States' Performance, Reforms, and Policy Capacity in Southern European Countries

Southern European countries have always been a problem in the varieties of capitalism (VoC) framework. In particular, the Old Southern Fours (OSFs), together with France and Turkey, have been characterized by a hybrid type of capitalism. According to Hall and Soskice (2001, 21), “they may constitute another type of capitalism, sometimes described as 'Mediterranean', marked by a large agrarian sector and recent histories of extensive state intervention that have left them with specific kinds of capacities for nonmarket coordination in the sphere of corporate finance but more liberal arrangements in the sphere of labor relations”. Thus, these four countries appear to be different from liberal market economies (LMEs), in which there is arm's-length interaction among market actors and the State behaves as a distant regulator, and coordinated market economies (CMEs), in which the State matters greatly since it plays the role of active promoter. In the four Mediterranean countries, the State is considered to play an active interventionist role to compensate for the weaknesses of institutional arrangements/complementarities. As a result, the State is a significant driver of the development of capitalism. Thus, economies embodying this third type of capitalism have been variously called mixed market economies (MMEs) (Molina & Rhodes, 2008; Featherstone, 2008; Hopkin and Blyth, 2012; Paraskevopoulos 2017) or state-influenced market economies (SMEs) (Schmidt 2007). This hybrid type of capitalism is characterized by a high level of “statism” in the political economy due to the weaknesses of institutional conditions. At the same time, the high grade of statism does not guarantee effective policies that compensate for institutional weaknesses. From this point of view, then, statism has not been capable of ensuring some form of coordination to ensure the needed institutional complementarities. The State has been particularly weak in guaranteeing three pivotal drivers when the quality of government is assessed: (i) government effectiveness; (ii) bureaucratic efficiency; and (iii) regulatory quality (Rothstein, 2012; Rothstein and Teorell, 2008). It could be said, then, that the hybrid type of capitalism is characterized by a paradox: the need for active statism in the presence of a weak state is clearly represented by the inefficient and often ineffective performance of the related public administration. Thus, exactly where there is the need for dense and deep intervention by the State, the State has been as weak, ineffective, inefficient, and often characterized by particularistic, rather than universalistic, actions. As is well known, a full Weberian state did not develop before the beginning of the democratization process, and this fact has been the cause of porosity and a lack of resistance with respect to the invasion of new democratic political élites (Morlino 1998). Thus, as described by some seminal studies (Sotiropoulos, 2004; Kickert, 2007 and 2011; Ongaro, 2010a), in Southern Europe, the State has been characterized by recurrent evidence of (i) centralism; (ii) political control over bureaucracy; (iii) lack of reputable administrative elites; (iv) party patronage and clientelism in personnel recruitment (including a conservative role played by public sector unions); (v) legalism rooted in the Napoleonic tradition, complemented by informal shadow governance structures; (vi) uneven distribution of resources; (vii) institutional fragmentation; and (viii) insufficient mechanisms for policy coordination (Barzelay and Gallego, 2010). These common characteristics had driven us to emphasize the trajectories and the results of the common efforts toward pursuing administrative reforms as very similar. However, as we will see, not necessarily similar conditions of departure lead to common results. It is not a case, for example, that even if they are very similar with respect to the role of the State and the characteristics of public administration (as well other social, cultural and economic aspects), the OSFs also experienced relevant differences in the timing of democratization and in their political systems and decentralization. Thus, we could expect that some differences should have developed over time in the role and characteristics of the State and its contribution to expediting the modernization and development of these countries. Furthermore, inefficient state action is a common problem that has often appeared in the policy and political agendas of these countries. The idea that the State, its bureaucracy and the features of policy making should be reformed has always been very high on the agendas of all four countries. Thus, these countries’ public administrations have been targets of repeated attempts at reform. For instance, since 2010, all four countries have shared the commonality of external pressures promoting State reforms in light of fiscal crises (Ongaro, 2010a). While regarding Greece, this fact has been documented by a steep path of provisions enacted by the central government to adjust the public sector to financial needs (Featherstone, 2015:301), similar evidence is not available for all remaining three. However, in general, the prevalent and diffused poor performing that induced the fiscal crisis is well displayed by financial indicators and the subsequent recommendations provided by the EU and the World Bank. As a result, reforms have been adopted in light of different contingencies and with different intensities but are uniformly associated with financial indicators (e.g., the spread). These attempts at reform have obviously tried to remove the obstacles to a more strongly performing role for the State in the related socioeconomic systems and thus to render it more coherent and congruent with respect to the need for systemic coordination. Overall, the comparative literature has substantially agreed on the OSFs not only having a common Napoleonic tradition but also having modernized in very similar ways with very similar results (Sotiropoulos 2004; Ongaro 2010b; Kickert 2011). Thus, the contribution of public administrations to the socioeconomic development of these countries and to the transformation of the forms of national capitalism have been very poor or negative. However, is this statement completely true? Have these countries developed similar administrative reforms with similar timing and similar targets? Have these four states changed in very similar ways in terms of centralization/decentralization and roles in public policies? Are the national bureaucracies so politicized that they impede the effective neutrality/proactivity of state intervention? Finally, are the results of the diachronic evolution of the four states truly as similar as argued by the literature? As we will show in this chapter, the response to these questions will not confirm, unlike the literature that has underlined and emphasized the similarities among the OSFs, that they underwent different trajectories of administrative reform that have produced different outcomes in terms of improvement of the state policy capacities. Portugal emerges to have developed a very deliberate and effective trajectory that has allowed the country to significantly improve its State policy capacity. Spain has reached some improvement despite institutional resilience and conflictual intergovernmental relations, while Italy has not been capable of improving its weak policy capacity due to the schizophrenic oscillation of the reforms (Italy). Finally, Greece has not been capable at all of improving its original very weak State policy capacity due to a substantial lack of real attempts to improve administration performance.