III Patterns and Lessons
Conclusions. From the Past to the Future of Fiscal Squeeze
After eight chapters examining the particularities of the politics of fiscal squeeze episodes—the stories that lie behind the reported financial outcomes we compared in Chapter Two—this chapter begins with a qualitative comparison of those episodes, considered in terms of loss imposition, political costs to incumbents, and effort by the state.
This comparison builds on our analysis in Chapter One (Table 1.2) and our summary assessments at the end of each of the 'episode' chapters. It reviews the intensity of fiscal squeezes in terms of the three qualitative dimensions of squeeze intensity that we identified in Chapter One and rated for each squeeze episode in the previous eight chapters.
When we compare our fiscal squeeze episodes in that way, bringing together our summary assessments at the end of the previous eight chapters, we find the 'loss imposition' element broadly corresponds to the intensity of squeeze as measured by hardness or softness on reported financial outcome measures in Chapter Two, but not necessarily with other financial outcome indicators commonly used in the 'consolidation' literature, notably of reductions in debt and deficit. The other two elements, the amount of political capital staked or reputation risked by incumbent politicians and the degree of effort expended by the state, do not seem to correspond very closely with intensity of squeezes measured in terms of financial outcome indicators.
This chapter then draws on the qualitative accounts of the previous eight chapters to explore how the fiscal squeeze 'game' seems to have changed over the century, going beyond the two trends that showed up in the statistical analysis in Chapter Two—that is, a certain shift (on the measures we used) to the more gradualist 'boiling frogs' approach away from 'surgery without anaesthetics' and an apparent shift away from hard revenue-led squeezes. In this section, drawing on the qualitative accounts of how blame was managed for fiscal squeeze in the last eight chapters, we point to the absence of moves towards outsourcing unpopular squeeze decisions to technocrats and experts, explore what might have changed in the factors triggering fiscal squeezes, and discuss what might be new about squeeze-related tactics such as 'stealth taxes', 'stealth' spending cuts or creative accounting, and 'bear traps' left by outgoing governments to constrain or embarrass their political opponents.
Third, bringing together the analysis of Chapter Two and the accounts given in the eight 'episode' chapters, we return to the issue of the consequences of fiscal squeeze that was raised in Chapter One. As we have seen in earlier chapters, fiscal squeezes commonly seem to have left noticeable political scars and memories that shape later actions. Each squeeze left something behind it in policy or procedural change, a few led to long-term abandonment of previous state activities (as opposed to temporary pauses or retreats) and one or two in the course of the hundred years might be seen as having constitutional consequences.
Further, we explore the electoral aftermath of fiscal squeeze. We noted in Chapter One that the general electoral consequences of 'austerity' are not clear in the fiscal consolidation literature. We do not dispute the conclusion of Alberto Alesina and his colleagues (2012), drawn from comparative research covering a period since the 1970s, that there is no clear correlation between incumbent loss of office and fiscal consolidation measured in terms of deficit and debt reduction, but we reach a different conclusion on the basis of our qualitative and quantitative indicators of squeeze intensity. When we look at fiscal squeeze on the basis of those indicators rather than debt and deficit reduction, we find that hard squeezes did indeed tend to be electorally toxic for incumbent parties over the century considered here. But they were not invariably so, and we comment on the few exceptions where incumbents survived hard squeezes.
Finally, having reviewed a century of fiscal squeeze politics, we look to the future. What will future fiscal squeezes look like if past trends continue? What would have to happen for those trends to be reversed? Can we expect the squeezes of the 2020s to resemble more closely those of the 1920s and 1930s or those of the last three decades?
