Shock therapies and the never-ending transition
The World Bank announced that by joining the European Union, the transition of the former socialist countries (Hungary, Estonia, Latvia, Lithuania, Poland, Czech Republic, Slovakia, Slovenia, Bulgaria, and Romania) ended in 2004 and 2007 respectively. The reason for this conclusion is that all countries have gained their economic output from the peak before the collapse of the dualist world system, meaning that after 20 years of inflation, struggle and macroeconomic instability, the GDP per capita surpassed its maximum value from the 1980s.
Nevertheless, solely the GDP does not tell much about the living standards of people. In every single country the Gini-Coefficient – a tool to measure economic inequality – rose, indicating the emerging, and later widening, gaps between the classes. Although this is a logic consequence related to the price liberalization, privatization and decentralization, unemployment rates occurred, which had not existed before. In 2002, more than 10 years after the collapse of the socialist system, in Poland, Bulgaria and Slovakia up to 20% of their citizens were unemployed, in the former Soviet countries of the Baltics, unemployment rose to 12%. These experiences cannot be ignored easily.
Different strategies were applied to cope with the challenges of the system shift: in Poland the economic shock therapy – a set of intense short-term measures to introduce trade liberalization, privatization and monetary stabilization – is nowadays perceived as both a success story and failure, while other countries dealt with much slower gradual steps to refrain from their prior model. Either way, due to the lack of employment in the first decade of transition, still in almost all former socialist countries (excluding the Czech Republic), poverty rates are between 15 and 20%. Leaving both the oldest and youngest members of the labour force in precarious conditions, there has been much space for Eurosceptic or nationalist ideologies to blossom.
Both the low turnout at the European Parliament elections in May 2014 and the chosen parties in the Eastern countries drew a picture of distrust and frustration regarding the European Union. Not enough, the current economic sanctions against Russia reinforce the underlying anger, since especially small- and medium-scale businesses as well as peasants are hit by the prohibition of exports to Russia.
While the consequences of these challenges are manageable, in Georgia, Ukraine and Moldova the influence of Russia and the Eurasian Economic Union matter: in spite of the signed economic Association Agreement between the EU and these countries, the self-proclaimed independent regions of Transnistria (Moldova), South Ossetia and Abkhaiza (Georgia) and the Ukrainian disputed areas Donetsk and Lugansk expressed the will to cooperate with the Eurasian Economic Union. Although they have not achieved independence, these regions continue to play a crucial role in destabilizing these countries of the EU’s external frontier.
Without being clearly visible, a complex combination of poor economic decisions, historic traditions and political challenges reinforces old tensions existing in countries that are still stuck in their transition period. Both a silent influence from Putin and the emergence of internal populist movements as a consequence of the paradigm shift in (Central) Eastern Europe can stir anger and doubt – a development which cannot be ignored by the EU in the long run.
European Commission: Memo on the EU’s Association Agreement with Moldova, Georgia and Ukraine
Foreign Policy: Putin’s Eurasian Dream Is Over Before It Began
E-International Relations Students: The Failure of Neoliberal Transition Policies in Eastern Europe Post-1989
Cover Photo: „Support the union of sickle and hammer“ flickr.com, user: James Vaughan
Side Photo: Alice Greschkow