- The EU’s other Periphery Archived Message
Posted by Tomski
on July 29, 2019, 1:35 pm
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https://off-guardian.org/2019/07/27/the-eus-other-periphery/ We’ll start with the 10 per capita poorest countries in the whole of Europe. In rank order: Moldova – GDP US$2560 Ukraine – GDP US$3560 Kosovo – GDP US$3990 Albania – US$4450 Bosnia and Herzegovina – GDP US$4769 Republic of Macedonia – GDP US$5150 Serbia – GDP US$5820 Montenegro – GDP US$7320 Bulgaria – GDP US$7620 Romania – GDP US$9420 Average per capita income in Europe as a whole is US$37,317 (2018 figures). What is noticeable is that most of these states are situated in either the Balkans or South-Eastern Europe. But that is not the end of the story. Portugal, the poorest country in western Europe with GDP standing at US$238billion, is just pipped by the Czech Republic (now Czechia which is actually in the centre of Europe) as the star performer of the East whose national income stands at US$ 240,105.million. Thus, in terms of per capita income the Czech Republic is the sole representative of the ex-Soviet states in Europe. This geopolitical and economic cleavage could hardly be starker. These two Euro-zones replicate the division of North and South between the US/Canada and central and Latin America. Much of the attention to European development – or the lack of it – has been preoccupied with the gap between the West and South of Europe. This present schism is attributable to tried, tested, and failed economic strategies promulgated by the various institutions of globalization: the IMF, WB, WTO and so forth. The single currency, the euro, became legal tender on 1 January 1999 and was adopted by most of the countries in the Euro area. But this proved to be the undoing of the political economy of the South. When different sovereign states are responsible for their own economic policies and are able to print and issue their own currencies on world markets, any distortions and maladjustments which occur in trade balances is alleviated by changes in exchange rate values – in short, devaluation. This will hopefully restore such imbalances and return to a trade equilibrium. However, this policy is, now, no longer available to the Southern European states since they no longer have their own currencies and, in addition, are under the tutelage the European Central Bank (ECB). The Southern periphery are now are using the same currency as the Northern European bloc, the euro, and required by the ECB to take on a one-size fits all monetary policy. Devaluations are therefore ruled out. Given the higher productivity levels and lower costs of Germany, Holland, Sweden, France and so forth, the Southern peripheral states have begun to run chronic balance of payments deficits. The only avenue left open to them is what is termed ‘internal devaluation’ – i.e., austerity. This results in low growth, high unemployment, high migration, depopulation, cuts in public spending and the rest of the IMF’s Structural Adjustment Policies – policies which have failed just about everywhere. So much for the southern periphery. Focus on Eastern Europe sheds light on a different set of problems. Most Eastern European countries, Bulgaria, Croatia, Czech Republic, Hungary, and Poland kept their own currencies; apart that is from basket cases like Latvia whose government, unlike the people, went where angels feared to tread – into the Eurozone and the euro. (N.B. Some Western European countries, e.g., the UK, Denmark, Switzerland and Norway did – wisely – keep their own currencies.) Excluding Russia, of course, these Eastern European states – termed ‘transitional economies’ – have become stalled in economic stagnation which so far has been difficult if not impossible to overcome. These obstacles have been specific to the Eastern periphery. The European Union now consists of 28 states. No fewer than 10 of these are former states of the Eastern Bloc, and this proportion is set to grow with the impending accession with some minor Balkan nations. Although Georgia and Ukraine are in line for membership of the EU, they are also expected to join NATO as has become customary for aspirant EU states. Whether they obtain either is a matter of conjecture, however, as this would be almost certain to cross Russia’s red lines and result in a major geopolitical flareup. Europe’s centre of gravity is shifting. And while the process of joining the European Union is driving change within these countries, it is also changing the nature of Europe itself. WHERE’S MY PORSCHE? Those Eastern European states which emerged from the break-up of the Soviet Union had been led to believe that a bright new world of West European living standards, enhanced pay levels, high rates of social mobility and consumption were on offer. Unfortunately, they were sold an illusion: the result of the transition so far seems to have been the creation of a low-wage hinterland, a border economy on the fringes of the highly developed European core; a Euro version of NAFTA and the maquiladora, i.e., low tech, low wage, low skills production units on the Mexican side of the US’s southern borders. This has had wider political and social ramifications for the entire European project. The Brave New World envisaged did not have any basic guiding principles or planning other than the usual neoliberal prescriptions of privatisation-deregulation-liberalisation, the well-thumbed policy triad of the neoliberal playbook. Central to this policy implementation was a controversial prescription called ‘shock-therapy’. The fact that this policy had already been tried in Russia and failed spectacularly, didn’t seem to worry the PTB. Such is always the case with religious beliefs. The doctrine itself had become popular among the ingenues and opportunists of the old ‘workers states’. Shock-therapy was designed to wipe-away all the old fuddy-duddy notions about state interventionism, welfarism, social and national protection; measures included the sudden removal of subsidies, fire sales of state assets (privatisation), and the abrupt removal of the controls and subsidies that had formerly applied to wages and prices. But the neoliberal militants insisted upon a policy of ‘freeing up’ the markets which, according to them, would maximise growth and development. Predictably of course, these policies also opened these countries to maximum – and often predatory – western penetration and influence. The shock was timed to occur before the establishment of financial markets within the region and, in the absence of investment capital, restructuring efforts became focused on labour – on reducing the unit cost of labour in order to become “competitive”. It should be understood that in neo-liberal, supply-side, economics the road to wealth and prosperity entailed policies that actually make their populations poorer. There seems to be a slightly Orwellian flavour here. ‘Poverty is Wealth.’ The wave of mass unemployment that this generated in the early 1990s goes well beyond the experiences of British recessions of the 1980s, with unemployment in some regions reaching 80 per cent. Shock therapy deliberately engineered a slump in the economies of the region, by shattering the region’s economic links, and then creating a massive domestic recession. SHOCK-THERAPY – ALL SHOCK NO THERAPY Regardless, the show must go on. The neoliberal religion taken up in many of these states, often by former members of the Communist nomenklatura, which resulted in high levels of structural unemployment were actually meant to do that, at least in the short-term. Painful as it was bound to be, this was the necessary shakeout of an inefficient and cosseted workforce and therefore the absolute precondition which would catapult these formerly backward economies into lean and mean competitors on Europe’s markets and the prelude of an entry into the developed economies on the Western European and US model. Yeah, right. In the real-world Michael Hudson[1] analysed just how this process panned out in Latvia. Etc. |
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