Transcript transition to market economy

THE IMPACT OF THE EUROPEAN UNION
ON
TRANSITION IN CENTRAL AND
EASTERN EUROPE
3nd PhD Summer School: Governance and Democracy
in CEE
Lüneburg University, Center for the Study of Democracy
August 23, 2007
Darina Malová
Comenius University, Bratislava,
financial support accorded by the Slovak Research and Development
Agency (No. APVV-0660-06) to fund research on new member states’
strategies in the EU is gratefully acknowledged.
Outline of the presentation
1. The outcomes of the transition to market economy.
What kind of capitalism has emerged in the eight new
member states?
–
Mostly liberal market economies have emerged in NMS (with exception of
Slovenia), characterized by the absence of inclusion of social actors in ‘building
capitalism by democratic design’.
2. What is the role of the external and internal political
actors in the transformation process?
–
Has the European Commission working closely with other IFIs promoted liberal
market economy in CEE and three Baltic states? Are domestic actors political
and social actors weak vis-à-vis EU? Why there are differences among NMS?
3. Does it matter? (for the European Union and/or the
European Social Model and/or quality of democracy)
The return to Europe: the triple transition and
EU Copenhagen criteria
The candidate country has achieved stability of institutions
guaranteeing democracy, the rule of law, human rights and
respect for and protection of minorities (transition to
democracy)
The existence of a functioning market economy as well as the
capacity to cope with competitive pressure and market forces
within the Union (transition to market economy)
Membership presupposes the candidate’s ability to take on the
obligations of membership including adherence to the aims of
political, economic and monetary union (the state building
process).
Theory of varieties of capitalism
(Peter Hall and David Soskice, 2001)
Two ideal types according to the “social” role of industrial firms:
1. Coordinated market economies
–
–
–
–
–
–
high union density
strong employers organizations
strong social dialogue on national and/or sectoral level
high level of collective bargaining coverage
significant workers’ participation in firm
employer’s participation in vocation training oriented on specific skills
2. Liberal market economies
–
–
–
–
–
low union density
weak employers organizations
weak social dialogue on firm level or no existent at all
weak or non-existent workers’ participation in firm
formal vocation training oriented on general skills
Economic and social outcomes of the triple transition
Sources: Union density (1. National statistics, self-reported date (Maria Lado, ILO), 2. World Values Survey
1995-97, Vaughan-Whitehead, Gini: UNDP, LIS
Union
Density
(1995-1997)
Dominant level
of bargaining
Gini
index
Slovenia
41.3
Intersectoral
28.4 (1998) 22.0 (2002)
Hungary
20.0-17.0
Firm
24.4 (1998)
26.0 (2000)
24.0 (2002)
Poland
15.0-12.7
Firm
31.6 (1998)
31.0 (2002)
Czech republic
30.0-24.1
Sectoral
25.4 (1996)
25.0 (2003)
Slovakia
40.0-27.9
Sectoral
26.6 (1998)
31.1 (2003)
Lithuania
15.0
Firm
36.4 (2000)
30.4 (2002)
Latvia
30.0
Firm
32.4 (1998)
34.1 (2002)
Estonia
15.0-17.6
Firm
37.6 (1998)
34.2 (2003)
EU average
43.8-33.7
9 out of 14 sectoral
Institutions of labor inclusion in 2003
Sources: Visser J. (2005): Patterns and Variations in European Industrial Relations. Report prepared for the EC.
Centralization of
wage bargaining
index
Coordination of wage
bargaining
Collective bargaining
coverage rate
Estonia
0.25
1
21-30
Latvia
0.30
1.5
11-20
Lithuania
0.23
1
11-20
Baltic avg.
0.26
1.2
14-23
Czech R.
0.27
1
21-30
Hungary
0.26
2
31-40
Poland
0.2
1
41-50
Slovak R.
0.33
2
41-50
Visegrád avg.
0.26
1.5
33-42
Slovenia
0.43
4
91-100
EU-8 avg.
0.28
1.7
33-42
EU-15 avg.
0.46
4.5
66, variations from 40
(UK) to 90 (Be, Fi,
Swe,Fr, It)
Varieties of Capitalism in CEE: Macroeconomic
Indicators (according to D. Boehle, 2007)
Governmen
Index of
t
Economic
expenditure
Freedom
/GDP (2003)
(2006)
Budget
Deficit
(2003-2004,
% GDP)
Public Debt
(2003-04, %
of GDP)
State Aid (%
of GDP)
Neoliberalism
(Baltic
States)
2.1
34.1
- 1.1
13.6
0.3
Embedded
Neoliberalism
(Visegrád)
2.3
45.6
5.8
46.8
1.9
Neocorporati
sm
(Slovenia)
2.4
48.2
2.1
30.1
0.7
Germany
2.0
46.8
3.9
64.6
0. 9
Varieties of Capitalism in CEE: Social and
Labor Market Indicators
Social
Expenditur
e
(% GDP,
2003)
Gini
(2002)
Real wages
(2004,
1989 =
100)
Unemployme
nt
(2002-05)
Labor
Market
Flexibility
Trade
Union
Density
(2002 or
2001)
Neoliberalism
(Baltic
States)
13.4
33
81
10.4
51
17.5
Embedded
Neoliberalism
(Visegrád)
20.4
28
115
12.7
34
23.8
Neocorporatis
m
(Slovenia)
24.6
22
95
6.4
64
41
Germany
27.2
28.3
N.A.
9.1
55
23.2
The role of the European Commission in
transformation process
agenda setter
direct influence - promoting policies, laws
and institution
indirect influence - encouraging
emergence of political and social actors.
European Union as agenda setter
Why the EC opted for the ‘neoliberal’ agenda?
1.
First of all, a coordinated market economy is more
difficult to “promote” than a liberal market
economy. It is a result of negotiated forms of nonmarket coordination.
2.
The EC promotes and guards the competition rules
within the Single European Market.
3.
The EU market agenda is mostly compatible with
that of the IFIs, „Washington consensus“ - what is
good for transition.
European Union as agenda setter
4.
5. Since 1989, the European Commission has
