these institutions.

The conflict between the general population on the periphery and the ruling elite originated in the early years of the republic. The „1925 rebellion‟ of Sheikh Said, the

1930 Dersim Insurgency, and a number of other small-scale reactionary movements in the 1920s and 1930s increased the regime‟s suspicions of those outside the ruling cadre.

These suspicions were reciprocal: the Caliphate was abolished in 1924 and the Arabic alphabet was replaced by the Latin alphabet in 1928. While the center was pushing for modernizing reforms, the rural population, particularly powerful landlords in rural areas continued to resist these attempts. Not surprisingly, these groups have been the main electoral base of right-wing political parties in the post-1946 era.

The second wave of democracy that occurred in the aftermath of WWII, brought

Germany and Italy into the democratic camp and touched Turkey as well. The post-war era was timely for a democratic transition for Turkey because the country was in the midst of the disintegration of an alliance between the regime, landlords, and a small bourgeoisie. As the war strained the country‟s budget, the regime levied heavy taxes in

1942; specifically the Wealth Taxes intended to extract resources from minorities. They especially targeted the Jewish and Greek business classes (Aktar 2002). Although this levy mostly affected the economically active non-Muslim minorities of the country, it reduced trust in the RPP among the business community (Keyder 1987). The second rift came with the Land Reform of 1945, which created a heated debate in the parliament as well as an alliance between landed elites and the small bourgeoisie.

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In the same year, some members of the parliament submitted a bill that demanded modifications to the Land Reform Laws. These dissident members of the RPP, including those subsequently expelled after heated debate on the land reform, formed the

Democratic Party (DP) in 1946. Joining this group was Celal Bayar, a war hero and liberal ex-prime minister from the 1930s. He resigned from the RPP to join this new political endeavor. With the consent of President Inonu, who accepted assurance that the new party would not challenge the foreign policy and secular nature of the regime, Bayar assumed the party‟s leadership (Toker 1970; pp. 112-113, Angrist 2006:182).

Having discussed the authoritarian nature of the single-party era and the emergence of electoral alliances in society for the RPP and the DP before the first democratic episode in Turkey, the next sections analyzes subsequent democratic episodes, the contentious but relatively less volatile political party system and the development of social policy in these eras.

First Democratic Episode, 1946-1960 Table 5.1 presents the results of elections during the first democratic episode in

Turkey. The results of the first election in 1946 were a modest success for the DP which gained 62 seats; whereas the RPP received 396 seats. Some argue that the election process was not entirely open and fair, especially since open-vote/secret counts procedures manipulated the election results (Karpat 1996). In the next election of 1950, this procedure was changed to secret-voting/open counting. The results gave the DP a significant mandate. The DP received 52.7 percent of the votes and 85.2 percent of the seats.

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[Table 5.1 about here]

During the first term of the DP, political and economic liberalism gained policy prominence. The party amended restrictions on the press and facilitated the establishment of voluntary associations. The number of associations increased eight fold by the end of the party‟s control in 1960 (Saribay 1991). Additionally, the DP relaxed laws that permitted organization of strikes, which had increased compared to the previous era (Makal 2007).

Economic growth in this era was substantial, ranging officially from 2.7 percent in 1952 to 23.3 percent in 1957. GNP nearly doubled between 1950 and 1960

(Kalaycioglu 2005:77-78). Economic growth and the lifting of restrictions on the free movement of the rural population led to urban growth. As a result, the rate of urbanization rose from 25 to 31.9 percent (Bugra 2007).

Ideologically, the program of the DP resembled that of the Christian Democrat parties of Europe. While the RPP was an adamant supporter of secularism, the DP, adhering to the principle of secularism and Kemalism, saw a more positive role for Islam in society. As soon as the DP came to power, it allowed the call to prayers to be performed in Arabic and lifted restrictions on religious pilgrimages. The DP revoked restrictions on religious publications and broadcasting on radio as well (Saribay 1991), but did not develop a strong organic linkage with religious groups as seen in the successor right-wing parties such as the DP and the MP (Ozbudun 2000, p. 19).

Nevertheless, thanks to its religion-friendly policies, the DP was able to garner significant votes from the peripheral population that was disenchanted with the secular policies of the RPP during the single-party governments.

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As the drop in prices for agricultural products on the world-market hit the export sector, the political fortunes of DP began to decline as well. In 1954, grain prices fell dramatically and in reaction, the DP increased its subsidies to farmers and raised tariffs to protect domestic market. Despite its populist policies, the party lost almost 10 percent of its votes in the 1957 election. The DP started to pursue authoritarian policies toward the main opposition party, the RPP. The DP introduced restrictions on the pro-RPP press and changed electoral rules to restrict cooperation among opposition parties (Saribay 1991,

126). In addition, the DP punished the core supporters of the RPP either through keeping their (public officials, bureaucrats) wages low or putting more political pressure on them.

Dissatisfied with the DP‟s policies, the core supporters of the RPP, including academic and bureaucratic elements, as well as other groups, took over the streets to protest (Kocak et. al. 1997). The military was concerned about the religious revival under the DP, as well as growing polarization in the country. Although the election of

1957 showed that the party was still strong, with more than 47 percent of the vote (see

Table 5.1), the DP‟s tolerant policies toward religious groups, allegations of corruption, as well as its authoritarian policies toward the opposition media mobilized organized groups linked to the RPP.

In cooperation with civilian elites, a group of colonels, independent of the higher echelons, declared martial law on May 27, 1960. The military elite banned the DP and sent their leaders to jail. Then, the military court prosecuted the leading DP elites and issued capital punishments for three leaders: the Prime Minister Adnan Menderes and his two cabinet members Fatin Rüştü Zorlu and Hasan Polatkan, which ended Turkey‟s first democratic episode in blood.

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Social Policies 1923-1960 Even before the founding of the Turkish Republic in 1923, the Ottoman Empire had laws regarding social policy issues. For example, the government issued special laws in 1865 and 1869 concerning working conditions. These included providing health care to workers and disability payments in cases of work accidents in major state economic enterprises. Such economic enterprises included coal miners in the town of Eregli, railway and seaport workers (Apan 2008). This tradition, providing social rights within private and public enterprises, continued in the new republic as well.

In the single-party era, Turkish social policies were mostly concerned with important public companies‟ limiting the number of working hours, child labor, work accidents, health services, and housing. State enterprises, such as Sumerbank (a major state economic enterprise) and SEKA, handled their own health care services and had autonomy in providing benefits to their workers. Makal (2007:135) noted that 80 percent of the expenditures of Sumerbank in 1947 went toward wages and wage-related expenses

(overtime etc.), while 20 percent was for social assistance to workers. Social benefits included child/marital benefits, educational/health benefits, work accident assistance, food and clothing provisions, etc. In this era, the regime practically banned strikes.

Strikes and those who encouraged strikes were charged with crimes (Makal 2007). On the pretext of the existence of a “classless society” in Turkey, unionization and any organizations based on class were prohibited.33

33 Makal (2007:369) argued that in a partial response to communism‟s threat, the Kemalist ideology was rejecting the existence of any class in Turkish society. In particular, the 1938 Associations Law (Cemiyetler Kanunu) made associations based on class, religion, and ethnicity illegal.

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The second half of the 1940s witnessed the creation of a number of social policy organizations. In 1945, the parliament established the Workers Insurance

Administration, which was later renamed the Social Insurance Administration (SIA).

Social funds for specific state enterprises such as Ziraat Bankasi (Agriculture Bank)

(1937), Central Bank (1938), State Airport Officials (1938) and others were merged in

1947 into an umbrella organization called the Public Official Fund (POF-Emekli

Sandigi). It instituted old-age pensions in 1949 and health as well as maternity insurance in 1950.

In the post-1950 era, the DP government legalized unionization. In addition, the

DP added other types of insurance and regulated accident, old-age, and death insurances.

In 1950, the DP government reduced the retirement age to 60 for both women and men and used funds from the SIA and the POF to subsidize farmers by purchasing grain and other goods above world-market prices (Insel 1996). The use of such funds did not create any problem for social security payments at that time, because the funds had just started to accumulate premiums from workers and public servants, and the number of pensioners was minimal (TUIK 2007).

Second and Third Democratic Episodes, 1961-1971 and 1971-1980 In the aftermath of the coup, the military called upon a number of intellectuals and public opinion leaders to write a new constitution that advocated freedom of thought, conscience, and association. In reaction to some repressive measures of the DP government, the military and civilian elites embraced the politically “liberal” constitution. Nevertheless, the authors of the constitution inserted some clauses that established boundaries for the political elites‟ activities, including one clause which said

216 that the Constitutional Court was a safeguard against any law that may endanger the

Republican principles. The rule of law ( Rechsstaat) was emphasized, rather than the rule of parliament (Heper 1988). According to Heper (1988, p.7), this Rechsstaat understanding of the state was enhanced to include clauses such as Article 153 of the

Constitution that prohibited annulling any specific laws passed during the Ataturk era.

The military elites expected that the RPP would assume power as a result of the election and pursue a land reform and other developmental policies emphasized during the military government. However, to the military‟s chagrin, the RPP did not perform well in the election to form a single-party government in 1961. Except for eight-months of right-wing coalition government just before the 1965 election, the governments between 1961 and 1965 were unstable coalitions, led by the RPP. In the next election in

1965, the successor of the DP, the JP, took the majority of seats (Kalaycioglu 1988).

With the RPP limited to its core supporters mostly in urban areas, the AP increased its electoral appeal among a larger segment of society and attained 46.5 percent of the vote in the 1969 elections. The AP remained in power until the 1971 coup. As political violence spread over the country, the military issued a memorandum to the AP government led by Suleyman Demirel. The Demirel government resigned and a new caretaker government formed.

The intervention in 1971 was different from the one in 1960 in several ways.

First, it did not result in the creation of a new constitution, only revised to some of its

Articles. Second, the major parties were not closed; only minor parties such as the religious National Order Party and the Marxist Turkish Labor Party were banned.

Finally, rather than a military government, a technocratic government established by a

217 liberal-minded RPP member, Nihat Erim (Karpat 1988), terminated political violence and partly implemented the land reform that the 1961 Constitution demanded.

However, the 1971 coup had important limitations for the RPP. It exacerbated the rivalry between the most two powerful persons in the party: the war hero and second

President of the Republic, Ismet Inonu and Bulent Ecevit, who wanted to transform the

RPP into a mass social-democratic party. When Ismet Inonu endorsed the care-taker government the military wanted, Ecevit resigned his post as general secretary of the party in protest. One year later, he successfully challenged Inonu at the Party Convention and assumed party leadership.

With the rise of Ecevit, the RPP reformulated its program to reach the traditional base of the European Social Democrat parties, in particular, the urban working class and poor rural farmers. Ecevit extended safety net programs and public policies to these groups. He expanded labor rights and increased wages he had pursued as Minister of

Labor between 1961 and 1965. He also increased subsidies to agricultural workers

(Kalaycioglu 2005, p. 105). As the RPP stood for the interests of the have-nots in society

(Kalaycioglu 1994), electoral success came as well. The party embraced a new position as “the left of the center” rather than identifying itself as “the state party”. This new ideological position led the RPP to increase its vote share, first to 33.3 percent in 1973 and then to 41.4 percent in 1977.

The 1970s also witnessed the emergence of new parliamentary parties that have played active roles in the post-1983 era. A nationalist party, National Action Party

(NAP) and a religious one, National Salvation Party (NSP) on the far right captured seats in the post-1970s parliaments. In 1973, the NSP participated in a short-term coalition

218 government with the RPP. Then the NSP formed unstable coalition governments with the JP along with the NAP in the second half of the 1970s.

In this era, the political party system witnessed growing instability along with an increase in patronage catering to party constituencies. The political parties, in order to emphasize their ideological differences to consolidate their electoral constituencies pursued assertive policies that signaled ideological differences among coalition parties

(Turan 1988). The political polarization also influenced associations with weak political interests. Associations only marginally interested in politics in the 1950s adopted more active roles. Parties created directly and indirectly affiliated economic and cultural organizations to mobilize their constituencies and to get support. The most important ones were the unions. Three unions were established: The Confederation of Turkish Just

Workers Union (HAK-IS) linked to the National Salvation Party; TUKIS was controlled by the National Action Party, and the third one was the leftist Revolutionary Labor

Unions Confederation of Turkey (DISK).

The second coalition government of the NSP, NAP and the JP dissolved in seven months. The subsequent coalition government led by the RPP could not cope with growing budget deficits. Difficulties caused by the oil crisis of 1974 led to a structural adjustment agreement with the IMF. The IMF programs led the government to cut wages and social spending, which fuelled political violence. The violence between 1975 and

1980 cost about 5,000 people‟s death “Armed assaults, sabotages, kidnappings, bank robberies and bombings” became a part of everyday life (Ozbudun 1990:193).

On the eve of the military coup, Turkish politics was deadlocked. The RPP‟s

Ecevit government fell again and the JP under Demirel established another coalition

219 government. Paralyzed governments could cope with neither growing social and economic problems nor political violence. For months, parliament was not able to choose a president; the numbers of politically inspired murders increased; the government was unable to develop policies that promoted economic growth; and inflation levels reached 100 percent, while real GDP declined substantially. On September 12,

1980, the military, under its commander, General Kenan Evren, declared martial law, dismissed the Parliament, and suspended all civilian institutions.

Social Policy, 1961-1980 Between the years of 1961 and 1980, governments introduced three major changes in the realm of social policy. The JP government in 1965 reduced the retirement age to 55 for women and 60 for men. Then in 1969, the JP government again changed the statue and removed the age limit, simply directing that 25 years of service allowed retirement. This policy was a boon for the AP in urban areas with their high concentrations of workers and employees.

Social security insurance came late for farmers and small business owners, compared to public servants and the working class. The insurance scheme for small businesses and farmers that own small shares of lands, established in 1971, was provided by the Independent Working People‟s Social Insurance Administration (IIA-Bagkur). Its intent was to include all workers except those working within independent agriculture

(Apan 2008, p. 277).

A third set of major changes were introduced in 1976 and 1977. On July 1, 1976, the JP-led government provided noncontributory retirement to those above 65 years old

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(Bugra 2008, p. 190). The right-wing coalition government reduced the required years of service for retirement to 20 years for women.

This section of the chapter showed that major changes in social policy were introduced by the right-wing governments in the pre-1980 era. While the RPP appealed to educated urban groups except for during Ecevit‟s term, the right-wing parties targeted rural constituencies and the new urban working class. By incorporation of rural and urban working classes through social policies such as extending the coverage of the IIA

(Bag-Kur) and SIA (SSK), the right-wing parties were able to gain significant votes from these groups.

The 1980 military coup introduced a second shock to Turkish political party system by closing all political parties, including the one that was associated with the regime, the RPP. The next section first discusses the peculiarities of the 1980 coup and then political and economic developments in the post-1983 era.

Post-1980 Era Scholars note that the 1980 military coup was different from previous ones in several ways and these differences had a drastic impact on the consolidation of democracy as well as Turkish political party system (Ozbudun 2000; Waterburry 1993).

Unlike the 1960 coup when the military elites collaborated with almost all civilian elites from bureaucratic, judicial, and business circles, the military elites of the 1980 coup were especially distrustful of the bureaucracy and handpicked those considered ideologically reliable to write a new constitution. Second, while the 1960 Constitution can be characterized as a liberal one, the 1982 Constitution curbed most of the civil liberties and

221 rights that the former document granted. One may argue that this is because both constitutions, in their own ways, reacted to the previous era‟s political conditions. As a response to the repressive nature of the DP‟s final years, the military elites expanded liberties and imposed restrictions on the state‟s power in 1960. To the contrary, in the

1970s, Turkey witnessed significant political violence among different ideological groups, especially leftist groups and right-wing nationalists.34

From the start of the military coup, the military elites promised to transition to democracy after ending the violence and reforming the system. While doing so, the military did not face any strong opposition and became the sole actor in rewriting the

Constitution.35

Fourth Episode of Democracy in Turkey, 1983 – Present The post-1983 political era in Turkey began with a new party system. All right- and left-leaning parties of the previous eras had been banned by the military government.

Although the military allowed the establishment of new political parties, they banned all politicians and new parties with ties to banned parties. The military elites allowed only three political parties, anticipating that two of their favorites, the National Democratic

Party (NDP-Milliyetci Demokrasi Partisi) led by a retired general and the

Popular/Populist Party (the PP), a leftist party, would constitute a two-party system that was seen as an antidote for the previous political polarization. The third party, the

34 In order to reduce polarization, the military elites imposed strict control over organized groups such as unions and associations, and created laws intended to eliminate politicization of the public service sector and of bureaucracy. All unions except for the Turk-Is, known to have collaborated with all governments and the military –imposed governments since its foundation, were charged with crimes and banned entirely (Waterbury 1993). 35 The military regime called upon law professors and academics that they trusted to write the 1982 Constitution. These people wrote it in consultation with the ruling military elites.

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Motherland Party (The MP-Anavatan Partisi), was allowed to participate in the election with the expectation that it would do poorly. The party leader, Turgut Ozal, a former

World Bank vice president, was a prominent economist as high-ranking bureaucrat in charge of designing economic liberalization plans before the coup. In the military governments, then he served as a state minister of economics, but resigned from his post in 1982 as a result of his disagreement with the military elites. We should note that despite his post in the military government, he was not seen as a man of the military and his party‟s electoral campaigns garnered huge support. This led the coup leader and the then president of the country, Kenan Evren, to openly chastise the MP in a televised speech. This speech indicated that the military did not approve of the MP acquiring power.

Turkish citizens thought otherwise and 45 percent of them voted for the MP in the

November 1983 election (see Table 5.2 for the post-1983 election results). This party was “the only party that was not clearly identified with the military despite its leader‟s prominent position under the military regime” (Sayari 1996:33). In the election, the PP achieved the second greatest number of votes with 30 percent, and the military‟s favorite, the NDP, with 23 percent.36

[Table 5.2 about here]

The MP leader and Prime Minister, Turgut Ozal, continued the free-market policies that he followed during his active role as deputy prime minister in the military

36 The latter was disintegrated; it was largely merged with the MP in 1985.

223 government.37 The first years of the MP‟s rule saw high economic growth (real GNP) in comparison to an average growth of 2.1 percent and 1.1 percent in the 1977-1979 and

1980 periods, respectively. Under Ozal, economic growth reached an average of 4.6 percent from 1981 to 1985. At the same time, the budget deficit decreased from 6.3 percent in 1980 to 1.9 percent in 1985 (Onis 1992).

While the export sector experienced significant economic growth, the new economic order created economic insecurities in society as well. As price liberalization was introduced subsidies were significantly cut and inflation remained in the double digits. Moreover, as the economy transformed from the ISI (Import Substitution

Industrialization) to an export oriented one, it drew more migrant workers to urban areas, which increased urban poverty (Onis 1997). As Table 5.3 and Table 5.4 show, the economic reorientation especially affected those groups that once received preferential benefits from the state. In particular, fixed-income groups, public officials, public and private sector workers, and professionals experienced the greatest losses from the transition (Onis 1992).

[Table 5.3 about here]

[Table 5.4 about here]

The 1987 election results showed the economic restructuring programs to be electorally costly for the MP. The party‟s vote share declined to 36 percent in 1987 from

45 percent in 1983. Another reason for this decline is that the 1987 lifting of the ban on previous political leaders encouraged some voters to support the successor parties of the

37 Ozal took an active role in designing the January 24 Decisions in 1980 that aimed to liberalize the economy, which eventually the military coup disrupted. After serving as deputy prime minister for some time, he resigned.

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1970s.38 The year of 1987 was the year that the loose coalition of forces within the MP began to disintegrate. Soon after the 1989 local elections that brought another defeat to the MP, Ozal chose to be a candidate for the Office of Presidency. Ozal anticipated the electoral defeat in the 1991 election, so he chose to run before Kenan Evren‟s term was about to end.

However, after Ozal became the President of Turkish Republic, the MP was not able to consolidate all of the different political leanings (liberal, conservative and nationalist) within the party. This became especially difficult after Mesut Yilmaz, the leader of the liberal wing, was chosen to be the party leader. Eventually, the conservative and then the nationalist camps left the party, making the MP more homogenous ideologically but less effective in garnering votes. Not surprisingly, nationalist and religious voters turned to the NAP and the WP respectively, increasing their totals in the

1991 and 1995 elections (see Table 5.2).

The 1991 elections brought the TPP to power in a coalition government with the

SDPP, the major left party. The leader of the TPP, Demirel, became prime minister and pursued populist economic policies. He instituted some of his campaign promises, such as early retirement and green cards (free health service for the poor through party branches), which resulted in increased borrowing from domestic and international sources. After he assumed the presidency in the aftermath of the sudden death of Ozal, a new prime minister and TPP leader, Tansu Ciller, pursued similar policies, which resulted in a major economic crisis in 1994. The government had to announce a new

38 The 50.3 percent of votes favoring the lifting of the ban paved the way for Suleyman, Demirel, Erbakan, Turkes and others to officially enter politics. This strengthened the TPP (True Path Party), the WP (Welfare Party), and the MWP/NAP (Nationalist Action Party), as these leaders reassumed their posts.

225 austerity program aimed at controlling wages, reducing public expenditures, and accelerating privatization. Moreover, the Turkish lira was devaluated by 300 percent.

