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opposition. German, French, and Dutch core voters, among many others, are
unlikely to agree to delegate the management of fiscal policy to an upper body
where potential recipients of transfers have a strong political presence. A proper
integration of fiscal policy would entail distributive implications that seem, at
this point, politically infeasible.
Unless, that is, the short-sighted patches and the lack of medium-term eco-
nomic strategy in response to the crisis manage to transform the Great recession
into a second Great Depression throughout advanced European economies. As
this topic has shown, the push for fiscal integration derives frommajor transfor-
mative crises, where cross-regional economic and social externalities operate
as a risk multiplier across jurisdictions, as a process causing risks to be no
longer restricted to subnational entities. Only then, when a majority of Ger-
man, French, British or Austrian voters, to name just a few, ask for solutions
that their governments alone will not be able to provide, will the integration of
fiscal policy in the EU become politically feasible. The paradox, central to the
strategic interaction among myopic incumbents responsive to their electorates,
is that the early adoption of fiscal integration could avoid the very social and
economic distress that seems necessary for fiscal integration to become a viable
political option.
SOME BROADER LESSONS AND THE ROAD AHEAD
This study of the relationship between fiscal structures and inequality, has
shown that the observable associations between institutions and social out-
comes result from a process of endogenous self-selection (Przeworski et al.
2000
). As stated throughout this research, if an association between decentral-
ization and inequality is observable, it is so because decentralization alters the
distribution of income and also because the geography of economic inequality
works, (under the specific economic and institutional conditions established
above), to produce and sustain specific fiscal structures. This process triggers
a dynamic, bidirectional, and at times mutually reinforcing relationship. It
follows that the reasons institutions matter are linked to the reasons these
institutions came into existence in the first place.
This result bears important implications for ongoing debates on the rela-
tionship between political institutions and social outcomes. The institutionalist
turn in comparative political science has been very helpful in preventing a sort
of naive economic approach according to which politics is just a mere reflection
of the working of a number of economic factors. This research has shown that
political institutions make a difference to a wide array of political processes
taking place under similar economic circumstances (Pierson and Skocpol
2002
:
693-722; Thelen
2010
).
However, in its efforts to substantiate the impact of institutions, the analysis
of the relationship between institutions and social outcomes may have gone
too far in the opposite direction. There is a tendency within institutionalist
literature to assume that institutions matter, per se, beyond the social and