coordinated aid from the G24 (including the OECD,
World Bank, IMF and Paris Club).
6.
The EC required to include “the social dimension”
into the Acquis just before the entry (1999 the
social dialogue and 2000 Lisbon Agenda). Too,
late, however.
Development of EU market conditionality
•
During 1989-1995 it primarily involved trade relations via
trade agreements that do not lead to accession.
•
It moved onto regulatory alignment via Association
Agreements, that aimed at extending the four freedoms of the
Single Market to EU-CEE relations.
•
Since 1998 via Accession Partnership the EU has shaped
many policy areas covered by any modern state.
•
Regular reports as an instrument for monitoring and
evaluating candidate countries based on the implementation
of Copenhagen Criteria.
•
Monitoring by EC continues due to the Maastricht criteria.
Economic priorities for the short term
Source: National Accession Partnerships (1998)
Czech Republic
implement policies to maintain internal and external balance
improve corporate governance by accelerating industrial and bank restructuring; implementing
financial sector regulation; enforcing Securities and Exchange Commission supervision
Estonia
sustain high growth rates, reduce inflation, increase level of national savings
accelerate land reform
start pension reform
Hungary
advance structural reforms, particularly of health care
Latvia
accelerate market-based enterprise restructuring and complete privatization
strengthen banking sector
modernize agriculture and establish a land and property register
Lithuania
accelerate large-scale privatization
restructure banking, energy and agro-food sectors
enforce financial discipline for enterprises
Poland
adopt viable steel sector restructuring program by 30 June and start implementation
restructure coal sector
accelerate privatization/restructuring of state enterprises (including telecoms)
develop financial sector, including banking privatization
improve bankruptcy proceedings
Slovakia
tackle internal and external imbalances and sustain macroeconomic stability
progress on structural reforms
privatize and restructure enterprises, finance, banking and energy-intensive heavy industries
Slovenia
act on market-driven restructuring in the enterprise, finance and banking sectors
prepare pension reform
Explanations: I. EU and its ‘neoliberal’ agenda
The nature of the accession process
characterized as a one-way transfer of EU
rules and norms. EU set priorities of
macroeconomic and also economic policies.
CEE governments (with exception of Slovenia)
mostly favored with TINA approach.
2. This type of EU conditionality continues and
EC monitors NMS and their economic
performance as a condition to adopt Euro.
1.
Explanations: II. Influence of domestic
political actors
1. How far fomestic politics, especially party
composition of governments in CEE
during the transition and accession
period can explain variations in the state
of market economies and societies?
2. Is there any left-right „logic“ in public
policies in CEE?
Election outcomes and government orientation
Source: Parties and Elections in Europe, at: http://www.parties-and-elections.de,
First elected
government
Second elected
government
Third elected
government
Fourth elected
government
Estonia
1992Right
1995Centre
1999Center-Right
2003
Center-Right
Latvia
1993Center-Right
1995Right
1995Center-Right
2002
Right
Lithuania
1991
Right
1992-96
Left
1996-2000
Right
2000
Center-Left
Baltic pattern
Right hegemony (except in Lithuania)
Czech R.
1992Right
1996Right
1998Left (minority)
2002
Left (minority)
Hungary
1990Right
1994Left
1998Right
2002
Left
Poland
1991Right
1993Left
1997Right
2001Left
Slovak R.
1992Left
1994Left
1998Right
2002
Right
Visegrád pattern
Right-left alternation
Slovenia
1990
Left
1992
Left
1996
Left
2002
Left
Slovenia trend
Left hegemony
Explanations: III. Influence of domestic
social actors?
1.
2.
3.
4.
Changes in the type market economy can be
conveyed also by social actors against the ‘will’ of the
ruling parties in government. At least, social actors can
have a role of veto players.
There is dominance of business groups over trade
unions.
Influence of pro-market oriented think-tanks in policy
making was and is important.
The recent developments in Slovakia illustrate the
power of foreign investors and Slovak managers,
which asked for the state intervention in vocational
training and also push for introducing Euro. (VW, PSAPegueot, Kia-Slovakia)
Conclusions and discussion

EC performed as the agency, influencing
transition to market economy.


Since the early 1980s the EU has promoted a new
mode of integration that seeks to reshape European
states with the aim of advancing the overall
competitiveness of the European economic space.
The Lisbon strategy requires all member states to
implement structural reforms (EU push for
deregulation, privatization, within a general
framework of macroeconomic stability.
Conclusion adn discussions
‘Old’ member states and EU neoliberal agenda

The „emulation“ of policies may continue. This time just
in the other E-W direction. According to some leading
politicians in the old member state, such policies
should be implemented also in their countries.

The leading figures and financial institutions behind the
reform packages are strongly convinced of the merits
of their case and of the superiority of their ideological
stance.

Margaret Thatcher’s dream came true, the eastern
enlargement has weaken the EU, at least its social
cohesion.