Another significant development in this era was that the Kurdish representatives of the SDPP left the party to establish their own political party. The first steps toward solving the Kurdish problem were taken by the government by recognizing the Kurdish language and allowing books and newspapers to be printed in Kurdish. Nevertheless, the continuation of the emergency rule in the Kurdish-dominated region and the ban on

Kurdish broadcastings continued (Hale 1994). Despite the promises of two party leaders in the government, Demirel and Inonu, the military and police violated human rights violations in the region. Moreover, the leftist parties took a stance against the new

Kurdish party (People‟s Democracy Party-PDP) and collaborated with the TPP in the parliament and lifted Kurdish immunity for politically motivated crimes. This led to the imprisonment of some representatives of the PDP. While Kurds withdrew their support from the left parties, they switched to the only alternative that criticized human rights violations in the region, the WP. Using the religious imperative, it first gained significant votes in municipal elections and then national elections.

Chronic high inflation and the 1994 economic crisis helped the Islamic Party, the

WP to mobilize those who were most affected, especially urban poor and workers during the electoral campaign. The WP gained the plurality of votes in the December 1995 election. It was able to mobilize disenchanted domestic migrant workers along with their core supporters, the small business owners and the economically disadvantaged segment of population. In fact, a 1994 survey indicates that only one-third of those who supported the WP claimed that their primary reason for their support were the Islamic roots of the

226 party (Heper 1997). The relatively successful performance in local governments as well as their use for helping the poor through distributing coal, clothing, and basic needs, contributed to the party‟s success (Heper 1997:36). After unsuccessful attempts to establish governments composed of secular parties in the parliament, the WP and TPP formed a coalition government in June of 1996.

However, the WP/TPP government did not survive long. In February of 1997 the military, anxious at the rise of Islamic party‟s power and policies, transmitted a memorandum to the government. Through „virtual coup‟, that is to say without the use of force, the WP/TPP government was ousted through the concerted efforts of the military and civilian elites. A new government, established by the MP, allied itself with the DLP, and had the support of the RPP in parliament. The latter party did not take part in the cabinet, but supported the coalition government with a vote of confidence in the

Parliament (Kalaycioglu 2005).

In the 1999 National Assembly elections, the DLP campaigned with the leftists/nationalist discourse, and the NAP which promised to solve “headscarf problem”39 against its rival, the WP. Capturing the PKK leader ensured victory. The

DLP and NAP formed a government with the MP. However, the financial crisis in 1999 and then 2001, along with corruption charges leveled at some members of the cabinet and the critical health of Prime Minister Ecevit, alienated the governing parties from public.

Under growing disagreements and poor economic performance, the call for the early elections became inevitable.

39 In 1991, the Constitution Court annulled regulations that allowed girls with headscarves to enter all public and private schools and universities. Since then, this issue has become a part of an electoral campaign in most elections.

227

The 2002 elections turned out to be a watershed in the Turkish political party system, putting all incumbent parties out of parliament and replacing them with a newly established a populist party, the Justice and Development Party (JDP). Founded by former members of the Islamic party, namely the WP, the JDP located itself as the major right-wing party during the election campaign, refrained from using religious discourse, and posed itself as a conservative democratic party in line with Christian Democratic parties in Europe. 40 The party garnered around 35% of the votes and 66% of the seats due to the electoral system that favored the major parties. The remaining seats were captured by the RPP, with 22% of the votes. Once established as major parties, the MP, the TPP, the NAP, and the DLP were out of parliament. The high electoral threshold was the major cause of the TPP and the NAP‟s decline from parliament as their votes, 8 and 9 percent respectively, were under the 10 percent threshold.

As seen above, Turkish political and economic outcomes have been very volatile throughout the post-1983 era. Economically, the country faced a dramatic economic crisis that led to a major devaluation in its currency, which devastated the middle class.

Turkish political party system witnessed the extinction of major parties and the rise to power of a newly established party. This section frames the conditions which we think promotes this fluctuation.

The next section will analyze the changes in voter turnout and the reasons behind them. It will show that although voter turnout by lower income groups remained relatively high due to mobilization by mostly the right-wing parties, a high volatile party

40 See Hale‟s (2005)‟s objection to the calling of AKP as a Muslim Democratic Party and his analysis on the differences between the AKP and Christian Democrat Parties.

228 system increased the use of targeted social spending. This caused the regression in economic equality in Turkey.

Voter Turnout Voter turnout has showed significant variation over the history of elections in

Turkey in the post-1983 era. The elections showed substantial variation, ranging from 78 percent to 92 percent. In contrast to Spain, increase in turnout did not benefit the left- wing political parties except for the 1987 election. Right-wing political parties were much more successful in mobilizing low income groups, increasing turnout significantly.

Similar to other cases, absentees come mostly from low income groups. However, the party fractionalization on the right prevented the poor from having more leverage over political parties. In particular, the diversity of farm products made it difficult for farmers to organize and put pressure on political parties.

Culhaoglu (2007) found that the 1982 Constitution, that made voter turnout compulsory, significantly increased the number of voters in the post-1983 era. Still, despite compulsory voting (due to lax enforcement), the turnout rate has declined over time. In particular, as Table 5.5 below shows, turnout experienced a significant decline on average, from around 92 percent in the 1980s to 83.8 percent in the 1990s.

[Table 5.5 about here]

A recent study found that turnout varies significantly across regions due to socioeconomic reasons. While voter turnout is higher in the provinces with high GDP per capita in the post-1983 era, this trend is the reverse of the 1970s especially for the poorest region, the Southeastern part of Anatolia ( Kalaycioglu and Çarkoğlu 2007). The

229 competition for votes among lower-income groups increased as a result of the rise of

Ecevit to the leadership of the RPP in 1972. His pro-poor policies made the party more visible in economically impoverished regions. In 1969, the RPP gained only 7.29 percent of the votes in Diyarbakir, a major city in the Southeastern region. Its vote share increased to 30.45 in 1973 and 34.82 in 1977.

Fluctuations in voter turnout are another phenomenon that we should look into.

The change in turnout in the post-1983 era occurred for several reasons. First, as discussed earlier, low socioeconomic development reduced voter turnout in areas like in

Eastern and Southeastern Anatolia. Second, as Kardam and Tuzun (1998) found (see

Table 5.6), the rightist parties were successful in mobilizing abstainers while the leftist parties were not successful in doing so, except for in some specific elections. For example, the SDPP was successful only in mobilizing their supporters in the 1987 election, in large part due to the negative effect of neoliberal economic policies of the MP on its traditional base, the middle/middle-upper classes (Kardam and Tuzun 1998).41

Third, the performance of parties in government affects the mobilization of only the

(potential) voters of the left-wing or right-wing political parties. For example, in the

1987 election, increased dissatisfaction with the economic situation helped the RPP to mobilize their potential supporters. However, the 1989 municipal election was the peak moment for the traditional left parties. In this election while some support for the MP moved toward the TPP, right-wing voters, compared to left-wing voters, stayed home disproportionately. The abstention rate more than doubled in the 1989 election. The RPP tradition was able to increase their share from 33.3 percent to 37.7 percent while parties

41 The MP strived to create a middle class independent of the state through various incentives in private sectors. In addition, the conservative middle class, shopkeepers, and sectors dependent on export-oriented policies largely voted for the MP.

230 from the DP tradition saw their share fall from 66.3 percent to 61.9 percent. Table 5.6 displays the change in abstention rate and the vote share of the left- and the right-wing parties. The vote shift from abstainers to the DP tradition and from the RPP to the DP occurred in 1989-1991 and 1991-1994 respectively. As seen in the table above, the RPP gained significant votes from the abstainers only in 1987 (Kardam and Tuzun 1998).

This may indicate that neoliberal policies of the right-wing parties in the early elections especially affected the low income groups and farmers, who usually vote for the right- wing parties. 42

[Table 5.6 about here]

[Table 5.7 about here]

To what extent do Abstainers come from lower income groups? If they do come from lower income groups, does this trend continue? If the theory is correct, we expect that non-voters are disproportionately the poor. My original survey conducted in the aftermath of the 2007 election, where voter turnout had significantly increased, asked whether one voted or not and also inquired regarding their occupations. Table 5.7 illustrates voter pattern by occupation based on the 2007 survey. It shows that most likely voters are pensioners, public servants, and small and medium scale business owners. As for unskilled and skilled workers, the unemployed, and students, their turnout level remains lower. However, an interesting pattern emerges from the survey showing that housewives are mobilized to vote during the election. Further analysis shows that around 60 percent of them voted for the JDP.43 This also shows the organizational

42 However, the corruption scandals regarding Istanbul municipalities run by the SDPP, as well as growing Kurdish separatism, and the party‟s policies regarding the Kurdish problem did not help the party in the 1991 election. 43 See Table 11.

231 strength of the JDP which established significant resources to develop networks in especially poor neighborhoods. As a result, as Table 5.8 shows, lower educated strata were mobilized by the populist JDP in 2007 election.

[Table 5.8 about here]

Political Parties, Social Policy and Electoral Volatility This section analyzes linkages between political parties and social groups. It then discusses how this relationship favors their constituencies at the expense of the poor in a highly volatile electoral environment. For this purpose, it first discusses electoral bases of the political parties and then how this relationship affects social policies in a weakly institutionalized political party system in Turkey. We expect that weak political party institutionalization provides incentives to Turkish governments to use more targeted spending.

Political Parties and Their Constituencies Following Mardin (1971, 1975), scholars noted a major cleavage in Turkish society, between the center and the periphery. The center includes the state elite, urban middle classes, and those who share similar visions. The periphery, on the other hand, includes rural populations into which the modernization project of the single-party rule did not effectively penetrate. Here, traditions and the significance of religion dominate, and subject and parochial culture prevail (Çarkoğlu 1998; Verba and Almond 1965).

According to Mardin, while the DP and its successor party, the JP, represented the periphery under the umbrella of the rightist ideologies, the RPP represented the center.

Initially, in the 1950s, the overarching coalitions of the DP consisted of landed elites in

232 the western part of Turkey, and the urban mercantile and small peasantry classes. The

RPP‟s base continued to be comprised of the local notables of Eastern Turkey, the urban middle class, largely public servants, and intellectual elites (Tunc 2005). With the rise of

Ecevit as the RPP‟s new leader, the RPP was able to incorporate urban workers and the less fortunate into its political coalition. In the same era, the JP received most of its support from rural voters and small business owners, giving up some of its urban poor votes to Ecevit‟s RPP.

The cleavages and their relations to political elites became more complex in the aftermath of the 1980 coup. Each military intervention resulted in a higher level of electoral volatility and fragmentation in the political party system for several reasons.

First, the military intervention disrupted political socialization in which voters are habituated into party identification (Sayari 2002). As party loyalty got weaker, voter preferences shifted from one party to another, increasing volatility.

Second, electoral rules were changed by the military regime in the new constitution. Proportional Representation (PR) was modified to favor larger parties with most votes to diminish the party fragmentation. In addition, changes in local (20 percent) and national (10 percent) thresholds were introduced for similar purposes. As the major parties were banned and changes in electoral rules were introduced, the first elections did not match up with the cleavage structure discussed earlier. Ozbudun (2000) found the vote percentages of the MP and the JP throughout the 1970s and 1980s to be only weakly correlated. This was in contrast to the Spanish case, in which a significant overlap between the two elections of the 1930s and the first two elections of transition were observed.

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The center-periphery cleavage that Mardin derived from his analysis of earlier decades of the Turkish republic has been recently modified by Çarkoğlu. His 1998 study suggested a qualified version of this cleavage and argued that “local/traditional vs. universalistic cleavage could be viewed as a reasonable working operationalization of the periphery vs. center concept.” He also uncovered a second cleavage inherent in Turkish voting, namely, “government controlled economy vs. market system/civil society”

(Çarkoğlu 1998:564). This second cleavage is more in line with the left/right partisanship continuum. As Table 5.9 suggests, Turkish society significantly changed as a result of increasing urbanization since 1950s and an increasing literacy rate since the establishment of the state. Such increases in urbanization and literacy enhanced left/right partisanship. Interestingly, Çarkoğlu‟s study uncovered such a dominant cleavage in the

1990s when the fragmentation of Turkish political party system witnessed “the rise of fringe parties to a major partner in the coalition government” (Cizre and Cinar 2003:309).

[Table 5.9 about here]

For example, in the 1990s the MP‟s base consisted of those who were in the camp of market system/civil system, while the TTP remained with the government controlled economy (perhaps because of a reliance on state subsidies). The different electoral base for these two right-wing political parties, the MP and the TTP, shows that the center- periphery cleavage needed to be modified as Çarkoğlu suggests. The next section discusses the social bases of political parties over time, suggesting change in social bases of the parties. This enables us to understand how governing parties favor their (potential) constituencies when they come to power.

234

Center-Right Parties

Motherland Party (MP) From its inception in 1983 the MP presented itself as the middle class party even though the size of the middle class was initially small and mostly comprised of public sector employees. Through its policies, the MP aimed to create its electoral base. It attempted to increase the size of middle class through its economic policies; tax incentives for establishing small and medium size businesses. In addition, the MP‟s liberalizing policies created a growing financial sector, which expanded the middle class as well. Other social groups such as people in the export-oriented agricultural sectors, inward-oriented manufacturing and the commercial class, the professional class, and religious groups benefited from the party‟s political and economic opening policies.

(Tunc 2005, p. 102-103).

However, while it created a significant middle class outside of the state sector, the neoliberal economic policies in the 1983-1987 periods alienated three important social groups that withdrew their support from the party. These groups were farmers, organized labor, and civil servants. As beneficiaries of the ISI policies of the previous regime, these groups were most harmed within this era. Subsidies to agricultural sectors were cut; wages for workers/civil servants were suppressed due to restrictive laws on unions and a ban on establishing unions for public servants (see previously presented Table 5.3 and 4).

Just after the 1987 election, Ozal allowed the SEE (state-owned economic enterprises) to increase their prices around 20 percent, which contributed high inflation, reaching to 80 percent in 1988. In addition, it introduced an austerity program, which

235 decreased Ozal‟s popularity level to the extent that the MP saw a drop 13 percent in support, between the 1987 national election and the 1989 municipal elections.

Furthermore, the MP made a major change in social policy that further alienated the party from its earlier supporters. In 1985, the required age before retirement was set to 55 for women and 60 for men. In addition, high inflation, that reduced the real value of wages/salaries significantly, led unions and other organized groups (even though they were not formal organizations such as those of public servants) to take action against the government. The Turk-Is, known for supporting the parties in power, including the military, organized the first ever nationwide street protest of workers against the government. It organized strikes in public and private workplaces to protest low wages, which eventually forced the government to sign an agreement with the unions. The agreement increased public wages and salaries significantly, but placed a huge burden on the budget. However, the agreement did not help the MP in the 1989 local elections. It lost a significant numbers of urban voters to the center-left and rural votes to the TPP

(Tunc 2005). Farmers started to switch their votes to the TPP, the pre-1983 successor party of the JD while organized labor turned to the leftist SDPP. Civil servants gave support for the SDPP, and to a lesser extent for the TPP, in both the 1989 municipal and

1991 national elections. The urban voters started to flee from the MP for the TPP and

SDPP. The MP lost not only to the TPP but also to the far-right parties, the WP and

NAP.

The results also suggest that the final blow to the MP, in part, came with new leadership from Mesut Yilmaz, the leader of the liberal wing of the party. With his rise to the party leadership in 1991, the conservative wing was purged from the party, which

236 led religious voters to support the WP and to a lesser extent the TPP. A significant portion of the MP votes deserted the party and voted for the WP/NAP in 1991. In the subsequent elections, the MP continued to lose its vote share and only appealed to a segment of the urban middle class. An economic crisis while it was a partner in a coalition partner was fatal to the party in the 2002 elections when it received only 5.1 percent of the votes and lost all representation in parliament. The party did not participate in the 2007 election. It still exists, but only nominally.

True Path Party (TPP) The TPP represented “a conservative, populist, egalitarian ideology in the tradition of the DP and the JP” (Ozbudun 2000:95). The TPP emphasized economic justice, distributive politics, and state paternalism. As the successor party to the JP, the

TPP has had a strong network in rural areas, which is evident in its support in those regions. While the TPP attempted to attract rural voters especially from the MP, it also targeted the urban middle class, which was hurt under the MP‟s neoliberal economic policies. Particular targets were those who lost their jobs due to privatization, who were insufficiently compensated, or whose socioeconomic situations had deteriorated.

In the 1991 elections, the TPP was effective in garnering urban voters through its populist appeal by making promises such as to give two keys to everybody, one for a car and one for an apartment. It also eased retirement requirements. Their appeals to urban voters were successful. In large cities such as Istanbul, Izmir, and Ankara, Table 5.8 suggests that the TPP‟s votes increased up to 11 percent in comparison to the 1987 election. The number of cities in which the party received between a 30 to 40 percent

237 vote, increased from 3 cities in 1987 to 26 cities in 1991 (Cizre Sakallioglu 1996:160).

In addition, the party continued to support agricultural subsidies and other incentives to enhance its stronghold in rural areas. As a result, in the 1991 election the TPP received support from peasants in large segments of the agriculture sector as well (Sayarı

1996/97). At the national level, the TPP increased its vote share from 19.1 percent in

1987 to 27 percent in 1991.

As Suleyman Demirel rose to the role of presidency in 1993, during the aftermath of Turgut Ozal‟s sudden death, Tansu Ciller assumed the TPP leadership. With its new leader, a young, female professor at a prestigious Turkish university, it hoped to attract more urban voters with conservative and rural roots (Cizre 2002). To the contrary with

Ciller, the TPP moved from the center to become a center-right party (Cizre 2002), emphasizing nationalism, religion, and culture in line with the JP‟s policies of the 1970s.

The party recruited former police chiefs, high-ranking bureaucrats, and the regional governors in the conflict-ridden Southeastern region. They aimed to appeal to the nationalistic segment of the population that voted for the NAP. With Ciller, the party took a hardline position on Kurdish issue. This led to the erosion of the party‟s influence in the southeastern region, where the party was doing well through the support of local notables. For example, while the party received about 20 and 30 percent of the votes in

Diyarbakir and Hakkari in 1991 respectively, the 1995 results showed a reduction to 10 and 19 percent.44

Despite its poor performance with 19 percent in the 1995 election, the party benefited from the country‟s fragmented political party system. The TPP‟s first coalition government with the MP fell due to corruption charges leveled against Ciller and her

44 www.belgenet.com

238 husband. The TPP then established a coalition government with the Islamic Party, the

WP. This one-year coalition government collapsed under the force of a concerted effort by President Demirel and civilian and military elites.

Frequent economic crises and coalition instability in the country alienated most of the voters. As a result, the party lost its urban voters and received most of its votes from rural areas. The party could not hold onto nationalistic voters, who retained to the NAP.

The TPP‟s vote share first fell to 12 percent in 1999 and then it lost all seats in parliament with only 9.54 percent in 2002.45

Center-Left Parties

Republican People’s Party (HP/SDP/SDPP/RPP)

The history of the left in the post-1983 era consists of frequent merging and high volatility among individual political parties. This was due to the military‟s unexpected ban on the historical party, the RPP (the one that was associated with the regime). In addition, many leftist leaders of the 1970s were banned by the National Security Council as candidates for Parliament when new left parties were established (e.g. the PP and

SDPP). Only the PP was allowed to participate in the election. Later on, the PP merged with the Social Democracy Party (SDP) in 1985 under a new party name, Social

Democrat Populist Party (SDPP). After the RPP was reestablished in 1992, both parties

(the RPP and the SDPP) merged under the RPP in 1995.

Who makes up the electoral base of the RPP? Typical RPP voters are urban middle/upper class, middle-aged, with at least a secondary education, and white-collar

45 The MP and TPP decided to enter the 2007 election with a new but historic name, the DP. However, a last minute bargained collapsed as the ANAP decided not to participate in the election.

239 workers (Gunes-Ayata 2002: 108-109: Ozbudun 2000: 97). In addition, the RPP did well among working women compared to housewives (women working in the household) and peasant women (Gunes-Ayata 2002). The party fared well in urban areas in most elections, especially in the coastal regions. For example, the RPP received about one- third of the votes in major cities such as Istanbul (29.84 percent), Ankara (29.50 percent), and Izmir (35.57 percent ) in the 1987 elections, while it got 24 percent nationally (see Table 5.10). Additionally, Gunes-Ayata notes that the white-collar workers and public servants were likely to be supporters of the party.

[Table 5.10 about here]

After a strong showing in the 1987 election, the party made major gains in the

1989 municipal elections. The 1988 survey shows a significant vote shift to the SDPP across different social groups. 40 percent of public sector voters, 58 percent of professional sector voters, and 38 percent of workers supported the newly merged social democratic party. Before the 1989 elections, the SDPP was able to regain its popular base of the post-1973 era. The 1989 municipal election confirms a surge in votes for the

SDPP. The party won in Istanbul with 35.5 percent of the votes; it also won in Ankara and Izmir with 36.61 and 45.9 percent, respectively. The party led the election, overall, with 32.76 percent.46

However, the poor performance for SDPP mayoral candidates and highly televised corruption scandals involving party members caused reversal of its appeal among the electorate. In particular, corruption charges at ISKI (Istanbul Water and

46 The results of municipal elections come from Yerelnet.org.tr, the portal of local governments.

240

Sewerage Agency) were devastating for the party (Gunes-Ayata 2002). The party would never regain its power after this scandal.

The RPP also lost Kurdish votes. Up until the 1995 election, the party did respectably in the southeastern part of the country through its ties to local notables as well as a social democratic party program that emphasized tolerance toward minorities.

The SDPP and the newly founded Kurdish party formed an electoral coalition in the 1991 election. However, rising tension due to civil war in the southeastern region and an alleged link between Kurdish representatives (members of DEHAP) and the armed

Kurdish Workers Party (PKK) resulted in a heated debate in the parliament. The attorney general of Turkey requested the lifting of the immunities of the representatives of the

DEHAP. The SDPP supported the TPP‟s legislation. In the aftermath of the passage, the

Kurdish deputies were forcibly removed from parliament. This literally ended the historical linkage between the leftist parties and Kurdish voters. For instance, in

Diyarbakir, a major Kurdish city, the two leftist parties, the SDPP and DLP, received

29.53 and 9.36 percent of the votes in the 1987 elections respectively. The RPP, the successor party of the SDPP, and the DLP were able to achieve only 1.97 and 2.62 percent in the 1995 elections. Similarly, in another Kurdish city, Hakkari, the total leftist votes declined to 4.60 percent in 1995 from 49 percent in the 1987 elections. Other southeastern cities such as Mus, Siirt, and Van witnessed a similar trend. Most Kurdish voters turned to the Kurdish nationalist party or religious parties that used Islam to cement the relationship between Turks and Kurds.47

Beginning in the mid-1990s, the RPP faced challenges from another leftist party, the DLP, and to a lesser extent from the Islamic WP. In addition, with the rise of the WP,

47 www.belgenet.com includes all election results.

241 the RPP tended to emphasize secularism and the secular nature of the regime, ignoring socioeconomic appeals from the people. As a result, the party could not appeal to the larger segment of society. The difference between the RPP and other parties became more distinct. The RPP‟s support was an increasingly secular and middle-aged. It had failed to recruit new voters. The party remained under the 10 percent electoral threshold for representation in parliament in the 1999 election.

The 2002 election made the RPP the only party in the opposition. The period between 1999 and 2002 was filled with economic and political crises. The DLP-led government (with the MP and TPP) was discredited in the eyes of the public due to their poor performance. As a result, the outsider party, the RPP (which was out of parliament in this era) became the only party that rivaled the AKP in the 2002 election. The RPP‟s

20-25 percent of votes in the last two elections (2002 and 2007) came mostly from secular, middle-aged, and educated voters (Erdem 2002/2008).

The biggest ethno-religious group that supports the RPP is the Alevis. The Alevis are known to be strong supporters of the RPP as its secular ideology is more appealing to them in a society where they faced persecution during the Ottoman Empire and the early decades of the republic. The size of this group is unknown exactly due to the sensitive nature of the issue. However, their population is estimated to range from 8 to 15 percent.

Consistent surveys show that they are around 8 percent (Erdem 2008). They had their own party in the 1960s, but it remained electorally weak. The Alevi party, Unity, received 2.8 percent of the votes in 1969, but then 1.1 in 1973 and 0.4 percent in 1977

(Ozbudun 1990).

242

The RPP also had links to organized groups in society through good relationships with two unions, the Turk-Is and particularly Disk-Is. It did have a close ideological link with the latter. It received its votes mostly from workers with secular tendencies.

Democratic Left Party (DLP) The DLP has been known as a “family party” or Ecevit‟s party. The first party leader was Rahsan Ecevit, Bulent Ecevit‟s wife, when he was banned by the NSC. After the lifting of the ban on the pre-1980 politicians as a result of the 1987 referendum, the leader of the banned RPP, Ecevit, assumed the party‟s chairmanship as a charismatic, incorrigible man of people. Except for the Ecevit‟s, the party did not have any public voice as only both were assigned to speak on behalf of the party (Kinikoglu 2002).

Nevertheless, with his charismatic personality, the DLP increased its vote share, peaking in the 1999 election. While the RPP was seen as the party of middle/upper class that was sensitive to the secular nature of the state, the DLP was able to appeal to all income levels in the 1999 election. The party fared well in urban areas, especially among workers, in general.

The electoral history of the DLP also shows that despite its weak organizational structure, the party did very well in the post-1994 elections. In the 1980s, when all parties were running against the MP, the DLP did not perform well. The disgruntled leftist voters went to the SDPP. In the 1995 elections, in the aftermath of the radical devaluation of the Turkish lira during the TPP-RPP government, the SDPP received

14.64 percent of the votes. After the merging of the SDPP and the RPP, the RPP power reached its peak in the 1999 elections when it became the major party with 22.19 percent.

243

A snapshot of the 1999 election may provide some idea of the profile of typical

DLP voters. This party received a significant numbers of votes from each socioeconomic stratum, close to 20 percent from each of 5 income groups. It did well among the unemployed and blue-collar workers (Gunes-Ayata 2002). This is in contrast to the RPP, which does better among high income groups compared to the lower income groups

(Esmer 2002). The DLP, a leftist party, attracted 15 percent of voters through its nationalist appeals while its rival on the left, the RPP attracted only 4.3 percent of voters.

The DLP also did better among religious voters, receiving 9.9 percent of their votes, compared to only 0.7 percent for RPP.

The party did not receive significant votes from the Alevi community due to the fact that Ecevit was reported to have a good relationship with the leader of an Islamic group, Fethullah Gulen (Aras 1999). He also argued that the Religious Affairs

Directorate should continue to exist and Alevis should be incorporated into this institution. However, the Alevi organizations favored having their own autonomous religious organizations. Unlike the RPP, Ecevit stayed away from Alevi associations. In addition, the DLP did poorly in Kurdish regions where Ecevit‟s RPP was the leading party in the 1973 and 1977 elections. This was largely due to his position on the Kurdish issue. He saw the Kurdish problem as a ”socioeconomic problem” due to the feudal structure there and he advocated socioeconomic plans to solve the conflict (Kinikoglu

2002). He ignored the political and cultural dimensions of the Kurdish problem and supported the lifting of immunities of Kurdish representatives so that they could be prosecuted by the court, which further alienated his party in the region.48

48 The Turkish law prohibits prosecution of deputies while they serve in the Parliament.

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The electoral fall of Ecevit‟s DLP was unprecedented in Turkish history. The party had an abysmal result in the 2002 election, losing 21 percent of its votes and was left out of the parliament. There are several reasons. First, during the DLP-led coalition government, Turkey faced a major economic crisis that led to the radical devaluation of

Turkish currency, leading to massive lay-offs. The event that triggered the economic crisis was a televised clash between the President and Ecevit, for which he was largely blamed. Second, another incident that made the party less appealing was worth mentioning. During its Party Congress, a candidate for party leadership experienced a physical attack by Ecevit supporters in front of the cameras, which weakened the party‟s image (Kiniklioglu 2002). Third, Ecevit was often hospitalized when he served as Prime

Minister and was perhaps too old and sick to convince the electorate to vote for him.

Far-Right Parties

The Welfare Party (WP/ VP/ PP) The Welfare Party was established in 1983, but not allowed to participate in national elections. In the 1987 election, its vote share remained under the national electoral threshold of 10 percent. In the 1983 and 1987 elections, most voters went to the center right parties of the MP and the TPP rather than the WP. In 1991, the WP ran an electoral campaign in conjunction with two right-wing parties, the National Action Party

(NAP) and Reformist Democracy Party (Islahatci Demokrasi Partisi), and their electoral coalition received around 17 percent of the vote. The party showed strong performance in the municipal elections of 1994 and then in the national elections of 1995.

Scholars note that the party‟s well-organized networks especially in the interior parts of Anatolia and in urban poor neighborhoods played a significant role in bringing

245 success (Tugal 2007). The party received significant support from those with lower socioeconomic status (Yesilada 2002). In addition, the Islamic parties‟ relatively successful local government performance in large cities resonated among voters. It also reduced the fear that the party will introduce Islamic laws when they rise to power. The local governments run by the WP delivered relatively better public services (Yavuz

1997). Their good performance convinced people that the party was an alternative to other parties in the democratic system. More importantly, the party was able to utilize the resources of municipalities to mobilize voters during elections. These municipalities recruited partisans through permanent and temporary contracts. The WP stressed social justice and political freedoms through its “Just Order” promises.49 The party achieved economic grievances through political discourse, a ploy with which the leftist parties had been successful in the past. Çarkoğlu‟s study (1998) on the party programs, including the parties in the 1980s and 1990s, showed that while the MP, the TTP, and the RPP did not change their parties‟ positions on many issues, the WP was able to respond to desires for interventionist economic policies and a strong government. It provided basic needs to people living in poor neighborhoods: Copying social democratic parties in Europe, the party sponsored voter registration drives, and provided transportation to polling stations

(Yavuz 1997). In the 1995 election, the WP received 21.1 percent of the vote which translated to 158 seats in the 550-seat Turkish parliament.

The party performed well in southeastern Turkey by using an electoral campaign friendly to Kurdish voters. The WP and its successor party, the Felicity Party (FP), received higher percentages of votes in the Kurdish region than the national average

49 It refers to an utopist political system in which justice will be provided with fair socioeconomic redistribution.

246

(Sayari 2002:140). While the party received 7.16 percent of the votes in the 1987 election, its vote in a major Kurdish city, Diyarbakir was about 24 percent.

However, the 2002 elections were devastating for the party when it received only

2.49 percent of the votes. The electoral base of the party switched to a newly founded party, the Justice and Development Party (JDP), which was established by the former WP members. In the 2007 election, the WP got 2.34 percent of the votes and remained out of the parliament.

Nationalist Action Party (NAP) The roots of the Nationalist Action Party are in the Republic Peasant Farmer‟s

Nation Party (Cumhuriyetci Koylu Millet Partisi-CMKP), established in 1948 as a coalition of small fascist and proto-fascist forces in Turkey. As the legendary leader of the party, Alparslan Turkes, was elected as the party chairman, the party increasingly became pan-Turkist and anti-Communist. The CMKP was renamed to the NAP at its

1969 Congress. This was when those who opposed the Turkish-Islamic synthesis were expelled and when the party left its anti-capitalistic tone and was considered more acceptable to the establishment due to its anti-communist stance (Cinar and Arikan

2002:26-27).

The party‟s electoral success began after becoming a coalition partner, along with the JP and the NSP, in the National Front government. The party received only 2.2 percent of the vote (as CKMP) in 1965; its election results increased to 3.3 percent in

1969, to 3.4 percent in 1973, and to 6.4 percent in 1977 (Cinar and Arikan 2002). In this government and later in the second National Front government, the party was able to

247 place their supporters into the all ranks of the bureaucracy. Police, teachers, and other public servant positions were distributed among pro-NAP and left-wing groups.

In the post-1983 era, the party showed a similar but more striking trend in elections. While it received only 2.9 percent of the vote in 1987, the tally increased to

4.1 percent in the 1989 local elections. The 1994 local elections provided the party with

8 percent of the votes and replicated its success in the 1995 parliamentary elections with

8.6 percent of the votes. In 1999, the party doubled its vote accumulation to 17.98 percent. Although the party received about 8 percent of the votes, and remained out of the parliament in the 2002 elections, the 2007 election brought the party into parliament with 14 percent of the votes.

Earlier studies suggested that the initial electoral base of the party consisted of less educated and rural voters. Its stronghold is Central Anatolia and some cities in East

Anatolia where urbanization is low. Surveys conducted in the 1990s gave some clues as to the profile of the typical party voter. One survey, conducted in the 1990s by A&G

Survey Research Company, compared the share of the votes of the NAP in Central

Anatolian cities. The party increased from 14 and 18 percent in Amasya and Erzurum, respectively, in 1994; its vote tally increased to 24.9 percent and 26.1 percent in 1999, respectively.

Other survey studies on the elections of the 1990s and 2000s showed that the social base of the party had become equal mix of urban and educated people. In particular, disproportionate numbers of new voters, most of whom are educated compared to previous generations, had become NAP supporters. This reduced the educational difference between the NAP and even the RPP, as their education level was

248 not statistically significantly different from that of the JDP or the RPP (Çarkoğlu and

Kalaycioglu 2007). The NAP supporters were driven by nationalism and to a lesser extent by religious values. In particular, the scarf debate in 1999 helped the party increase its appeal to conservative voters. The survey conducted before the headscarf incident took place in the aftermath of the 1999 election showed that while only 39.7 percent of MP voters and 76.8 percent of TPP voters supported the wearing of a head scarf in universities , this was 96.3 percent for the NAP was almost equivalent to the WP voters (99.4 percent). The party‟s position changed when it came to power as it sided with the establishment. This cost the vote of some conservatives in the 2002 election when the party could not surpass the 10 percent threshold for representation.

Justice and Development Party (JDP)

The 2002 election was shocking in many ways as a newly established JDP came to power by having the majority in the parliament. Some argued that the success of the

JDP was tied to a relatively low voter turnout in the 2002 election (Tepe 2007). It was expected that as turnout increased its vote share would decline. However, the party increased its share to 47 percent in the November 2007 election when turnout increased from 77 percent to 84 percent.50 In order to understand the electoral base of the JDP as well as others, we will discuss the findings of two surveys: The ESS 2 conducted in the aftermath of 2002 election and my original survey conducted in 2008.

50 It is also possible that this may be a valid explanation. For example, turnout by voting age population seems to stay the same. While voting age population increases in the country, it seems that a certain segment of population remains alienated.

249

The ESS 2 shows that the JDP received from conservative segment of Turkish society. For example, the survey presents an eleven category index of religiousness. The five most religious categories overwhelmingly voted for the JDP in the 2002 election, ranging from 60.8 % to 74 % within these categories. Again within these categories, the main opposition party (the RPP) ranged from 4.6% to 13%. In contrast, as expected, as religiosity declined, the vote share of the JDP decreased. Nevertheless, the JDP was able to get 10.5% of those who were not religious at all. The results were substantially similar if we considered attendance in religious services.

As for the education level, Table 5.8 shows that the JDP does better in all educational categories except for college degrees. Looking at secondary and lower categories, we realize that the JDP clearly shows that it is comprised of people with lower education. The JDP became a party of union members in the 2002 elections. More than half of the previous and current union members voted for this party, while this ranged from 13.6% to 25.9% for the RPP.

[Table 5.11 about here]

The post-2007 survey gives similar picture on the electoral base of the JDP with some notable changes. In this original survey, I asked the respondents which party they voted for in the last election and their current occupation. Table 5.11 is in line with other studies (Baslevent et al 2009; Kalaycioglu and Carkoglu 2007) which shows that the JDP appeals to unskilled workers, house workers and small business owners (shopkeepers) compared to skilled workers and medium business owners. However, the result shows that the JDP did better than any other political groups among all categories except for the

250 pensioners. This is noteworthy because compared to the 2002 election, the JDP lost most of its support from pensioners whereas the RPP gained more votes from pensioners. The interviews that I conducted in Social Security Administration and unions explain this vote loss of the JDP among pensioners. My interviews with bureaucrats also confirm that the

JDP government transferred more toward low income groups and disabled people through increased salaries or increasing their in kind benefits such as the health care.51

Some pensioners alternatively turned to the main opposition party, the RPP and the NAP.

Table 5.11 shows that there exists less of a difference in percentage between the

JDP and the RPP for public servants and medium scale business owners. Pensioners on the other hand have equal inclination toward these two parties.

To conclude, this section showed the highly unstable social bases of the political parties in a weakly institutionalized political party system like Turkey‟s. This section suggests that Turkish voters have a low party attachment. In addition, historical and survey data shows that the RPP is strong among public service sector, but in a declining trend. In addition, the RPP lost its appeal among Kurdish voters. As for the right-wing political parties, they appealed to low income groups. Their appeal to urban population increased over time especially after 1983. The post-1983 parties did not hesitate to transfer social assistance to lower income groups. As for the JDP, this party has gained votes across almost all social groups, with a lesser extent among high socioeconomic groups. By using social policies very effectively, this party continues to be strong among the lower income groups.

51 Interviews 14-17

251

Social Policy and Electoral Volatility Similar to Poland, Turkish social security schemes are highly hierarchical, privileging certain occupations over others. Public servants and workers in public sectors which constitutes one-third of labor force. This makes these groups particularly sensitive to social policies of the governments, and in turn, they become an important electorate to whom political parties appeal. Given that unions are mostly organized in public sectors,

(around 80% of public sector workers are represented by labor unions), they exercise significant leverage over social policy initiatives. In contrast, unionization is very low in the private sector, meaning that public sector workers disproportionately benefit from social spending.

The weakness of the political party system makes targeted spending more significant. In this highly unpredictable environment, targeted spending increases, while non-targeted social spending, namely education and health care, declines. This section presents evidence that changes in social policy in the highly volatile Turkish political party system tend to promote even more targeted spending.

As discussed earlier, each military intervention had a deleterious effect on the party system. In the aftermath of the third military intervention, the political party system in Turkey has become more volatile, displaying dramatic changes in results from election to election (Sayari 2002). In this political environment with high uncertainty, political parties extensively used social policy as part of their electoral campaigns for the 1989 local and 1991 national elections. Facing challenges from the WP and NAP as well as the TPP and the SDPP/RPP, the MP extensively used social policies to resist back the rise of these parties. The TPP-led government offered a generous pension system that had a lasting effect on national budget. However, before discussing this issue in depth, some

252 major developments that affected the development of social policy in the military government between 1980 and 1983 require some scrutiny.

The Military Government, 1980-1983: In the aftermath of the coup, the NSC

(National Security Council) was not interested in overhauling their old social policy and creating a new one. The government continued to follow the 24 January Decisions, which was a landmark decision in terms of liberalizing the national economy. The policies of the military government, such as applying to the provincial governors for permission of organizing a strike, made strikes almost impossible. Large-scale strikes were discouraged on the pretext that strikes should not make the national economy vulnerable. Unsurprisingly, as a result, only a handful of strikes occurred even in the aftermath of the transition to democracy by the late 1980s.

However, the military elites were not averse to using social policy. This era included two major changes in social policy.52 First, the government added independent agricultural workers to IIA (Bag-Kur) just before the national election in 1983 (Karikoca

2002). This was intended to give some credit to the National Democratic Party (NDP), the military‟s favorite party whose prominent members had also served in the governments of 1980-1983. The success of the NDP in rural areas compared to urban areas can be in part attributed to the incorporation of agricultural workers to the Bag-Kur.

Second, soon after the military coup, the NSC revised a major social policy, which reduced the premium burden on public servants and increased their pensions to the extent

52 In addition, the NSC used social policy to remove some politicized bureaucrats from their posts. It encouraged bureaucrats to take early retirement or be terminated.

253 that their pensions exceeded their current incomes (Sabah 2007). This created persistent inequality between pensioners and the actively employed public segment.53

Social Policy in the Post-1983 Era Significant changes in social policy spending occurred in the post-1983 era. The increase in spending was remarkable in the 1990s when coalition governments became the norm. This high volatility environment created a very uncertain situation for political parties as the exit of parties from parliament became possible from one election to another. As a result, while the (seat) volatility score (Pedersen index) was around 14 in

Spain, it was around 43 in Turkey (see Table 5.13). As a result of a highly volatile environment, social spending in the country increased within a period of 15 years from

8.6 percent of GDP in 1984 to 19.7 percent of GDP in 1999. This required the state to transfer significant portions of its budget and 5 percent of its GDP to three social security organizations.

[Table 5.12 about here]

[Table 5.13 about here]

A closer examination of this period may explain this increase. As discussed earlier, the agricultural and organized labor sectors were excluded from the MP‟s societal alliance while “large segments of urban dwellers, the middle classes, and export-oriented

53 Saim Uslu of Hak-Is stated that this inequality comes from the lack of the will of political parties and the military has no responsibility. Resul Kurt of Social Security Administration agrees with him and adds that its burden on the budget is small.

254 business became strong supporters of Ozal (the MP leader, 1983-1989)” (Tunc 2005:65).

The MP government was concerned with a social security system, in particular the growing expenditures of pensions as a result of the 1965 and 1977 early retirement bills.

The 1985 legislation made major changes that upset the beneficiaries of the overburdened social security system by mandating retirement age of 55 for women and 60 for men.

This alienated the supporters of the party among the civil service, public and private sector workers. In response, the opposition parties, the SDPP and the TPP, ran electoral campaigns on this issue, leading the latter to promise to make retirement easy.

In order to lessen the burden of economic transition, the MP resorted to other social policies such as using special funds to reduce poverty. In 1986 the MP established the Solidarity Fund to assist those who were in need. This fund had branches across the country, and was administered by the highest state officials and prominent persons of towns. It provided assistance for health care, food, clothing, and some cash to the poor.

However, local party branches and other types of political influence played a significant role in its distribution to the extent that only 6 percent of the poor could receive payments

(Cankal 2006).

Starting in 1986, the MP government followed three distinct policies in order to stem the loss of votes in the election (Waterbury 1993:254-259). First, it increased pensions and wages/salaries significantly, increased subsidies to rural areas just before the election. However, as soon as the election is over, the government increased prices of goods produced at State-owned enterprises (SES). However, raising the prices of the goods (of SES) caused high inflation, in a way helped to reduce its burden on the budget.

This created more harm than good as high inflation alienated the targeted middle class.

255

Second, in reaction to the growing power of unions, the MP government created

“contract personnel” instead of “permanent public employees” (Waterbury 1993). As a result, while 5,000 contract personnel worked in the public sector in 1985, that number increased to 300,000 in 1989 (Waterbury 1993, p.258). Third, the MP governments added significant discretionary funds to be used to block or neutralize organized labor, white-collar employees, and to create/keep their electoral constituency‟s happy

(Waterbury 1992, p.45). The Defense Industry Support Fund, the Mass Housing and

Public Participation Support Fund, The Mass Housing and Public Participation Fund, the

Municipalities Fund, the Resource Utilization Support Fund, the Social Solidarity Fund, etc. were controlled by the Prime Minister without the approval of the Parliament

(Waterbury 1993, p. 199). The Mass Housing and Public Participation Fund (MHPPF)‟s goal was to finance public housing projects from the resources coming from privatization. According to one account, these funds comprised of 42 percent of the equivalent of the total tax revenues in 1986, about 6.2% of GDP (Oyan 1987; Waterbury

1993). Through these funds, the government intended to curb the negative effects of austerity programs, which kept wages low and increased unemployment (Sayari 1996).

In the face of the forthcoming elections, the MP leader, Ozal aimed to appeal to middle/upper income groups by offering a new retirement plan. Growing disparities between public servants and workers in terms of their pensions led Ozal to introduce a special pension for workers. According to this plan, those who paid high premiums would be entitled to receive higher wages.54 One year after the legislation passed, the

Constitution Court invalidated the bill. In summary, the Court‟s decision prevented the

MP‟s plan to appeal to the middle/upper working class.

54 http://arsiv.ntvmsnbc.com/news/443681.asp

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The nine percent loss in the 1987 elections as well as the 1989 municipal defeat led the MP to pay more attention to social policy as well as to economic concerns of the work force. The relationship between the MP government and Turk-Is, the largest union, known to be on friendly terms with all governments collapsed in 1989. In this era, other unions, disbanded during the military rule, were established again. Turk-Is increased its membership to 1.4 million; Hak-Is claimed to have 150,000 (Waterbury 1993).

Realizing that urban votes, civil servants, and public service sectors were essential for a minimum winning coalition, Suleyman Demirel campaigned against a new social security law that increased the retirement age to 60 for men and 55 for woman, introduced by the

MP government. As leader of the TPP in 1991, Demirel ran an electoral campaign appealing to organized groups and embracing the motto of the unions. He promised that he would not allow people “to retire in the grave.” He hoped to channel the urban middle class voters from the MP into the TPP. As the 1991 election results showed, the party garnered significant votes from urban areas, compared to the 1989 election and formed a coalition government with the left-wing SDPP.

The TPP-SDPP coalition government in 1992 introduced the early retirement law that made retirement possible at the age of 38 for women and 40 for men. According to the law, women who worked for 20 years and men for 25 years could receive pensions without an age limit. And women and men who worked 19.1 years could receive pensions for 35 and 28 years, respectively. In addition, the Demirel government did not forget its rural constituencies, farmers and small business owners. He gave them the same opportunity to retire early by requiring them to pay their past premiums. By paying their past premium that has eroded as a result of high inflation, many easily became

257 entitled to receive pensions55 As Table 5.14 indicates, this resulted in 2 million newly retired people entering the social security systems.

[Table 5.14 about here]

In summary, he offered a lucrative deal for social groups that aimed to create a multi-class social base. As Table 5.15 indicates that this put burden on the budget as transfers from the budget to Social Insurance Administration (SIA) started in 1993. As a result, transfers to social funds and three social security administrations, PoF (Emekli

Sandigi-Public Officials), SIA, and IIP (Bagkur), significantly increased in this era.

Table 5.16 shows that transfers from the budget increased to 2.7% of GDP in 1992, and

4.1% in 1994 along with increased payments of interest on domestic economic actors (see

Table 5.15 and 16).

Public servants and workers in the private sectors, primarily in urban areas, have benefited from this bill. The appeal to urban voters has been crucial as a result of increasing urbanization over years, from 43 percent in 1980, 53 percent in 1990, and 65 percent in 1997 (Eligur 2006). The competition over public servants and public service workers between the TPP and its coalition partner, the SDPP, intended to draw urban voters from their ideologically proximate parties. In particular, one-third of the labor force, public servants, were the target. Another group that benefited from the TPP-SHP coalition government was organized labor. They not only benefited from the early retirement law, but also benefited from wage increases.

55 In the very short run, this would provide new revenues money to the Treasury. However, it proved to be a disaster for the economy.

258

[Table 5.15 about here]

[Table 5.16 about here]

In addition, the TPP-SDPP government provided health care for the poor by providing them a “Green Card.” Those who were in need applied to their local administrators in their neighborhoods that were supposedly more knowledgeable regarding their economic situations. If they received the card, they benefit from public and private hospitals, free of charge (Bugra 2008:190). However, the local party officials were active in determining who would be eligible to receive a „Green Card‟.56 As a result, those who were financially more fortunate and had connections to the parties, and were able to benefit from these programs. The major newspapers complained that even

Mercedes owners had access to the Green Card.57 While the program increased the budget and work hours in hospitals, the share of those that truly needed to receive the

Green Card, the less financially able, remained small. Recent reports on the cancellation of millions of Green Card applicants suggest that significant misuses of the Green Card program took place in the past.

These generous social policies that intended the poor but mostly benefited the nonpoor as a result of partisan politics had a lasting impact on the Turkish economy and the political party system. Increasing public expenditures and a growing budget deficit in

1992 and 1993 led to a major economic crisis in 1994, which shrank the middle class and increased poverty in the country. As the SDPP and the TPP were discredited in the eyes of their constituencies, the WP was signaling a move to the center and received strong

56 Interview 10 is with a local government official in charge of the Green Card program. This official stated that although local officials report whether the person in question deserves a Green Card and any other kind of helps, their report can be dismissed. The political parties, through the mayor or local governor could exert their influence significantly. 57 http://www.tumgazeteler.com/?a=1729581

259 endorsement from its voters. The short-term coalition government of the MP-TPP, supported by the DLP in the parliament, was quick to increase price supports for agricultural products, which were higher than world market prices.

[Table 5.17 about here]

Table 5.17 shows collective agreements (labor contracts) that have significantly increased since 1996. The new coalition government of the WP-TPP signed a collective agreement with major unions in 1996, doubled wages of public sector employees, and increased pensions for citizens under all three social security institutions: IIP, PoF, and

SII. More than five-hundred thousand people benefited from the raise in pensions and from improved social rights, such as child benefits, etc. However, aiming to appeal to civil servants and seeing the surge in right-wing ideology among the working class, the

WP did not forget raised compensation for public employees under the POF and workers under the SII. Additionally, these two parties also appealed to peasants, urban workers, and other groups whose pensions were smaller than those of public employees.

Nevertheless, the former groups became major beneficiaries of these social policies. As a result of the generosity of the WP-TPP coalition government, social transfers increased from 4.5 percent in 1995 to 5.8 percent in 1996 and to 7.5 percent in 1997.

After the RP-TPP government was ousted, the new government, the MP-DLP coalition government (minority government) had to inject 8 billion dollars into the treasury to compensate for increases in wages and social policies. Growing budget deficits spurred discussions on social welfare reform policy. However, no governing party dared to further reform the system. Such an action would alienate voters, especially

260 before the elections. On the contrary, just before the election, the government increased public wages as well pensions and used two state banks (Halk Bankasi and Ziraat

Bankasi) to provide low interest credit to small farmers and small business owners.

The 1999 elections brought the MP-NAP-DLP coalition to power58, under which the IMF Stability Program changed the early retirement law, increasing the retirement age to 58 for women and 60 for men. On the other hand, the Constitutional Court annulled some clauses of the legislation concerning public officials, which delayed the implementation of changes in retirement age. In this new bill, one positive development was the introduction of an unemployment benefit. However, this instigated large strikes and criticism from all segments of society. In addition, the new reform plans, including reducing the number of civil servants by 15 percent and overhauling price supports for agricultural goods, alienated voters from the governing parties. Additionally, the 2001 economic crisis which devalued Turkish currency about 300 percent finally alienated the voters of all social segments from the coalition of governing parties. This eliminated

58 In this era, as a reaction to economic and political instability, voters moved their allegiances from one party to another mostly within the same ideological camp. Compared to the 1995 and 1999 elections, 20 percent of RPP supporters switched their votes to the DLP, while only 6 percent of DLP supporters turned to the RPP. The WP lost about 15 percent of its vote to the nationalist party, the NAP. The MP and the TPP, central-right parties also lost 23 and 14 percent of their votes to the DLP, respectively. In other words, not only is intra-volatility obvious, but also inter-volatility in the country destabilized the country‟s political party system in 1999 election. The RPP remained out of parliament; the DLP and the NAP became the largest parties in the parliament; and the latter was considered a marginal party.

261 them from parliament when they lost 40 percent of their support (See Election Results,

Table 5.2).

Recall that the 2002 election produced the collapse of the Turkish political party system with the highest volatility scores (Pedersen vote index=51 and seat index=100) in its history. As the three coalition parties lost all their seats in the parliament, a newly established Islamic party, the JDP, came to power. The JDP government designed social policies that favored low income civil servants, low income retired people, and other members of the traditional base of right-wing parties. It increased the pensions for retired farmers, retired agriculture workers, and those with disabilities.

However, these politically motivated, generous policies forced the government to reform social welfare programs. According to a new law passed in 2006, those who retired after January 1, 2007 had to have attained the age of 58 for women and 60 for men, and this age of retirement would gradually increase to 65 after the year of 2036

(Apan 2008:282). According to this plan, insurance premiums for public servants and workers will be incrementally increased to 7200 days in 20 years.59

In summary, we can claim that social policy issues became significant parts of electoral campaigns in the post-1987 elections. The trend toward increasing social policy spending accelerated in the 1990s when coalition governments dominated the political sphere. The unstable and short-term coalition governments in the second half of the

1990s caused high use of targeted spending as governing parties relied more on social policy to appeal to their electorates. In addition, targeted spending increased as parties courted the same social groups because the public service sectors/officials and the urban

59 The government changed some clauses regarding state employees because of the Constitutional Court had invalidated some clauses regarding state employees in 1999.

262 middle class constituted the major organized electorate. They became the major beneficiaries of social policies of the governments. As a result of targeted spending, overall social spending in Turkey increased in a period of 15 years from 8.6 percent of

GDP in 1984 to 19.7 percent of GDP in 1999.

In the aftermath of its victory, the JDP government transferred state resources toward low-middle income groups. According to a high-ranking bureaucrat in the

Ministry of Labor and Social Security Minister, the JDP government wanted to increase competitiveness of Turkish business in the global market. This was to also suggest that they took a pro-business position regarding social security programs, but at the same time pursued the policies that supported social groups that needed state support. The JDP continued to pursue its pro-poor policies and showed less inclination toward reducing social programs during its first term. On the contrary, as the Minister of Labor and Social

Security Minister, Omer Dincer, stated during our interview, new reform has aimed to decrease pension differences among public servants, offering a higher raise for those with lower ones.60 According to Dincer, the JDP intended to get rid of injustices across pensioners, but the Constitutional Court lent a decision to favor public servants, which kept their privileged status.

However, the JDP governments increased pensions for similar groups and incorporated old-age more as well as offered new programs for the disabled. The number of pensioners from 2001 to 2004 has increased by 10 percent in four years (TUIK 2008).

The biggest increases in this era are due to new pensioners to the Social Insurance

Administration of the workers and the IIAs of private farmers and low income groups.

60 The interviews with the Minister and a high-ranking bureaucrat took place on October 2, 2009.

263

Similarly special programs and increasing non-contributory pensions for the disabled have been funded from the state resources. The bureaucrats I interviewed emphasized the programs toward the disabled, which have siphoned their important portion of the budget.

They also noted that especially under the JDP, its policies toward health care dramatically increased the budget as the state allowed the social security beneficiaries to benefit from private hospitals by paying a small amount of their bills. This, according to the interviews, led to the misuse of social security opportunities as private hospitals started to overcharge and citizens overused it such as visiting the doctors for minor things. In addition, spending on drugs reached heights to the extent that it absorbed around 10 billion dollars of the social security budget. In the second term, with Dincer as the

Minister, the priority of the JDP government was to reduce spending for drugs. As a result of a growing financial burden, the government was forced to accelerate the reform on welfare programs. The government completed social security and welfare reform, which was finalized in 2008 just after the 2007 election. Nevertheless, its earlier populist policies contributed to the increased vote to the JDP in the 2007 election, making the party in charge remain one more term with 47 percent of votes. After its victory in the

2007 election, the JDP increased the retirement age and combined all three social security organizations under one organization, easily identified as the Social Security Institution.

In conclusion, this section showed that the post-1983 era witnessed increasing targeted social spending as a result of a highly unstable political party system. The single party-government was replaced, first, by coalition governments of two parties and then of three parties. There was great difficulty in forming governments, but they were easy to break up. In particular, starting from the 1994 election, we see frequent changes in

264 governing parties. In this era, the right-wing parties extensively used pensions, social aid wages, and other social programs. This impeded the reform of the system in the 1990s.

Although the reform attempts were made, they became modified. The early 2000 reforms were done as so that no choice was left for the governing parties since increasing social security and welfare expenditures widened the budget deficit and made it difficult even to pay public sector wages/ salaries. Moreover, the IMF made reforming social security systems a condition for assistance. Nevertheless, the reform was incomplete as coalition governments decided for early elections in 2002.

The next section discusses the Spanish situation. First, it discusses political and economic backgrounds and then follows a similar order by discussing voter turnout, linkage between parties and social groups, and the social policies of Spanish political parties.

Spain Linz and Stepan (1996:108) consider Spain “the paradigmatic case of the study of democratic consolidation as much as the Weimar Republic became paradigmatic for the study of democratic breakdown.” After four-decades of stable authoritarianism, the process toward the consolidation of democracy in Spain was not easy and faced a number of challenges. Nevertheless, the political elites led by Adolfo Suarez, himself a

Franquist, overcame resistance of the previous regime‟s loyalists as well as incorporated the socialist and communist parties into the democratic process. Finally, the defeat of an attempted military coup in 1981 put an end towards skepticism about the consolidation of

Spanish democracy.

265

While there are always generic similarities between democratization processes, the Spanish case differs markedly from some of the other cases discussed in this study, especially the postcommunist ones. First of all, the Spanish transition to democracy was not dual in nature. In other words, the dual sequence of political and economic liberalization, exemplified by Poland and the Czech Republic, did not take place in Spain.

Although some economic reforms were initiated in the early phase of democracy under the UCD government, the political reforms of 1975-1982 was so predominant that it strongly contrasts with the two Central European cases.

In the early phase of transition, the secret and open negotiation with the Franquist and opposition elites paved the way for the passage of Law for Political Reform in

November 1976 (still under the authoritarian regime) in the Parliament. The Law of

Political Reform established procedures for political reforms and the new Constitution.

In addition, even the economic agreements of the Moncloa Pacts of 197761 had the political intention of creating a political environment in which opposing groups could more easily accept a new regime.

1931 was a historic year for Spain since it was the year that the Second Republic was declared. When the Republicans/Socialists came to power as a result of the 1931 elections, they wanted to modernize Spain through a series of social and political reforms, patterned on Turkish-type secularism and French laicite. The republican government passed legislation that stripped the Church‟s state aid, aimed to modernize education, and made the state secular by officially declaring separation of religion and the state. However, the rest of society did not share this vision. The Church, the

61 The Monclea Pact is designed by Suarez, the then prime minister, and the major figure in the transition era. The aim of this pact is to soothe concerns of major groups so that transition to democracy can be achieved.

266 bourgeoisie, and rural people opposed the leftist vision. The conservatives, organized under the Confederatión Espanola de Derechas Autónomas (the CEDA), won the 1934 election. They revoked previous laicite policies and enacted legislation that emphasized the Catholic nature of the state. The two visions of Spain continued to clash when the

Communists/Socialists and other groups united under the umbrella of the Popular Front, then won the 1936 election against the National Front forming a government. They again repealed the previous government‟s policies and reintroduced their assertive secular agenda.

As the political elites were divided, Spanish society was politically paralyzed as well. Churches were burned; assassinations of prominent people from either camp became common. This resulted in a civil war when the military, with the support of conservative groups, revolted against the Republican government in 1936. The fight between the Republicans and Nationalist lasted three years. Around six hundred thousand people (one million according to Franco) from both sides were killed. With the support of the military, as well as from fascist governments of Germany and Italy,

Franco‟s army was victorious over the Republicans in 1939. In the aftermath of the Civil

War, Franco‟s regime employed repressive tactics to suppress the remaining insurgent groups, mostly communists.

Pre-Franco Era Social Policy Before discussing the Franco regime, a brief explanation of the social policy of the pre-Franco era is valuable. Institutionally, the legal framework for social policy has its roots in the 1800s. In particular, the 1812 liberal constitution was the first legal document that articulated rights for public education, health, and social welfare. Later

267 legislation of 1822 required local governing bodies to be responsible for hospitals, orphans, and maternity assistance (Mangen 2001). Local societies, namely Montepios, provided aid to the aged, widows, and invalids, as well as incorporated older forms of assistance for sickness and death. Democratic Spain in 1975 inherited over 4000 of these societies (Mangen 2001). However, unlike northern Europe, the Montepios did not have a sufficient presence to exercise a decisive influence “when the debate on the organization of Spanish social insurance was initiated” (Mangen 2001:16). According to the study of the Interior Ministry in 1909, religious congregations were responsible for most welfare institutions (two-thirds) and provided 90 percent of the personnel for lay, public welfare institutions (Alvarez 1985; Mangen 2001). Finally, like other Southern European countries, the family played a significant role as welfare a agency, which continues to present day (Arriba and Moreno 2005).

Authoritarian Spain Franco revised history to give more legitimacy to his rule. According to the

Franquist revisionist history account, the Civil War was inevitable because Spanish people were not ready for democracy. The country had different ethnic groups and its

“perverse individualism” and other cultural factors inhibited democracy, making peace under Franco essential for bringing development and making Spain a major actor in international politics.

The Franco regime pursued a developmental economic policy, after Franco eliminated the remnants of the oppositional groups especially in the late 1950s. The take- off of the Spanish economy was not easy after the devastating civil war. Spain‟s national

268 income was only able to reach to the level of the pre-civil war year in the early 1950s (

Mangen 2001). As budget deficits and inflation seemed to be uncontrollable in the

1950s, the technocrats of the regime pushed forward an economic stabilization plan that required significant liberalization of economy (Alexander 2002). In summary, the economic reforms of the technocrat cabinet in 1959 created an economic growth that exceeded the level of other Southern European countries, including Italy, Greece, and

Portugal as they approached the 1970s.

In addition to economic liberalization, Spain underwent some political liberalization in the 1960s (Linz 1973) in which the regime loosened its grip over socialists and communists, albeit with strict surveillance. The limited political liberalism allowed a gradual increase in discourse, critical of authoritarian regime, and a consequent increase in oppositional groups (Linz 1970; 1973). However, compared to economic liberalism, political liberalization was less profound.

As Spain began to resemble its capitalist neighbors in Europe, social change was also inevitable. Industrialization created social mobility and Spain saw a mass emigration from rural to urban areas. For example, over 1.5 million people in Andalusia moved to cities between 1951 and 1975 (Alexander 2002). Table 5.18 demonstrates the profound change in the Spanish economy from the 1950s to present. The share of agricultural workers in the labor force dramatically dropped to 22 percent in 1975 from

46 percent in 1930. On the other hand, the service sector increased to 40 percent in 1975.

[Table 5.18 about here]

269

The implications of profound socioeconomic change translated into contentious politics on Spanish streets. The underground communist and socialist unions were better organized and were able to strike more frequently as a result of an increasingly populous and politicized work-force dissatisfied with its wellbeing. The final years of Franco‟s regime witnessed growing protests by students and unions. Especially in the last year before Franco‟s death, a significant increase in the number of strikes became a concern to the regime‟s loyalists. The number of strikes and workers participating in them increased from 811 to 441,000 in 1973 and then from 1,193 to 625,000 in 1974 (Bermeo

1994:605).

In addition to demonstrations by students and workers, Basque separatist political violence intensified, which disconcerted regime insiders regarding the future of the government. The contention between hardliners and those more liberal lingered in the aftermath of Franco‟s death in 1975.

Social Policy under Franco The economic progress under Franco did not translate into a well-developed social policy with expansive coverage. The level of spending on education, health, and other social policy issues remained comparable to the levels of developing countries. In particular, an important segment of Spaniards were not able to access public health resources (Kennedy 2001; Ercarnacion 2008). Nevertheless, as the labor force increased, social protection in terms of the percentage of GDP reached 11.7 percent in 1975, up from 4 percent in 1960 (see Table 5.19).

270

[Table 5.19 about here]

Democratic Spain With its transition to democracy in 1975, Spain had a fully capitalist economy with a relatively strong middle class (Guillen and Alvarez 2004). As Table 5.20 shows, large segments of the population were comprised of the middle and working classes, which shows that the Spanish economy almost converged with developed economies of

Europe. Between 1954 and 1975, GDP per capita income increased eleven (11) times, from $200 to $2,200 (Maravall 1982). With a lower rate of poverty and substantial size of the middle class, Spain completed its transition to democracy and consolidated its democracy relatively in a short period of time.

[Table 5.20 about here]

Unlike Polish and Czech democratization, Spanish transition was an elite-led transition in which regime insiders initiated democratization and negotiated with the opposition groups. The power elite and opposition “studiously avoided anything that could potentially delay, encumber, or inconvenience that path toward a consolidated democracy” (Ercarnacion 2008:2). The individuals representing the Franco regime and the democratic opposition secretly met, away from the public eye. They crafted a transition or as some called it, “transition by transaction, political crafting of democratic consolidation” and “the very model of the modern elites‟ settlement” or “pacted democracy” (Linz and Stepan 1989; Gunther 1992; Ercarnacion 2001).

Following the death of General Franco on November 20, 1975, politics continued with no significant changes in the first six months (Gunther 2004). The newly appointed

271 president of the government, Carlos Arias Navarro, resisted any proposal to reform the system. The Spanish parliament, known as the Cortes, was dominated by (Franco) loyalists. Under such circumstances, reforms seemed unlikely. The picture significantly changed after King Carlos appointed Adolfo Suarez as prime minister. He pursued the corporatist Cortes to abolish itself and approve, in November 1976, „The Law for

Political Reform,‟ which established procedures for political reforms to be undertaken by a democratically elected Cortes (Gunther 1992).

As opposed to Navorro, Suarez was more intensively engaged with opposition groups, and established informal and formal consultation groups. On the one hand, he was trying to persuade the stubborn Franquist elites to accept reform. On the other hand, he was trying to accommodate opposition groups, including the communists and ethnic nationalists, some of whom engaged in political violence.

The increasing number of strikes and other forms of demonstrations helped

Suarez as well. Mass mobilization and frequent violence from 1975 to 1976 provided him with leverage to convince the hardliners of the necessity of reforms. Similarly, he warned the opposition that unless they relaxed their uncompromising position, the hardliners would halt the reformation process. While pursuing these reforms, he also tried to create a center-right party that would appeal to the upper-middle and middle class voters, especially those with religious backgrounds. In the spring of 1977, he established the Union of Democratic Center (UCD). With a strong showing for reform in the 1977 election that produced an assembly with democratic legitimacy, he succeeded the first step of institutionalizing of a new democratic regime (Gunther 2004).

272

The Suarez government introduced a series of economic reforms to stimulate the economy. However, economic reforms adversely affected the labor market, causing job losses in diverse segments of the economy. In order to prevent the mobilization of labor unions and other organized groups, the government initiated a set of negotiations that led to the Moncloa Pact of 1977 between trade unions, the newly legalized political parties, and the Suarez government. According to an ex-deputy of the PSOE and participant of the Moncloa Pact, Francisco Arnau Navarro, the PSOE was able to bring concerns regarding social policy to the transition government.62 A recent study summarized the core of the pact: “The consensus achieved in the negotiation process rested on solid ground as trade unions and left-wing parties waived wage increases in exchange for government commitments to undertake structural economic reforms. Various processes of industrial rationalization and economic deregulation were initiated to permit a greater play of market forces” (Ayala, Martinez and Ruiz-Huerta 2000:210).

The Moncloa Pact included a variety of reforms, including the right to establish labor union representation in companies. The return of property expropriated in the aftermath of the civil war, and increased public investment, but at the same the pact included items that strictly controlled social security budgets, tax reforms, and imposed strict monetary policies (Maravall 1982).

Contrary to expectations as Bermeo (1994, p.604) noted, although the Moncloa

Pact promised to reduce state intervention in industry, the size of the public sector increased and inefficient public enterprises continued to receive financial support.

Maintenance of jobs and protection of the most depressed sectors of the economy were

62 The interview took place in Geneva during the 2009 ILO conference.

273 provided. The UCD leader, Leopoldo Calvo Sotelo, clearly stated this intention, “our primary objective is to prevent an increase in unemployment” (Linde 1990, 47).

In the aftermath of transition, Spain entered a new era with more economic problems, rather than political ones.63 As economic reforms ensued, economic restructuring cost many jobs in different sectors. High level of unemployment remained the biggest problem for the first governments. However, positive developments also amassed. Inflation decreased from 29 percent in 1977 to 16 percent in 1978; the balance of payments recovered and exports increased by 29 percent (Maravall 1982:121). The expectation was that after the initial elections economic transition would alienate a significant portion of society, leading to decreased voter turnout. When the PSOE came to power in 1982, it sent two critical signals to domestic and international audiences through its position regarding the European Union (the EU) and North Atlantic Treaty

Organization (the NATO). It introduced economic restructuring plans, including reforms needed for (EU) membership. The PSOE took the NATO membership to referendum, which removed the pressure of the PSOE‟s campaign promise. Regional devolution had been an evolving issue (discussed in the next sections) with which the PSOE, and later the Partido Popular (the PP), had to handle.

As we see in this section, Spanish political history revolves around two major parties, the PSOE and the PP. These two parties dominate the political scene; however, they may need to form a coalition government with regional parties. Although Spain

63 Linz, Stepan, and Gunther (1995) even noted that the Spanish democracy had been consolidated before the 1981 military coup on October 25, 1979 when the Catalan and

Basque referenda were held.

274 experienced a long term high unemployment problem, this did not create unstable political or economic problems. The Spanish transition also showed this stability by the level of voter turnout, linkage between parties and social groups, as well as targeted spending, as will be discussed below.

Voter Turnout Our theory expects that the poor are less likely to vote in Spain. We found that voter turnout does not significantly vary, with significant percentage of low income and education groups. The PSOE was successful in garnering these segments of society. In

Spain, we see less difference between the have and the have-not in terms of voting, mostly conditional upon the strength of the PSOE in a particular election.

At the height of Spain‟s political drama, that is the founding election in 1977, the optimism of Spanish citizens led to a high turnout of seventy-nine percent (O‟Donnell and Schmitter 1986). Unlike other countries in this study, voter turnout has been relatively stable over the years in Spain. This is a good indication that the differential rate between participation of the poor and the well-off was insignificant in electoral outcomes in Spain. Comparing the European Social Survey (ESS) of 2002 and 2004 shows that while the difference was significant for the 2000 elections; it disappeared for the 2004 elections when the PSOE won the election. This may suggest that the high turnout favored the PSOE, which was more linked to lower-income groups.

[Table 5.21 about here]

275

Table 5.21 presents voter turnout in Spain. The voter turnout in the 1977 election was 77 percent and this was surpassed in the 1982 election when the socialist party,

PSOE came to power; the voter turnout, remarkably, reached 79.8 percent. The high voter turnout in the 1982 election came as a reaction to the attempted military coup which had a strong mobilizing affect on pro-democratic groups, especially PSOE sympathizers. The PSOE was able to utilize its organizational strength in urban and rural areas through its local branches and unions.

The 1996 election brought defeat to the PSOE. Corruption scandals and media exposure of the secret establishment of death squads targeting the ETA members weakened the strength of the party. During this election, with the hope of reducing the overall majority in the parliament, the PSOE pursued a policy that aimed to stigmatize the PP as an unreformed, Franquist party and emphasized the economic gains and the

PSOE‟s role in joining the EU. On the other hand, the PP appealed to elderly voters by

“defending pensions” and to the under-30 voters by “promising to reduce the term of military service from nine to six months” (Gillespie 1989:428). The disillusioned PSOE voters casted blank votes; 54,000 voters more switched to the PP (Gillespie 1989 ).

Nevertheless, the PSOE lost the election by a small margin. As for the 2000 election, thanks to the PP‟s economic policies that reduced unemployment rate significantly, the margin increased.

In the 2004 election, the PP government‟s mishandling of the Madrid bombing and its attempt to blame it on the ETA mobilized absentees and new voters to vote largely for the PSOE. Bali (2007:669) confirmed the widely held assessment that the Madrid

276 bombing mobilized citizens, who were less likely to participate in politics, and voters from the center and left.

Some empirical findings corroborate the argument that turnout helps the PSOE.

Gunther‟s (2004:218-219) analysis from survey data of the 1977 election showed that the left parties, in particular the communist party, the PCE and the socialist party, the PSOE, were more successful in mobilizing voting from previous absentees. While 13 percent voted for the PCE and 9 percent voted for the PSOE while mobilized, this had been 5 and

8 percent for the UCD and AP, respectively. The difference in mobilization was more striking in the 1982 election. In this election, 20 percent of the mobilized electorate voted for the PCE and the PSOE in total only 8 percent voted for UCD and AP in that election.

Social class and religiosity were significant factors for explaining voter behavior.

Those who were of low socioeconomic class or working class were supporters of the left parties in the early elections. The middle class and professionals constituted the core of the conservative parties, the AP/PP. However, the 1990s election witnessed changes in voting behavior among electorates. Increasing social modernization and the attempt to become “catch-all parties” obscured the affect of social class and religiosity on voter behavior. In particular, these factors were less important for those who voted for the

PSOE or the PP. While in 1982 social class and religiosity explained 49 percent of the variance in voting behavior, this was reduced to 19.8 percent in the 1993 election

(Gunther 2004:271).

277

Political Parties, Social Policy and Electoral Volatility The linkage between social groups and political parties will be discussed in the

Spanish context. As we see above, the Spanish party system is stable and we expect less change in voter preferences across elections, unlike the Turkish case. Two major parties dominate the political scene in Spain and their electoral bases have been relatively stable.

Nevertheless, with the rise of the middle class, we see the parties compete for their votes.

If the theory is correct, we expect that stable political party institutionalization reduces incentives for the use of social policies by political parties. Thus, we do not expect a significant increase of targeted spending toward certain social groups in Spain.

Political Parties and Their Constituencies Spanish elections demonstrated relatively high stability in the linkage between voters and political parties. As Table 5.22 suggests, the Spanish political party system revolves around the conservative and leftist parties. The leftist parties are the PSOE and the PCE/IU and the Conservative parties are the UCD/AP/PP. In addition to the major leftist party, the PSOE, the communist party, the PCE (renamed as the IU Izquierda

Unida-The United Left), were able to hold seats in all the post-1977 parliaments. Two major unions (national trade union organizations), Union General de Trabajadores (The

General Union of Workers or UGT) and Comisiones Obreras (The Workers‟

Commissions or CC.OO), have had direct and indirect links to these two major left parties. Moreover, as Table 5.23 suggests, while working class and lower middle class among younger cohorts voted for the left-wing parties, the same groups among older cohorts voted for the right-wing parties, the UCD and AP.

278

[Table 5.22 about here]

[Table 5.23 about here]

Spanish political parties have historic roots dating from the Second Republic.

Maravall (1982) uncovered a strong correlation between voting patterns of the Second

Republic and the first elections in the post-Franco era. That study found that those provinces (total 52) that voted for the Republican camp, after four decades, have continued to vote for the same political camp. As Table 5.24 shows, the correlations remains high with the 1931 election (r = 0.7) or the 1936 election (r = 0.61).

[Table 5.24 about here]

Next we will analyze the electoral bases of Spanish political parties in more detail. The right-wing political parties and then the left parties will be discussed.

The UCD The UCD was a coalition of fourteen smaller groups organized by party notables with fairly diverse ideologies (Bermeo 1994:606). The ministers, affiliated with the

Franco regime held significant autonomy that created frequent clashes of interest among cabinet members. This caused instability in the cabinet as Prime Minister Suarez had to replace some ministers, including the Labor Minister, four times in four years (Bermeo

1994).

Nevertheless, this loose coalition within the UCD was able to win two elections in

1977 and 1979. The PSOE and PCE were not convincing for center votes; whether or not they aspired to accept the rules of democratic game, these votes went to the UCD. The

UCD received significant votes, including those from the center/the left of center, and won these two elections. In the 1979 election the UCD was successful in garnering votes

279 from unskilled agricultural workers as well as its core groups: small business, retailers, and churchgoers. The UCD received 46 percent of the votes from them. The UCD only gathered 21 percent of votes from skilled nonagricultural workers (Gunther et al.

1986:194). Another study found that more than half of the business elites, chief executives, and association leaders supported the UCD in the 1977 and 1979 elections.

Meanwhile the support for the PSOE and PCE among these groups, in total, was around

3-4 percent (Martinez 1993).

Yet growing disputes among notables of different factions in the party, mishandling of divorce law, and other issues weakened the party to the extent that the

UCD faced the most devastating electoral defeat in Western European political party history. The party seat decreased from 168 to 12 in the 1982 election. The PSOE increased its vote share from 31 percent in 1979 to 48 percent in 1982; this almost doubled its share of the parliament from 121 to 202. The communist PCE lost most of its seats, drastically reducing them from 23 to 4. As for the AP, the party showed a spectacular success, increasing its vote share from 6 percent to 27 percent (Gunther et al

2004).

The Popular Party (AP/ PP) Small-business owners and retailers had been supporters of the right wing parties, the UCD and the AP, in the first two elections. In the 1977 and 1979 elections, around

20 to 25 percent of the business elites, chief executives, and business association leaders supported the AP (Martinez 1993). The retailers expressed their preference for conservative parties with 28 percent consistently voting for the right; 60 percent voted for the center-right and right parties (the UCD/AP/PP) (Alexander 2002:174).

280

In 1977 and 1979 elections, the predecessor of the PP, the AP, experienced two devastating election results that shook the party leadership and that led to the reformulation of the party and its image. During this period, moderate centrist voters in society saw the AP as a threat to a new democratic order as the party included some hard- core Franquists to expand their electoral success. However, Spaniards leaning toward the center saw the party as a legacy of the past, antithetical to their visions of a New Spain.

They continued to support the UCD in the 1979 elections. In particular, after the 1979 election the Third National Congress removed its founding fathers from the party, or they resigned. This action gave the first indication of AP‟s being a liberal-conservative party

(Pappas 2001). With its new image and owing to the grave mistakes of the UCD during electoral campaigns, such as having the hard-core Franquist candidates, the AP contested the UCD‟s position in the 1982 election and replaced the UCD as the center-right political party.

However, in the 1980s, its immoderate position with regard to abortion, regional autonomy, and social welfare for the poor hindered its rise as a rival to the PSOE. Only after it was able to moderate itself and refrained from adopting tough positions on these controversial issues, the party became a major competitor to the PSOE and eventually won the 1996 election.

During this period, the PP was economically liberal, which helped it regain the support of Spain‟s business confederation. It abandoned the Franquist policy of economic interventionism and espoused privatization. Although it was liberal on economic issues, it was conservative on social issues. While in the early 1980s the AP opposed decriminalization of abortion and also opposed divorce, it was renamed as the

281

PP in 1989, moving to the center. The PP promised not to annul any law since 1978 (on controversial issues such as abortion and divorce. Similarly, the party moderated its position on regional issues and provided autonomy for economic and fiscal issues. From

1996 to 2000, the small, Catalan party of the coalition government named Convergència i

Unió (Convergence and Union or the CiU), led by PP‟s Aznar, agreed to transfer up to 30 percent of income tax revenues to Catalonia. In addition, it gave fiscal autonomy and the right to levy taxes on goods such as alcohol, tobacco, and fuel to the Basque region

(Gilmour 2006:34). These policies helped the PP appeal to religious Basque voters.

Partido Socialista Obrero Espanol (PSOE) As we discussed above, the PSOE had a long history going back to the pre-Franco era. The Popular Front, the predecessor of the PSOE/PCE, was banned under Franco.

The Socialist and Communists went underground and continued to fight against the

Franco regime after the Civil War. The left remained active in unions even during the

Franco era. During the transition, these two groups emerged once more. The Socialists and Communists were divided and established their own political parties, but lost to the

UCD.

The 1982 election had a paramount importance. Gunther et al (2004:272) succinctly summarizes the election results of the 1982 election and states that “with the collapse of the UCD in the 1982 election, however, a significant class crystallization of voting preferences emerged. Most of the working-class segment of the UCD‟s electorate shifted its support to the PSOE, while most of its middle-class voters moved in\to the ranks of AP supporters.” In the 1982 election, the PSOE garnered one fifth of its votes

282 from the working class, its traditional core. Moreover, it was able to receive more votes from the professional and employed, excluding small and medium sized enterprises.

When the PSOE came to power, unlike its counterpart in France, the PSOE followed fiscally orthodox policies to fulfill the requirements of the EU (Kennedy 2006).

The PSOE accelerated its transformation from a class-based party to a catch-all party between 1982 and 1996. When the party was in power, it gave up advancing its statist economic policies, furthering the liberalizing process in the economy by calling for the dismantling of Franco‟s public sector economy. Politically, it made NATO a key component of its Europeanization of the country. The PSOE incorporated Spain into the

EC as well.

In 1982, Share (1989) noted, the PSOE received 46 percent of the votes of all workers, 44 percent of sales employees, and 28 percent of entrepreneurs. Overall, skilled and unskilled workers constituted a significant segment of their electoral base, 56% of the

Socialist electorate (Share 1989, p. 112; excerpt from Hamann 2000:1032).

In the 2000 election, an electoral alliance with the IU to mobilize leftist voters who were likely to abstain brought an electoral defeat to the PSOE. Its votes declined from 38 % in 1996 to 34% in 2000. The overall Spanish population did not favor this shift and some of the middle class left for the PP (Kennedy 2006). This electoral defeat led to a leadership change in the party, bringing Jose Luiz Rodriguez Zapatero to the party leadership as the general secretary of the PSOE.

This section showed that stable political party system exists in Spain along two major political parties. This is in contrast to the Turkish political party system. The

PSOE receives votes from the workers, lower income groups, and middle class voters.

283

For the PP, religious voters and small and medium size company owners remain the core electoral base. The communist party and regional parties have continued to operate and participated in coalition governments. When these parties participate in governments, they were able to get more political and economic autonomy with resources.

Targeted Social Policy and Volatility This study argued that the level of political party institutionalization affects the development of social policy as the political parties are concerned about their survival and their electoral chances (Mair and Bartolini 1990). In a highly volatile environment, these two concerns grew tremendously as rivals on the same or opposite on ideological spectrum faced electoral defeat or extinction. This was especially true for such electoral environments, since unstable political party systems also are highly associated with an incumbency disadvantage (Bernhard and Karakoc 2008). More importantly, volatile electoral environments tended to produce “short-lived” electoral alliances compared to long-lived coalition governments in Europe (Bawn and Rosenbluth 2006 ). In these weak political party systems systems, stable long-term coalition systems, (e.g. single party governments) were rarely found. The electoral promises of the parties, particularly toward their non-core groups were less credible as a result of high uncertainty and high turnover in government. This leads the parties in government to rely more on targeted social spending. As a result, we expected that the strong party institutionalization in

Spain reduced the likelihood of targeted social spending for electoral purposes.

[Table 5.25 about here]

284

As Table 5.25 shows, the Spanish political party system remained stable, and the two major parties remain the main competitors for power. In contrast to Turkish social policy, Spanish social policy developed in a relatively stable political party system with consistent competition on the left and the right. The UCD increased social spending significantly in the aftermath of transition, but then the PSOE was the party that formulated its policy toward its electoral base. The PSOE was able to design extensive public policies and some targeted policies toward the working class and the poor.

Regarding its policies toward its core groups, it relied on the unemployment benefits, which cost up to 4.8 percent of the Spanish GDP. However, compared to Turkey, Spain was able to keep its level of spending constant relative to its GDP. It transferred some spending toward certain groups; non-targeted spending constituted a significant portion of social spending. As will be seen in the next section, the ratio of spending on pensions over health and education remained almost the same. In sum, the stable party systems in

Spain compelled the parties to design policies that targeted the majority through public policies, rather than their core groups.

Table 5.26 and 27 confirm low volatility in the political party system and substantial loyalty in individual preferences. Nevertheless, significant shifts may also indicate that some voters were swayed through policy changes and were sensitive to government policies. In particular Table 5.26 suggests that most of volatility comes from intrabloc volatility, especially between the PSOE and the PCS, and the UCD and the AP.

[Table 5.26 about here]

[Table 5.27 about here]

285

As for the linkage between voters and political parties, the PSOE and the PP appealed to distinct electorates. Except that since the 1990s the PP also changed its social policy toward poor regions, including Andalusia. The PSOE, particularly supported programs in the two most economically depressed, but electorally rich regions, which were considered the bastions of the PSOE. In addition, the PSOE developed unemployment policies that benefited the working class. As Table 5.28 indicates, the governments under the PSOE initiated more responsibility on the state for social protection for the workers.

[Table 5.28 about here]

The UCD The peak in social spending occurred during the early years of transition, in part to soothe increasing protests led by workers. In the aftermath of the regime change the

Suarez government increased the social budget by almost two-thirds, which amounted to just over 19 percent of GDP by 1982 (Rodriguez 1990b). Within social security and welfare expenditures, pensions were the most rapidly rising element of the budget, growing from 36 per cent of the budget to 44 percent at the end of the transition. Public expenditures between General Franco‟s death in 1975 and the year of 1981 rose in GDP share by almost 80 percent, reaching 7.5 per cent of GDP (McVicar 1985). Widening eligibility, enhancement of entitlements, and an increase by over 40 percent in the number of recipients occurred. In particular, the number of disability pension receivers increased significantly (Guillen 1992; Mangen 2001). Guillen (1992) argued that the

Suarez governments expanded social policy programs extensively without hurting the

286 macro-institutional economic structure. Using social pacts, Spanish governments wanted to demobilize working class and at the same to appeal to working class. From the transition to 1986, as Table 5.29 shows, six social pacts were signed in Spain. Through the Moncloa Accords, Suarez was able to get their consent for their policies in return for some political, social, and economic concessions, such as the right to unionize in various industries and the right to strike, etc.

[Table 5.29 about here]

The PSOE When the PSOE came to power in 1982; its level of social spending had already reached about 19 percent of GDP. Through a number of pacts with unions, the PSOE aimed to keep wages low. As Table 5.29 shows, the Monroe Pact of 1976 was the only pact that included social policy on its agenda. In the post-1982 era, the PSOE signed pacts that included wage policies, but not social policy. The party was able to convince the unions to cap wage increases. As a result, the PSOE government was able to avoid increasing social spending in the initial years. However, the pact between the UGT and the PSOE did not continue long. In 1988, the first nationwide strike, organized by the

UGT in collaboration with its rival union, the Communist-affiliated Comisiones Obreras,

(CC.OO) was launched against the PSOE government over its attempt to cap wage increases to 5 percent. The tension between the PSOE and the UGT eventually resulted in cutting the organic link between the two in 1990 (Encarnacion 2000). This break-up was also reflected in social pacts in Spain as the PSOE governments avoided sitting on the table with labor unions since 1998 (Table 5.30).

287

[Table 5.30 about here]

Despite a high unemployment rate and economic policies that broke some of its campaign promises, the PSOE won three elections in row. It established majority governments as a result of the 1986 and 1989 elections. In the 1993 election, it established a coalition government with the CiU, the Catalonian party. As Hamann

(2000) indicated, according to economic voting theory, voters held responsible the current government for the state of economy and punished it in the next election. Beck

(1988) found that Spaniards were one of the most economically oriented voters in

Europe, second only to those in the UK. Barnes et al. explained this by arguing the existence of low party attachments in the early transition years during which voters assessed the governments based on economic performances.

However, the continued victories of the PSOE belied the predictions of economic theory. Hamann (2000) argued that in addition to the lack of a credible alternative party to which voters could turn, the PSOE‟s social policies created a strong attachment among the low income groups through well-applied unemployment benefit policies. The PSOE had been able to build an electoral coalition that attracted the votes of manual workers, rural voters, and voters dependent on state-subsidized incomes (Hamann 2000:1019).

In particular, the PSOE doubled spending on unemployment benefits, up to 4.8 percent of the GDP in 1994. Under the PSOE‟s Gonzales, in 1992, Spain benefited from the EU‟s cohesion funds, half of 15 billion Euros went to Spain (Ercarnacion 2008, p124:

Kennedy 2001). The government provided three years of unemployment subsidy to those who were laid off because of industrial reconversion. In addition, the PSOE government

288 provided “tax reductions, investment subsidies and special assistance to help out the unemployed, including job training and retraining” (Ercarnacion 2008:124).

A recent study uncovered how the PSOE used unemployment policies for its electoral purposes. Watson (2008) argued that the PSOE government took power from the unions by usurping the role of distribution of unemployed benefits in rural areas, especially Southern Europe. Rural unemployment benefits known as Empleo

Comunitaria (EC) had been controlled by the unions, after Franco. When the UCD came to power, it increased the benefits to demobilize unions in the South. The party was not particularly bothered by the strength of communist-led unions, because such benefits toward unions would reduce the electoral chances of the PSOE. After coming to power, the PSOE designed policies intended to weaken the communists unions so that the PSOE, not the CC.OO, would gain credit for these policies; they especially gained credit through their unemployment benefits. After the policy change, the socialist party officials and local branches replaced unions, weakening the CC.OO and strengthening the party‟s position. This policy proved to have a demobilizing effect on the unions. The CC.OO organized 460 actions from 1983 to 1985; this declined to 117 from 1986 to 1998

(Watson 2008, p 466).

[Table 5.31 about here]

As the PSOE government launched economic restructuring planning, massive layoffs occurred as evidenced by the high unemployment rates in the country. In an attempt to mollify its electoral base, workers and others, the PSOE government engaged in implementing compensatory programs for laid-off workers (Wozniak 1991; Hamann

289

2000). Table 5.31 shows the increasing trend in coverage up until 1989 when the government launched a reform of its social security system. The coverage increased to 83 percent in 1993 (Hamann 2000, p. 1036). The government attempted to require that at least one year of full work was to be complete before one was eligible for a lay-off .

However, the bill failed as public reaction and electoral concerns within the party became overwhelming (Heywood 1995; Hamann 2000). Nevertheless, the government reduced per person unemployment benefits (the average benefits/gross national product per capita) by 50 percent from 1983 to 1992. Their success of passing this bill may have been due to low support for unemployment benefits among the population, because the support for the unemployed declined from 55 % in 1982 to 30 % in 1993 (Boix

1998:153).

The introduction of non-contributory pensions is worthy of mention. In 1990 the

PSOE government introduced the Law of Non-Contributory Pensions of the Social

Security for elderly and disabled citizens non-affiliated (or discontinued contributory records) with the Social Security system. Another law was intended for low-income families, for children under 19 years, and for the handicapped. The former was first compensated by the contributory Social Security system, “although it was agreed later on by the social partners in the Toleda Pact that the costs of noncontributory pensions would be charged to the Spanish general revenue” (Arriba and Moreno 2005:150). Through these policies, the PSOE was able to appeal to the disadvantaged segment of population.

This showed that it was not a party of workers, especially after its break-up with the UGT in 1990.

290

The pension system was another area in which the PSOE pursued reform and designed compensatory policies to smoothe the cost of economic adjustment. In 1985, the party made a major reform that mainly hurt the highest earning pensioners. The

PSOE government introduced noncontributory pensions that extended pension eligibility to those who did not or could not contribute to the pension funds. This, in particular, added half-million Spaniards to the pension system by 1992 (Chhibber and Torcal 1997, p.40). However, the growing burden on the budget led the government to increase the eligibility requirements for disability funds (Hamann 2000).

As the government was able to maintain the level of spending on pensions and other kinds of benefits, it was also able to invest in the health care system. Influenced by the British model of the National Health Service, the government wanted to separate health care from social security and provide universal coverage and finance it through

“taxes rather than employer contributions” (Rico 1997:120-121). The reform passed in

1986, which increased population coverage from 84.5 percent to 99.8 percent in 1991

(Hamann 2000:1038).

The PSOE was also able to utilize social policies through effectively means- testing. Minimum pension supplements, noncontributory pensions for the elderly and disabled, assistance unemployment benefits, and social assistance (salario social) programs were increased (Laparra & Aguilar 1997:89). These measures were compensated by other cuts in pensions (1985) and unemployment benefits eligibility

(1984). By 1992 about one in eight Spaniards received some kind of means-tested benefits; the overall number of recipients in 1992 was 10 times as high as a decade earlier

(Laparra & Aguilar 1997, p.89).

291

Survey results showed that the PSOE‟s social policies were effective. “The PSOE was particularly successful in maintaining the vote of blue-collar workers, both in the industry and service, as well as the agricultural sectors, the elderly, and others dependent on state-subsidized income, but also sectors of the middle class, who would likewise benefit from pensions, health coverage, or education reforms” (Hamann 2000:1039)64

In short, social policy during the PSOE years expanded its coverage. While spending on unemployment benefits doubled to 4.8 percent in 1994 from 1983, the PSOE also invested in education and health care. A recent study finds that “Spending on education also increased five-fold during the decade 1982-92. Total public sector spending by 1995, the PSOE‟s last full year in office, was almost 50 percent of GDP.

(Kennedy 2006:69).

The PP and Social Policy In the 1980s, the PP vehemently opposed the Rural Employment Plan, which reduced its electoral chances in Andalusia and Extremadura. These two regions hosted segments of the most deprived social groups in Spain, for whom social and economic policies were critical. The PSOE‟s pro-poor policies helped the party to gain most of the votes from the region. However, the PP‟s vehement opposition alienated the rural and

64 Notably, seventeen Comunidades Autonomas have also been active in some social policy issues. The regions in the 1990s implemented minimum income policies for low-income families. “These minimum income benefits filled in a hole in the social protection system or, in other words, helped to complete the weaving of the Spanish safety net as it stands now. Such benefits were intended to provide monetary resources to those citizens potentially active in the labor market facing situations of need. Elaboration and implementation of these programs by the Spanish regions took place between 1989 (first program introduced in the Basque Country) and 1995 (final one implemented in the Balearic Islands)” (Arriba and Moreno 2005: p 150-151).

292 the elderly voters that benefited from these policies. As a result, initially, the PP did poorly in the 1980s.

When the PP came to power in 1996, the party had already moderated its position on welfare programs. It made pacts that included welfare policies, unlike the pacts that the PSOE created. It improved the condition of the Rural Employment Plan, which showed some continuity with the PSOE government. This assisted the PP establishment of a majority government in the 2000 election, improved the image of the party, and offset the PSOE‟s propaganda that the PP would cut social security protection for people in rural areas. In addition, the PP‟s pension policy was also in line with its catch-all party status that did not include radical reforms, unpopular among the populace (Mangen

2001).

The PP government manipulated minimum pensions, too. In the fall of 1999, the real value of minimum pensions increased by 3 to 5 percent. Boldrin, Jimenez-Martin and Peracchi (2004) argued that the PP initiated the increase to please recipients, who were among low wage earners. They argued that the PP, like the PSOE pursued such policies as part of their strategy to become catch-all parties.

In conclusion, in the early years of transition Suarez expanded social spending significantly to soothe the working class, making social spending about 17 percent of its

GDP. Over the years the level of spending increased up to 21 percent. When compared with social spending, we see that this increase was very modest. For example, social spending in Turkey increased from 5 percent to 13 percent from 1983 to 1999, more than doubling its initial value. We see that in the 1980s social spending did not change significantly. When the PSOE came to power in 1982, it introduced policies including

293 minimum wage and unemployment benefits, which helped lower income groups significantly. In addition, the relatively absence of hierarchical social security system in

Spain enabled political elites to devote social spending over lower income groups, including the unemployed and rural labor force. In particular, the absence of early retirement laws that the political parties used for privileging their electoral base and pacifying mobilizing segments of society stabilized to the level of social spending in

Spain.

The next section will compare targeted spending and inequality in more detail; showing how targeted spending is associated with high inequality in a weak and strong political party institutionalization context.

Social Spending and Inequality This study argues that low participation by the poor and high electoral volatility lead political parties to use targeted social spending for electoral purposes, which ultimately have regressive affects on inequality in a given country. Spain, with a relatively high voter turnout and low volatility, serves as a candidate for low inequality.

Turkey represents an interesting case with its relatively high voter turnout and higher volatility. The evidence through paired case studies lends support to our theory that

Turkey experienced persistent high inequality, while Spain was able to reduce inequality to a substantial degree.

First, Table 5.32 presents average volatility, targeted spending, and voter turnout levels for both countries. This table shows that while the average turnout in Turkey in the post-1983 era was about 86.1 percent and volatility scores were around 43. On the

294 other hand, Spain had 74.1 percent voter turnout while its electoral volatility remained a comparatively low, 14.

[Table 5.32 about here]

Figure 5.1 compared targeted spending in Turkey and Spain and suggest that targeted spending in Turkey showed significant variation within the period of 1984-1999 while it remained stable in Spain. For example even though the targeted spending level in Turkey was 0.44 in 1984, it increased to .58 in 1999. Targeted spending in Spain, on the other hand remained relatively stable. In 1984, the targeted spending rate was .62.

Over time, it fluctuated around .62 and remained around the same level in the early

2000s.

[Figure 5.1 about here]

Change in spending on old-age benefits, health, and education in these countries substantiates our theory. Looking at the old-age pensions, we see an increase in both countries. Old-age pensions in Turkey have increased from 1.3 percent of GDP in 1984 to 5.07 percent in 1999. On the other hand, during the same time interval, old age pensions in Spain showed a comparatively modest increase, from 5.6 percent to 8.1 percent of GDP. This was equivalent to a 45 percent increase, which was much lower than Turkey‟s increase.

In order to get the ratio of old age pensions over health and education spending, we divide old age pensions over the sum of health and education spending. This suggests similar patterns. The ratio for Turkey was 0.36 in 1984 and then increased significantly

295 to 0.78 in 1999. In the same period, it did not change significantly in Spain, only from

0.75 to 0.91. In other words, the ratio of old-age pensions over non-targeted social policy spending (health and education spending) increased by 116 percent in Turkey, whereas it only increased by 21 percent in Spain.

A recent study confirms that this trend continues. Despite differences in data, a

2004 report of Eurostat showed that the targeted spending rate reached 0.7 in Turkey, while it remained around 0.6 in Spain. The biggest portion of this targeted spending comes from pensions. Pension spending over all social spending was 0.42 in Spain and

0.68 in Turkey, which suggests that Spain had developed relatively more stable social policy programs (see Figure 5.1).

As Table 5.33 shows, the percentage of older people (65 and above) of Spain multiplies the percentage of the older age groups in Turkey. However, the unstable political party system led Turkish governments to increasingly use cash transfers, including pensions, old-age pensions, and others as to increase their vote totals. As a result, pension spending over all social spending was very high in Turkey although the number of elderly people in Turkey was three times smaller than that of Spain‟s. Spain had an income support policy for people under the official poverty rate. In addition,

Spain had a developed family/child allowance and unemployment benefits that the

Turkish social policy system did not substantially cover. Although the social spending figures are different, the IMF Financial Statistics show similar trends that the ratio of targeted spending increased from 0.09 in 1985 to 0.2 in 2000 in Turkey.

[Table 5.33 about here]

296

In post-1987 Turkey, social spending increased as a result of early retirement laws; most of the spending went to the public service sector, small business owners, and those private owners that could afford to benefit from the new early retirement law.

Table 5.34 shows that economic inequality increased from 1987 to 1994. The richest quintile increased its share from redistribution around 6-9 percent while the lowest quintiles experienced decline in their shares. Table 5.34 presents inequality data when

Turkey have started to face frequent political and economic crisis with high inflation that favors the upper classes. As a result, we see increase in the share of the fifth quintile. On the other hand, mobilization of the poor, the middle-class (public officials) caused similar effects of policies on the lowest four quintiles. As the economy crumbled in the mid-1990s, social spending became a greater financial burden on the government budget that it faced severe difficulties in paying public wages/salaries as well pensions.

[Table 5.34 about here]

As discussed earlier, another of the major problems that Turkey, like Poland, faced were hierarchical social security programs. The military interventions and the governments created a social security system in which certain occupations, such as public servants and workers in major sectors, benefited greatly. This was more dramatic in

Turkey, where this hierarchy caused most of the cash spending to fall to pensions. My interviews with the Minister of Labor and Social Security Minister and the bureaucrats of

Social Security Institutions uncovered another problem that increased the burden on the system. The bureaucrats in this Administration state that Turkish laws allow people to retire based on their last governmental position. As a result, people who pay lower

297 premiums over years, move to higher positions for a short term (through their political connections). After staying at the last position for a couple of months, they can be entitled to get higher pensions that at least triple the sum of their premiums that they give

(TUIK 2007).

On the other hand, Spain was able to channel other kinds of cash spending, such as unemployment benefits, and income support for all people in poverty. The Spanish governments refrained from early retirement laws. Spain‟s stable social spending may be observed by looking at OECD data, which shows that Turkey‟s social spending increased most significantly over the years compared to other Southern European countries.

As a result, these two countries showed contrasting pictures in terms of their income inequality levels. While Turkey faced increasing income inequality beginning in the mid-1980s, Spain was able to diminish its inequality level. I use two comparable household surveys to compare inequality for Turkey. These two household surveys are considered most reliable estimators by studies on this topic (WIID2b).65 Table 5.34 confirms the hypothesis that from 1987 to 1994 inequality significantly increased in

Turkey except for the top 20 percent income groups. Overall inequality increased from

0.44 to 0.50. However, the results changes if we look at WIID2b. According to this source, there was a slight increase in inequality, only 46.5 in 1987 to 46.7 in 1994.

Nevertheless, comparing these surveys shows that the impact of social transfers in

Turkey is minimal compared to countries with stable political party systems. WIID2b also reports household income surveys conducted by the European Commission in 2002

65 Please note that all household surveys used for comparison of Turkey and Spain share all these characteristics: all areas (urban and rural), all population, household, unit of analysis is person; income disposable. This is true for all surveys, Turkish Household Surveys, European Commission and LIS.

298 and 2003. According to these surveys at Table 5.34, gini coefficients remain around the same level, slightly decreasing from 46 in 2002 to 45 in 2003. The major business association, TUSIAD, issued a report that analyzes the effect of taxes and social transfers on income inequality. The results are suggestive but confirm our expectation that inequality level did not show any remarkable decrease in this country. It finds that taxes and social transfers reduced inequality (gini coefficients) by 35 percent in Germany; this was only 5% in Turkey (Table 5.36).

[Table 5.35 about here]

[Table 5.36 about here]

[Table 5.37 about here]

Household surveys were conducted in Spain as well and they give us more reliable gini estimates. In particular, Luxembourg Income Study (LIS) and European

Commission study present the most reliable gini coefficients (Table 5.37). In WIID2b, note that the quality for gini coefficients from these sources for Spain was the highest.

As we note above, according to LIS, gini coefficients decreased to 31.7 in 1990 from

34.4 in 1980. European Commission estimates start from 1995. According to this source, gini coefficient was 33.2 in 1995. Over time, it declined to 31.5 in 2000 and

2001.

Conclusion Our comparative case study above suggests that the populist parties increased spending on health and education as well as its coverage, appealing to lower income groups. For example, the JDP of Turkey was very successful in reforming the health care

299 system in a way that made it easier for ordinary citizens to access. In addition, by providing free books and case assistance to school children in need, it boosted its popularity. As a result, the JDP was able to increase its vote share to 47 percent in 2007 elections. In other words, the non-targeted nature of spending on health and education can be affectively used by a populist party for electoral purposes. This in fact may have a positive effect on lower income groups as gini coefficients in the second half of 2000 showed. In this era, gini coefficients dropped as the share of the lower income groups increased.

In conclusion, the level of political party institutionalization in Southern Europe caused two distinct outcomes for social policy and varying level of inequality. While the institutionalized party system of Spain was able to maintain a constant level of targeted spending, the under-institutionalized party system of Turkey faced increasing targeted spending over the years. As Table 5.40 shows, the affect of transfers on gini coefficients has been minimal in Turkey, compared to Italy and other European countries. The small affect of transfers on gini (5%) in Turkey was suggestive evidence that its social policies were inefficient in part due to the nature of the political party system.

300

Table 5.1 National Election Results in Turkey (1946-1957).

Election Vote and Seat Political Parties Year Shares (%) RPP RNP DP FP NP Independent 1946 Votes * - * - - - Seats 85.4 - 12.7 - - 1.2 1950 Votes 39.4 - 52.7 - 3.1 4.8 Seats 14.2 - 85.2 - 0.2 0.4 1954 Votes 35.4 4.9 57.6 - 1.5 Seats 5.7 0.9 92.8 - 0.6 1957 Votes 41.1 7.1 47.9 3.8 - 0.1 Seats 29.2 0.6 69.6 0.6 - 0.1 Source:Kalaycioglu 2005, p.75; Tuncer 2002 *: Kalaycioglu notes that the exact figures of vote share are not known for the 1946 election RNP: Republican Nation Party, FP: Freedom Party; NP: Nation Party; DP: Democrat Party and RPP: Republican Popular/People’s Party.

301

Table 5.2 Parliamentary Election Results in Turkey, 1983-2002.

Election Vote/Seat Political Parties

Shares Year (%)

MP PP/SDPP/RPP NDP DLP WP/VP/FP NWP/NAP JDP PDP/DPP YP Indep

1983 Votes 45.1 30.5 23.3 ------1.1

Seats 53 29.2 17.8 ------0

1987 Votes 36.3 24.8 - 8.5 7.2 2.9 - - - 0.4

Seats 64.9 22 - 0 0 0 - - - 0

1991 Votes 24 20.8 - 10.8 16.9 *** - - - 0.1

Seats 25.6 19.5 - 1.6 13.8 *** - - - 0

1995 Votes 19.6 10.7 - 14.6 21.4 8.2 - 4.2 - 0.5

Seats 24 8.9 - 13.8 28.7 0 - 0 - 0

1999 Votes 13.2 8.7 - 22.2 15.4 18 - 4.7 - 0.9

Seats 15.6 0 - 24.7 20.2 23.4 - 0 - 0.6

2002 Votes 5.1 19.4 - 1.2 2.5 8.4 34.3 6.2 7.3 1

Seats 0 32.4 - 0 0 0 66 0 0 1.6

Source: Kalaycioglu 2005:126; Tuncer 2002:329:335 MP (Motherland Party, Anavatan Partisi), PP (Populist Party, Halkçi Parti, which merged with a social democratic party to form the SHP in 1985), NDP (Nationalist Democracy Party, Milliyetci Demokrasi Partisi, which merged with the MP in 1986), SDPP (Social Democratic Populist Party, Sosyal Demokrat Halkçi Parti, which merged with RPP after it became legal again in 1995), the RPP (Republic People’s Party, Cumhuriyet Halk Partisi), DLP (Democratic Left Party, Demokratik Sol Parti), TPP (True Path Partisi, Doğru Yol Partisi), WP (Welfare Party, Refah Partisi) banned by the Constitutional Court in 1998, participated in the 1999 elections), FP (Felicity Party, Saadet Partisi, participated in the 2002 elections), NTP (Nationalist Toil Party, Milliyetci Çalisma Partisi, merged with NAP after it became legal again in 1995), NAP (Nationalist Action Party, Milliyetçi Hareket Partisi,) JDP (Justice and Development Party, Adalet and Kalkinma Partisi), PDP (People’s Democracy Party (PDP), Halkin Demokrasi Partisi, which participated in the 2002 elections in alliance with PDP), DEHAP (Democratic People Party, Demokratik Halk Partisi), YP (Young Party, Genç Parti). *** NTP participated in the elections in alliance with the WP, and under the WP banner.

302

Table 5.3 Real wage and salary index for Turkish work force, 1968-97 (1968=100) Year Wages Salaries 1968 100 100 1978 221 109 1979 196 106 1987 118 44 Source: Adapted from Waterbury 1993; originally from Kepenek (1990:98)

303

Table 5.4 Private and Public Sector Wages (Average), 1985-1991.

Change over Previous Year 1985 1986 1987 1988 1989 1990 1991 Public Sector -16.2 -13.3 1.5 -14.8 38.7 25.9 56.6 Private Sector -6.9 -1.9 12.6 -4.9 31.3 16.4 50.6 Source: OECD; Tunc 2005:115

304

Table 5.5 Turnout in Turkey, 1983-2007.

Elections Turnout Vote/VAP* 1983 92.3 75.5 1987 93.3 91.8 1991 83.9 79.8 1995 85.2 79.1 1999 87.1 80.4 2002 76.9 73.8 2007 84.2 74.0 Source: IDEA. *VAP: Voting Age Population

305

Table 5.6 Abstentions and Votes for Parties from the RPP and DP traditions (%).

Election Year Abstainers RPP Tradition DP tradition 1950 13.9 39.5 55.8 1954 14.2 35.4 63.1 1957 24.4 41.1 58.9 1961 22.2 36.7 62.5 1965 34.1 31.7 65.1 1969 42.0 39.4 55.0 1973 38.0 39.7 57.5 1977 31.8 43.8 53.7 1983 13.2 30.5 68.4 1987 9.4 33.3 66.3 1989 21.6 37.7 61.9 1991 18.7 31.9 67.9 1994 12.0 27.5 72.1 1995 18.0 29.7 69.8 Source: Kardam and Tuzun 1998:100. Note: Abstainers’ share includes non-valid votes that inflate its percentage.

306

Table 5.7 Turnout by Occupation (%), 2007 Elections. Occupations Voted Not Voted Skilled Workers 78.3 21.7 Unskilled Workers 77.4 22.6 Public Servants 88 12 Pensioners 91 9 Shopkeepers 82.6 17.4 Housewives 89.1 10.9 Students 55 45 Unemployed 70.3 29.7 Private Workers 83.3 16.7 Small Business 93.1 6.9

Source: Original Survey (2008), N: 2082

307

Table 5.8 Votes by Level of Education, 2007 Election.

Parties Less Than Primary Secondary High College or Primary School School School School More JDP 51.9 55.6 54.5 39.1 33.2 RPP 11.1 16.0 22.3 27.4 33.6 NAP 7.4 11.0 10.7 19.1 12.6 WP 4.9 4.5 2.9 2.5 4.2 Independents 17.3 6.3 4.1 5.8 3.3 YP 2.5 2.5 2.5 1.6 2.3 Others 4.9 4.1 3.0 4.5 10.8 Source: Original Survey,N:1506.

308

Table 5.9 Urbanization/ Literacy Level (%). Year Urban Literacy 1923 24.57 na 1950 25.04 42.37 1965 34.42 48.72 1970 38.45 56.21 1975 41.81 63.62 1980 43.91 67.45 1990 53.03 77.29 1997 65.00 87.00 2000 65.10 90.00 2001 65.20 91.00 Source: Eligur 2006.

309

Table 5.10 Urban Votes of the RPP. Major Cities Vote Share of the RPP (%) Izmir 29.84 Istanbul 29.5 Ankara 35.6 National Share 24 Source: Election Results.

310

Table 5.11 Social Groups and their Vote Share (%), 2007 Election.

Skilled Unskilled Civil Shop- House- Small Medium Workers Workers Servants Pensioner Keepers workers Unemployed Business Business JDP 40.3 57 34 37.1 46.6 53.8 44 55.9 26.1 RPP 26.7 13.3 28.3 37.1 25.3 17 30.7 22 21.7 TPP 3.8 2.4 3.8 2.1 0.6 2.6 0 0 4.3 DLP 0 6.1 0 1.4 1.1 0 0 0 0 MP 0 0 0 0 0.6 0 0 0 0 NMP 18.9 12.1 1.9 7.1 6.7 12.8 18.7 13.6 17.4 WP 2.4 2.4 3.8 6.4 3.4 4.4 0 0 8.7 YP 2.4 3.6 1.9 1.4 1.1 2.6 1.3 0 0 Others 9.3 11.6 13.1 10.9 16.9 9.2 5.3 9.5 26.1 Source: Original Survey, N:1514.

311

Table 5.12 Turkish Governments in the Post-1983 Era.

Election Years Government Parties 1983 Election 1983-1987 MP 1987 Election 1987-1991 MP 1991 Election 1991-1995 TPP/SDPP(RPP) February-May 1996 MP/TPP 1995 Election June 1996-June 1997 WP/TPP June 1997-December 1998 MP/DLP/DTP January-April 1999 DLP-minority 1999 Election April 1999- November 2002 DL/NAP/MP Note: DTP: Democratic Turkey Party, splinter of TPP

312

Table 5.13 Volatility, 1983-2002 Elections Volatility 1983-1987 39 1987-1991 20 1991-1995 22 1995-1999 20 1999-2002 51 Average 30 Source: Kalaycioğlu and Çarkoglu 2007:37

313

Table 5.14 Number of Pensioners in the post-1990. The Population Covered by Social Insurance Programs (in Thousands) Institutions 1990 1996 1997 1998 1999 2000 2001 2002 2003 2004 ES 6,446 7,502 7,655 7,930 8,126 8,311 8,572 9,038 9,238 9,270 SSK 19,488 28,062 30,380 32,489 30,745 32,192 31,098 33,089 35,065 38,234 Bag-Kur 11,333 11,823 12,680 13,220 13,900 15,036 15,282 15,548 15,882 16,234 The Private Funds 312 308 315 318 333 324 323 324 296 301 General Total 37,579 47,696 51,029 53,956 53,103 55,863 55,275 57,999 60,480 64,039 1.Active Insured 6,898 8,497 9,041 9,384 9,167 9,707 9,421 9,894 10,359 11,059 2.Voluntary active insured 406 1,143 1,161 1,111 1,166 1,099 1,138 1,180 934 513 3. Active insured in agriculture 826 1,041 1,049 1,025 1,055 1,061 1,031 1,040 1,088 1,175 4.Total active insured 8,130 10,681 11,251 11,520 11,387 11,867 11,591 12,114 12,381 12,747 5.Pensioners 2,931 4,594 4,932 5,274 5,637 5,985 6,335 6,628 6,920 7,249 6.Dependants 26,517 32,421 34,847 37,163 36,078 38,012 37,349 39,258 41,179 44,044 Total Population 56,709 63,443 64,584 65,723 66,856 67,913 68,898 69,875 70,847 71,814 Total labor force 20,150 22,697 22,755 23,385 23,878 23,078 23,491 23,818 23,640 24,289 Unemployed 1,612 1,503 1,552 1,607 1,830 1,497 1,967 2,464 2,493 2,498 Active/passive ratio 2.77 2.32 2.28 2.18 2.02 1.98 1.83 1.83 1.79 1.76 Dependency ratio 3.62 3.47 3.54 3.68 3.66 3.71 3.77 3.79 3.88 4.02 Share of active insurued 0.43 0.5 0.53 0.53 0.52 0.55 0.54 0.57 0.59 0.58 in employment Share of insured population (%) 66.3 75.2 79 82.1 79.4 82.3 80.2 83 85.4 89.2 Source: Social Security Administration. ES:Emekli Sandigi for Public Servants-PoF, SSK: Social Insurance Administration-SIA and Bag-Kur: Independent Insurance Administration-IIA.

314

Table 5.15. Social Transfers for the IIA. Years Increase (%) 1991 - 1992 0 1993 800 1994 68 1995 77 1996 776 1997 75 1998 254 1999 83 2000 32 2001 65 2002 51 2003 88 2004 7 2005 31 Source: Undersecretariat of Treasury

315

Table 5.16 Social Transfers in Turkey. Consolidated Government Budget 1992-1998 Percent of GDP 1992 1993 1994 1995 1996 1997 1998 Revenues 15.8 17.6 19.2 17.7 18.0 19.4 22.0 Expenditures 20.1 18.5 15.4 14.4 16.3 19.2 17.4 Personnel 8.5 8.5 7.0 6.4 6.5 7.0 7.3 Other current 1.8 1.8 1.9 1.8 2.1 2.4 2.4 Investment 2.7 2.7 1.9 1.2 1.6 2.0 1.7 Transfers to SEEs 0.7 1.3 0.5 0.6 0.3 0.4 0.3 Social Transfers 2.7 4.3 4.1 4.5 5.8 7.5 5.7

Interest on Public Debt 3.7 5.8 7.7 7.3 10 7.7 11.7 Foreign Borrowing 0.9 1.2 1.7 1.3 1.1 1.0 1.0 Domestic Borrowing 2.8 4.6 6.0 6.1 8.9 6.7 10.6

Budget Balance -4.3 -6.8 -3.9 -4.1 -8.3 -7.6 -7.1 Source: Undersecretariat of Treasury, (Tunc 2005:145)

316

Table 5.17 Collective Agreements in Turkey and Number of Workers Covered (thousands).

Years Sector Number of Number of Workplaces Number of Workers Agreements Involved Involved 1996 Public 861 6,971 281,190 Private 1,010 3,319 234,650 Total 1,871 10,290 515,840 1999 Public 1,137 9,638 544,995 Private 1,149 2,735 283,463 Total 2,286 12,373 828,463 2002 Public 1,113 4,741 131,852 Private 660 2,712 123,207 Total 1,773 7,453 255,059 2005 Public 1,176 10,301 382,992 Private 2,801 4,086 204,464 Total 3,977 14,388 587,456 Source: K. Blind 2009:54.

317

Table 5.18 The Structure of Spanish Economy, 1940-2000, (% of Labor Force). Year Agriculture Industry/Construction Service 1930 46 26 28 1940 50 23 27 1950 48 26 26 1960 37 30 33 1970 29 37 34 1975 22 38 40 1980 18 38 44 1985 18 34 48 1990 13 34 53 1995 10 31 60 2000 8 30 62 Source: Gunther et al 2004:69

318

Table 5.19 Social Protection Before and After Transition in Spain.

Years Social Protection / GDP (%) 1960 4.0 1975 11.7 1982 19.3 1986 19.6 1993 24.5 1996 22.4 Data: Mangen, 2001

319

Table 5.20 Social Classes before Transition.

Executives 1.8 Upper and Upper-Middle 5 Businessmen 2.7 Middle 35 Professionals 4.8 Lower Middle 20.3 Mid-level 4.2 Working 33.6 White-collar Employees 14.3 Poor 6.1 Civil Servants 9.6 N 3007 Self-employed 14.7 (small business, propretors, merchants) Workers 34.2 Farmers 7.5 Farm laborers 6.1 N 2841 Source: Gunter et al (1986: 191, excerpt from Fundacon Foessa, Informe Sociologico sobre la situacion social en Espana)

320

Table 5.21 Voter Turnout, Spain.

Turnout Turnout Election Year RVP (%) VAP(%) 1977 77.0 79.4 1979 68.1 72.3 1982 79.8 83.1 1986 70.4 73.7 1989 70.0 71.3 1993 77.0 77.4 1996 78.1 80.6 2000 68.7 73.8 2004 75.4 79.8 2008 76.0 77.9 Source: RVP: Registered Voting Population, IDEA.

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Table 5.22 Spanish Elections, 1977-2004.

1977 1979 1982 % of Votes No of Seats % of Seats % of Votes No of Seats % of Seats % of Votes No of Seats % of Seats PCE/IU 9.3 20 5.7 10.8 23 6.6 4 4 1.1 PSOE 29.4 118 33.7 30.5 121 34.6 48.4 202 57.7 UCD 34.6 166 47.4 35.9 168 48 6.5 12 3.4 AP/PP 8.8 16 4.6 6.1 9 2.6 26.5 106 30.3 CiU 2.8 11 3.1 2.7 1 0.3 3.7 12 3.4 PNV 1.7 8 2.3 1.5 7 2 1.9 8 2.3 1986 1989 1993 % of Votes No of Seats % of Seats % of Votes No of Seats % of Seats % of Votes No of Seats % of Seats IU 4.5 7 2 9.1 17 4.9 9.6 18 5.1 PSOE 44.6 184 52.6 39.9 175 50 38.3 159 45.4 AP/PP 26.3 105 30 25.9 107 30.6 34.8 141 40.3 CiU 5.1 18 5.1 5.1 18 5.1 4.9 17 4.9 PNV 1.6 6 1.7 1.2 5 1.4 1.2 5 1.4 1996 2000 2004 % of Votes No of Seats % of Seats % of Votes No of Seats % of Seats % of Votes No of Seats % of Seats IU 10.6 21 6 5.5 8 2.3 5.3 5 1.42 PSOE 37.5 141 40.3 34.1 125 35.7 43.3 164 46.85 AP/PP 38.8 156 44.6 44.5 183 52.3 38.3 148 42.28 CiU 4.6 16 4.6 4.2 15 4.3 3.3 10 2.85 PNV 1.3 5 1.4 1.5 7 2 1.6 7 2 ERC 0.7 1 0.3 0.8 1 0.3 2.5 8 2.28 Source:Ercarnacion (2008:54)

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Table 5.23 Class Identification and Party Preference by Cohort (%), Spain.

PCE PSOE UCD AP(CD) Younger Cohorts Working class 19.9 45.9 15.7 1 Lower middle class 17.3 40.1 24.3 2.3 Middle or upper class 10 30.5 31.7 8.4 Middle cohorts Working class 12.3 29.8 37.9 2.4 Lower middle class 4.4 31.5 48.4 4.8 Middle or upper class 4 22.6 50.3 12.9 Older cohorts Working class 7.6 31.7 5.1 2.3 Lower middle class 2.4 24.7 57 8.2 Middle or upper class 4.8 11.3 59.2 19.5 Source: Gunther 1986:201.

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Table 5.24 Comparing the pre-Franco era with the 1977 Elections.

Correlations Between Pre- and Post-Francoist Elections PSOE share (1931) and PSOE share (1977) 0.70 PSOE share (1936) and PSOE share (1977) 0.61 Popular Front share (1936) and PSOE (1977) 0.50 PCE share (1933) and PCE share (1977) 0.25 Popular Front share (1936) and PCE share (1977) 0.69

Source: Maravall 1982:175

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Table 5.25 Spanish Governments, 1977-2007.

Government Time in Office Duration(months) Party % Seats Government Type Suarez I 1/77-4/79 22 UCD 47 Minority Suarez II 4/79-1/81 22 UCD 48 Minority Calvo Sotelo 2/81-10/82 21 UCD 58 Minority Gonzalez I 12/82-6/86 43 PSOE 53 Majority Gonzalez II 7/86-10/89 40 PSOE 50 Majority Gonzalez III 12/89-6/93 43 PSOE 45 Majority Gonzalez IV 7/93-3/96 33 PP 45 Minority Aznar I 5/96-1/100 45 PP 52 Minority Aznar II 4/00-1/04 46 PSOE 43 Majority Zapatero I 4/04-present - Minority Source: Encarnacion (2008:44) and Gunther et al (2004:167). Data are updated to 2007.

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Table 5.26 Intra- and Interbloc Volatility in Spain (%).

Total Intrabloc Interbloc Years Volatility Volatility Volatility 1977-79 10.8 8.6 2.2 1979-82 42.3 35.6 6.7 1982-86 11.9 9.5 2.4 1986-1989 8.9 7.2 1.7 1986-1989 9.5 7.8 1.7 1993-1996 4.4 2.7 1.7 1996-2000 10.1 2.7 7.4 Mean 13.9 10.6 3.4 Source: Gunther et al 2004.

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Table 5.27 Volatility at the Individual Level.

Typology of Voters (%) Voter 1977-79 1979-82 1982-86 1986-1989 1989-93 1996-2000 Loyalists 63 48 59 62 64 62 Shifters 11 32 15 10 15 15 Mobilized 7 7 10 9 7 5 Demobilized 6 4 8 9 8 9 Abstainers 12 8 8 10 7 9 N 4150 3915 6443 2266 3592 3571 Source: Gunther et al 2004:218

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Table 5.28 Sources of Social Protection in Spain.

Social Protection Receipts by Source 1960 1977 1980 1985 1993 1996 % Employers 68.6 76.3 63.4 53.9 50.3 52 % Employees 21.7 17.5 18.9 18.4 16.7 17.6 % State 3.4 4 16.2 25.4 31 27.8 Source: Mangen 2001:193

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Table 5.29 Spanish Social Pacts, 1977-1986.

Agreement Duration Participants Content Moncloa Accords 1977-78 Government and leading Wage policy, social opposition parties policy, tax reform Basic Inter-confederate Agreement (ABI) 1979 CEOE,UGT Labor relations Framework Inter-confederate Agreement (AMI) 1980-81 CEOE, CCOO,UGT Wage policy National Employment Agreement (ANE)Wage Policy 1982 Wage policy Inter-confederate Agreement (IA) 1983 CEOE, UGT,CCOO Wage policy Social and Economic Agreement (AES) 1985-86 CEOE,UGT and government Wage policy Source: Encarnacion 2008:125

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Table 5.30 Spanish Social Pacts, 1994-2005.

Social Pacts Duration Participants Content Inter-confederate Agreement to Regulate 1994 CEOE, UGT, CCOO Labor relations Labor Ordinance Agreement for the Resolution of Labor Conflict 1996 CEOE, CCOO, UGT Labor relations Agreement on Pension Reform 1996 CEOE, UGT, government Pension reform Tripartie Agreement for Professional Training 1996 CEOE, UGT, CCOO Professional Training Inter-confederate Agreement for Employment 1997 CEOE, UGT, CCOO Reduction of Stability temporary contracts Inter-confederate Agreement on Collective 1997 CEOE, UGT, government Collective bargaining Bargaining regulations Agreement to Increase Minumum Social 1999 CEOE, UGT, government Pension reform Security Pensions Pact for the Prevention of Labor Risks 1999 CCOO, UGT, government Workplace safety Agreement on Pensions and Social Protection 2001 Pension Reform Inter-confederate Agreement for Collective 2001-05 CEO, CCOO, UGT Wage bargaining Bargaining Source: Encarnacion 2008:125

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Table 5.31 Unemployment Benefits (Spanish Peseta) during the PSOE, 1983-1989.

Years % of Number of Unemployed Unemployment Benefits/ % Receiving Benefits Benefits (Peseta) Other Programs Change 1983 564,349.30 658,470.70 1984 36.9 621,480.30 729,275.80 10.8 1985 41.0 830,446.70 911,014.40 24.9 1986 41.5 951,960.90 1,043,749.50 14.6 1987 42.8 1,026,308.00 1,150,971.30 10.3 1988 44.5 1,146,842.40 1,273,698.80 10.7 1989 52.0 1,314,843.00 1,458,396.50 14.5 Source: Bermeo, 1994. Unemployment benefits are Spanish Peseta.

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Table 5.32 Turkey and Spain in Comparison. Turkey Spain Mean Turnout (%) 86 74 Mean Volatility (Pedersen Index) 30 13 Change in Targeted Spending (%) .43-.58 .62-.61 Change in Inequality (Gini Coefficients) 43-44 31-31 Source: All data years range from 1984 to 2000. Volatility is Pedersen Index. Targeted Spending is the ratio of public cash transfers over all social spending. Gini coefficients come from the SWIID.

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Table 5.33 Population above 65 years in Comparison (%). Year Turkey Spain 1980 4.56 11.21 1990 4 13.61 2000 5.15 16.76 2007 5.72 16.95 Source: WDI (2009).

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Table 5.34 1987 and 1994 Household Surveys of Turkey, Income Quintiles.

All population Urban Quintiles 1987 1994 1987 1994 First 5.24 4.86 5.43 4.83 Second 9.61 8.63 9.33 8.19 Third 14.06 12.61 13.6 11.87 Fourth 21.15 19.03 20.71 17.9 Top 49.94 54.88 50.93 57.22

Gini Coefficients 0.437 0.492 0.444 0.515 Source: State Statistics Institute

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Table 5.35 Gini Coefficients, Turkey. Year Gini Source 1987 46.5 Turkey National Household Survey, the WB 1994 46.7 Turkey National Household Survey, the WB 2002 46 European Commission 2003 45 European Commission Note: All gini estimates are based on income disposable. All surveys share the same characteristics as it is reported by the WIID2b, such as coverage and unit of analysis.

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Table 5.36 Gini Coefficients Before and After Social Transfers in Europe.

Gini Coefficient Gini Coefficient The Effect of Taxes and Transfers Country Year Before Taxes and Transfers After Taxes and Transfers on Income Distribution Denmark 1994 0.42 0.22 -48.30 Sweeden 1995 0.49 0.23 -52.80 Finland 1995 0.39 0.23 -41.10 Netherlands 1994 0.42 0.25 -39.90 Belgium 1995 0.53 0.27 -48.40 Germany 1994 0.44 0.28 35.30 Italy 1993 0.51 0.35 -32.40 Turkey 1994 0.47 0.45 -5.70 Source: Income Distribution and Poverty in Turkey Report, p.118., by Turkish Industrialists and Businessmen's Association (2008)

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Table 5.37 Gini Coefficients of 1980-2001, Spain. Year Gini Source 1980 34.4 Luxembourg Income Study 1990 31.7 Luxembourg Income Study 1995 33.2 European Commission 1996 33.4 European Commission 1997 34.9 European Commission 1998 33.3 European Commission 1999 32.7 European Commission 2000 31.5 European Commission 2001 31.5 European Commission Note: All gini estimates are based on income disposable. All surveys share the same characteristics as it is reported by the WIID2b, such as coverage and unit of analysis.

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Figure 5.1 Comparing Targeted Spending in Turkey and Spain.

Source: OECD and WDI.

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Chapter 6

Conclusion This dissertation has sought to elucidate why and how economic inequality has persisted in the aftermath of transition to democracy in the Third Wave Democracies of Europe. It theorizes and shows the mechanisms in which, why and how clientelistic policies are adopted by political parties, and caused targeted social policies, resulting in increased inequality. Using a multi-method technique, it tested the theory in a large- N cross-national analysis and then two paired-case studies drawn from Postcommunist and Southern Europe. The findings from both multivariate and case study analyses explicitly provided strong support for the theory and illustrated the mechanisms by which new democracies could not generate income equality.

This study makes several contributions to the literature. First of all, the theory and empirical findings challenge the conventional approach that democracy reduces inequality. The basic assumption in these studies is that the poor will have more say in electoral process, forcing the parties to redistribute toward them until the median and mean income converges (e.g.

Acemoglu and Robinson 2005; Boix 2003). This approach overlooks an important point that democracy not only empowers the poor but also the middle classes (Kaufman 2009). While the poor lacks resources that decrease their leverage over politicians in some important realms such as higher voting record, contacting and lobbying, the middle classes are the ones with resources such as income, education, social capital and etc. Compared to the poor who have lower political participation rates, the middle classes are seen as the repository of votes and therefore the parties target them through their policies. The targeted spending increases as volatile electoral environments also raise the risk of survival for parties.

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In this respect, the findings of our study also cast some skepticism over Bueno de

Mesquita et al (2003) who argue that transition from authoritarianism to democracy results in the higher level of public goods as a result of increased selectorate and winning coalition. This argument also contests Boix (2003) who argues that democracies create a larger public budget as a response to popular demand on public goods and policies. This project showed that the public sector is more concerned with designing and implementing policies for the middle and upper classes. The record of low political participation by the poor distorts public policies in new democracies. However, this may be true if the poor is mobilized and consequently have consistent high turnout. The findings suggest that high participation in even highly volatile electoral environment increases transfers for the poor, having progressive impact on economic equality.

Second, this study adds to Pontusson and Rueda (2008) that appreciate the utility of

Meltzer and Richard (1981), but offers a more realistic picture regarding the nature of redistribution in new democracies. Like Pontusson and Rueda (2008) this study further modifies the median voter theory they developed for their study and continues in their line of thinking on how median voter theory ignores the historical and ideological and organizational linkage between voters and the parties.

It speaks to another finding of Pontusson and Rueda (2008) argue that the core constituencies of the left and of the right respectively have different attitudes toward inequality:

While the working class demands more redistribution, supporters of the right-wing parties demand less redistribution. Our finding shows that the left parties tend to use universal social policies and reduce targeted policies as political ideology of the government in our models has a statistically significant effect on social spending. Nevertheless, both studies share the same

340 concerns regarding the Meltzer and Richard (1986)‟s limitation on redistributive theories and offers a more realistic version of it. Going beyond Pontusson and Rueda (2008), this study offers a more dynamic theory in which political parties strategize different social policies depending especially on electoral volatility and voter turnout by the poor.

Third, related to the issue above, this study concur with the idea that the voter preferences are endogenous to political process and therefore political party strategies must be taken into account in relevant literatures (Iversen 1994; Przeworski and Sprague 1986). On the other hand, the findings do not confirm Przeworski and Sprague (1986) who argue that that political parties create images of society, forge collective identities such as party attachment and affect how the electorate vote. The problem with their argument is that while the Downsian spatial theories see voting as exogenous and ignore the political process, Przeworski and Sprague almost put the parties in the center, making voters almost subjects that can be easily manipulated.

As we see in new democracies of this study, political parties are too weak to create such image and have difficulty surviving, let alone winning elections.

Fourth, this study adds to discussion initiated by Keefer (2007) and Kapstein and Conrad

(2008) that the credibility problem of political leaders in new democracies is a major problem and this promotes clientelistic policies. However, the case studies suggest that part of the problem that pushes parties to resort to clientelistic policies is the weakness of political party institutionalization. Another problem lies in the weak political party identification among voters, which encourages the utility of clientelistic policies for politicians. In this respect, while

Kapstein and Conrad (2008) and Keefer (2007) make an argument emphasizing the lack of credibility of politicians in the eyes of public, this study emphasizes structural factors as well as individual characteristics of voters.

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Social Policy Legacies of Authoritarian Regimes The democratization literature emphasizes the pivotal role of the working class and the middle class in pushing transition from authoritarian regimes to democracy. It also pays attention to social basis of authoritarian regimes, suggesting that these regimes cannot be understood only by focusing their repressive character. Rather we also should look at the different social coalitions that support their rule as a factor in their durability (Rueschemeyer et al 1992;

Luebbert 1991; Moore 1993, Collier and Collier 1991). In particular, it ignores that authoritarian regimes design public policies to the benefit of their supporters and groups that are prone to mobilization. Moreover, particular attention on the emergence of political opposition and transition to democracy caused scholars to ignore how the past policies have persisted in the new regimes. Although there are some exceptions to this pattern (Inglot 2008; Haggard and Kaufman

2008), some of the policies played a significant role in the persistence of inequality and in some cases it worsened as new groups were incorporated into privileged social policy programs.

This study adds to recent studies on social policies that emphasize the legacy argument. It agrees with Inglot (2008) and Haggard and Kaufman (2008) who argue that current policies cannot be understood without examining the social policies of authoritarian era, especially where the regime used a variety of policies to ensure the allegiance of social constituencies. These policies privileged certain segments of society, mostly civil servants and other public service sector actors. In particular, the regimes used guaranteed jobs, lifelong pensions for these sectors and their descendants, subsidized goods such as durable and nondurable goods and housing. Our case studies show that social policy legacy; particularly hierarchical social policies continued in the aftermath of transition and were even extended to new groups in new democracies. In this respect, this study examines this retrenchment from the view of political parties, adding the motivation of political parties to the social policy discussion (Kaufman 2009).

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Do development strategies play a role in these hierarchical social policies? The answer is yes, in line with the legacy argument, for example, Haggard and Kaufman (2008) and (Huber,

Mustillo and Stephens 2008) argue that the middle-income countries of Latin America favored the middle class and organized labor at the expense of the workers in urban informal sectors and the rural poor in the pre-1980 era. The import-substitution development strategy of Latin

America versus the statist economic model of postcommunist Europe determined the way social policies have been designed (Haggard and Kaufman 2008). Those countries such as Turkey and

Poland which could not enlarge their middle income groups excluded an important segment of society from social welfare policies. They perpetuate the hierarchical nature of social policies.

One of the reasons for these hierarchical social policies is that social welfare systems in these countries are occupational-based. Lynch (2006) categorizes welfare programs into two basic types: citizenship-based welfare programs and occupational welfare regimes. Although most of the countries started with occupational welfare programs, some switched to the former in the post-1945 era. The occupational based welfare programs are more elderly-oriented and favor labor market insiders. In this system, the current and former members of the core work force are most protected, and new (potential) employees have a hard time gaining entry into the system.

Like many developing countries, new democracies imitated the social welfare policy of Western

Europe and implemented similar programs. These programs did not change in new democracies and did not turn into citizenship-based welfare programs, as in many more established and richer democracies.

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Labor Market Insiders and the Continuation of Hierarchical Social Policies In the aftermath of transition to democracy, labor market insiders constitute the major electoral bases of both the ex-authoritarian and new parties, whether left-wing or right-wing.

Pensioners, workers, civil servants and other groups have diverse political lineages and economic interests. These groups are not the electorate of any one particular party. Our case studies show that even the right-wing parties also receive significant votes from pensioners and workers for several reasons including clientelistic policies, religious and ethnic reasons.

Our theoretical and empirical findings concur with Rodrik‟s (1998) compensation theory.

On the other hand, they do not support Rudra (2008)‟s argument that the labor market insiders are the ones that globalization has hurt the most as a result of decreased social spending. The poor on the other hand did not benefit from the previous social policies and economic restructuring seems to have done little to change that. On the contrary, as this study shows, the middle classes are still able to mobilize effectively and demand that governments continue targeted compensation at the expense of universal social policies. However, we should keep in mind that Rudra‟s analysis is based on India, South Korea and Brazil where she argues that the trade unions were not able to defend the interests of skilled labor against government retrenchment. The difference may be because she examined the cases where globalization has affected the most, and where the middle class is weak. It should also be noted that she does not take into account regime type, particularly democratic nature of the regimes in which electoral process has significant effect on social policies. On the other hand, our findings are in line with her cross-national study (2004) where she suggests labor market insiders are privileged over the outsiders, mostly the poor in developing countries.

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Other insider groups should not be ignored as an important player in shaping social policies as well. Welfare bureaucracies, union or business elites have acted depending on context to reform or defend existing welfare schemes (Cook 2007; Hellman 1998). As Cook (2007:5) argues, „benefit recipients, trade unions, public-sector organizations, and women‟s groups use political alliances and electoral feedback to resist cuts and negotiate compensation.” Even though as she argues, governments have more power and fewer political constraints, they may resort to retrenchment. However, our case studies show that when governments have to implement retrenchment policies under the pressure of the IMF or other international actors, they do it selectively, not hurting their electoral bases. For example, the ODS government in the Czech

Republic or the JDP government in Turkey were selective in cutting and expanding social spending over groups. As we see in Turkish case, social assistance programs were launched to lower income groups by the JDP government.

Political Party Institutionalization One of the major potential contributions of this study is to take our attention to the weakness of political party institutionalization in new democracy. Previous studies assume the existence of political party systems analogous to developed democracies of Western Europe and predict the positive effect of democratization on income equality. However, in new democracies, political parties operate under very difficult electoral environments in which they face the constant risk of the staying out of the parliament and the extinction (Bernhard and Karakoc

2008). Therefore, the programmatic character of political parties in new democracies is a rare found phenomenon (Mainwaring and Torcal 2006).

As political parties are discredited in the eyes of the public amidst political and economic transformation, instable coalition governments become the norm of the day. Under such

345 circumstances, it is difficult to from governments of programmatically compatible parties. In other words, “the less institutionalized the party system, the more difficult it is to generate vertical accountability”, which spills over to opposition parties, reducing their credibility as well

(O‟Dwyer 2006:2). While O‟Dwyer (2006) argues that parties of power use public policies to build their organizations such as employing their supporters in state bureaucracy, this study analyzes how these parties use social policies to satisfy a larger segment of society that will make them a competitive political party.

This study also suggests that under such highly volatile electoral party systems, political parties tend to develop similar policies that appeal to their core groups as well as groups that do not have strong party identification. Occasionally, they may appeal to the same groups for a variety of reasons. The most conspicuous example is working class of Poland, which are divided along secular/religious dichotomy. For example, in the 1990s, while religious voters voted for the Solidarity- based parties, secular workers voted for the SLD.

Roberts (2010) confirms the blurred distinction between party programs in the postcommunist countries. He finds no clear policy distinction in the party programs in postcommunist countries while they are responsive to public opinion. As a result, the choice of voting for a particular party is heavily influenced by factors other than the party platform of the parties. The lack of distinctive party programs in the elections makes clientelistic social policy an important tool for parties if they want to appeal to electoral base of another party (Roberts 2010).

This reflects itself in the relationship between pension replacement rate (percentage of received pension over regular salary for a particular occupation) and electoral volatility. Andrews Roberts shows that pension replacement rates are correlated with volatility scores as the rate is higher in

Poland than the Czech Republic.

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As we noted throughout this study, high volatility in new democracies results in inefficient public policies. A recent study argues that democracies are electorally accountable, mandate responsive and policy responsive. And due to the presence of these three factors, democracies end up producing better outcomes (Manin, Przeworski and Stokes 1999). However, as Roberts (2010) shows, new democracies perform badly on mandate responsiveness. Citizens do hold governing parties accountable for policy decision and if they do not approve, they punish them in the next election. As for mandate responsiveness, it suggests that parties present clear and meaningful programs in their electoral campaigns and in the party programs. However, there is not a clear distinction between party programs in the postcommunist context. The ongoing high volatility in the aftermath of transition and economic difficulties results in the party programs that offer similar policy positions. Andrew Roberts (2010) support this conclusion, finding less clarity in the party programs of postcommunist democracies than in that of long- standing democracies.

The convergence of party platforms has some consequences on citizen welfare and the quality of democracy. Our findings in part support a recent study by Bernhardt, Duggan and

Squintani (2009) who argue that this convergence of party platforms reduces voter welfare while the divergence increases it. This study finds that the convergence of party platforms increases the welfare of organized and core constituency of parties while this is not true for the rest of it.

Our findings do not support O‟Dwyer and Kovalcik (2007) who argue that underinstitutionalized party systems insulate weak executives in parliamentary systems from popular pressures in the second generation of the reforms in the region. These governments, they argue, launch radical reforms that strongly institutionalized parties could not implement. They give examples of how governments reduced social benefits, increasing protest from both the

347 working class and the poor. However, they ignore that the parties implementing these reforms could do so because of weak linkages with a working class base. As our cases illustrate, governments design policies that do not significantly affect their electoral support among social groups and do not hesitate to engage in cuts in spending for social groups from whom they do not have expectations of support in elections. In addition, they talk about reforms in Slovakia.

However, volatility in the Slovak party system was more stable than the 1990s of Poland and other volatile postcommunist countries. It would have been more difficult to do the reform in

Slovakia. Furthermore, even in the region, those that adopt liberal economic policies were heavily punished and that is why governments remained responsive despite economic constraints. In summarize, we conclude that weak party institutionalization with weak executive did not insulate the parties from popular pressure in executing first-generation economic reform policies.

Populism As suggested above, “underinstitutionalization means that rather than choosing among a manageable number of familiar and relatively stable parties, voters are faced with too many party choices, many of them new, unfamiliar and having uncertain prospects.” (O‟Dwyer 2006:25).

This environment creates suitable political environment where populist parties mobilize disgruntled citizens who look out for new outlet to try in electoral arena. There is strong evidence for this in our case studies of Turkey, and Poland, and in other postcommunist countries, e.g. Bulgaria.

When the populist parties come to power, they initiate new policies that aim at least to keep their base. As populist governments have difficulty coping with increasing spending, they resort to newly popular social assistance programs toward lower income groups. In addition,

348 they cut benefits for those who enter job market and prioritize contract jobs which do not give tenure to new workers in public sectors. In particular, populist leaders while cutting benefits for the insiders, which are associated with established parties, design policies to capture the votes of the outsiders.

Populist parties resort to new type of policies in neoliberal age by taking the route of launching neoliberal reforms. This creates a marriage of convenience between liberal technocrats and populist leaders (Weyland 1999, 2003). New neoliberal populist leaders target social groups that have less party identification and disgruntled ones and are able to be an effective force. For example, even though neoliberal populism curbed the power of unions and thereby their power, the JDP of Turkey has increased certain pensions but at the same time like Menem and Fujimori launched new social assistance programs toward the poor, the disabled and others (Weyland

1999). In addition, the JDP government has played around with the mix of social policies, favoring non-targeted social over targeted social spending. In particular, the government has increased spending in health care and education since coming to power. In addition, it increased benefits and salaries for disability programs and pensions. As a result, it was able to reduce income gap between the poor and the rich as a result of targeted policies toward lower income groups. Along with these policies, its increased spending the health-care boosted its electoral win in the 2007 election. In Latin America, countries that have stable political party systems and parties (e.g. Argentina‟s Peronists) have been able to use social assistance programs to mobilize lower income groups to limit the power of the unions and their control over the party (Kurtz

2004). This neoliberal populism has been successful at least in the short term. While such policies have demobilized organized interest supporters for its proponents, but this has been

349 compensated for with the mobilization of new voters through social assistance programs

(Weyland 1999, 2003).

Turnout Our research also speaks to voting turnout in democracies. It agrees with Solt (2008) and

Anderson and Beramendi (2008), who find that income inequality reduces participation. The latter shows that people below the median income in society is less likely to participate in elections while those above the median income is more likely to participate. However, overall income inequality affects all income groups equally, which suggest the linear negative effects of inequality on participation in OECD countries. Some studies such as Krishna‟s edited volume

(2008) that included Bratton (2008) on Africa, Booth and Seligson (2008) on Latin America and

Krishna on India showed that there is no difference between the poor and the nonpoor.

However, the difference in these two findings may come from the fact that this study, Solt (2008) and Anderson and Beramendi (2008) examine the middle-income countries while Krishna,

Bratton and Booth and Seligson (2008) do empirical analyses in low-income countries.

However, it seems that as it happened in the Spanish case, the strong left movements in Central

American countries, India and African countries, mixed with clientelistic policies may propel the mobilization of the poor.

Multi-Method Approach This study offered a theory in Chapter 2 that embodies “explanations of the phenomenon under investigation”, and at the same in subsequent chapters it demonstrated “explanations for the evidence concerning phenomenon” (Tilly 2008:47). While doing this, it combined more than one methodology. The combination of more than one form of inference is an increasingly common research strategy in social science. And the combination of large- and small-n modes

350 of inquiry is a powerful tool to establish plausible causal theories that can be demonstrated to be valid for a larger set of countries. Emphasizing the utility of large-N and paired-case studies within most-similar research design, this study brings together these two approaches, empowered by fieldwork and an original survey, to answer an important puzzle in comparative political economy literature. In particular, controlling for “common systemic characteristics” and examining “intersystemic differences” paired comparison case studies were able to utilize „dual process-tracing‟ in postcommunist Europe and Southern Europe respectively (Przeworski and

Teune 1970:33; Tarrow 2009).

The case analysis explored the potential causal links between variables in the theory, pointed out where it failed to hold, and in those cases investigated why the theory fell short. It showed in a volatile electoral environment, Poland was able to reform its social programs to curtail perpetual increases in social spending after two-years of intensive negotiation in the parliament. Similarly, after its first term, the JDP majority government in Turkey felt compelled to pass similar legislation after it understood that it could not continue to increase social spending. The Polish reforms in the second half of the 1990s showed the theory may explain how reforms can be done and which groups can be hurt most under conditions of electoral high volatility. The Turkish case, on the other hand, showed that the populist JDP could launch a reform under conditions of high volatility, but as our theory suggests, the cut in social spending hurt its reputation with the electorate. The Czech Republic case is interesting in the sense that growing volatility in the party system along instability in the governments led to significant increase in social spending. In other words, if Poland continues to stabilize its electoral volatility, it is possible that in the near future, Poland and the Czech Republic can be an example of the opposite roles in future case studies regarding social spending. As growing volatility increases

351 targeted spending in the Czech Republic and stabilizing volatility reduce it in Poland. However, this needs more time span to test it.

To summarize, this study uncovered a puzzling trend in new democracies and offered a new theory on the persistence of inequality. Our analysis has been limited to Europe as this is the only region that hosts a number of countries having continuous democratic regimes to test our theory. The theory, especially the link between organized groups and political parties and electoral volatility posed here may be applicable to other new democracies. Further analytical studies may test this assumption in the future.66

66 Voter turnout in the low-income countries may follow a different trend. For example, Bratton (2008) and Booth and Seligson (2008) find that there is no significant difference between the poor and the nonpoor in Africa and

Latin America. Although this requires more scrutiny, future studies should note this difference.

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EKREM KARAKOÇ

Department of Political Science Phone: (412) 296-0314 The Pennsylvania State University Fax: (814) 865-1911 224 Pond Laboratory [email protected] University Park, PA 16802 http://Ekrem.Karakoc.googlepages.com

EDUCATION

Doctor of Philosophy, Political Science, Penn State University, PA 2010 Major Field: Comparative Politics Minor Fields: International Relations and Political Methodology Dissertation Title: Democracy and the Inequality Paradox: How Democracy Has Increased Income Disparities in Post-Communist and Southern Europe. Committee: Michael Bernhard (Co-chair), Lee Ann Banaszak (Co-chair), Chris Zorn, Burt Monroe, and Mark Anner (Labor Studies).

Graduate Program in Political Science, Miami University, OH 2005

Master of Arts, Political Science Indiana University, IN 2004

Bachelor of Science, Arts, Sociology & IR, Koç University, Istanbul 1998

PUBLICATIONS

• “Civil Society and the Legacies of Dictatorship.” World Politics (July) 2007, with Michael Bernhard. • “Moving West or Going South? Inequality and Institutionalization in Post-Communist Party Systems” Comparative Politics (forthcoming), with Michael Bernhard.

UNDER REVIEW

• “Economic Inequality and its Asymmetric Effect on Civic Engagement: Evidence from Postcommunist Countries”

• “Religion in Politics: How Does Inequality Affect Secular Attitudes?” with Birol Baskan.

• “Globalization and Anti-Foreigner Sentiments: A Multi-level of Analysis” with Yunus Kaya.

WORKING PAPER

• “Bonding and Bridging Associations in Ethnic Context: Their Differential Effect on Political Participation” with Lee Ann Banaszak.

• “Heterogeneous attitudes towards globalization: Does social spending help?” with Andreea Mihalache.