Academic journal article Capital & Class

From Transition Crisis to the Global Crisis: Twenty Years of Capitalism and Labour in the Central and Eastern EU New Member States

Academic journal article Capital & Class

From Transition Crisis to the Global Crisis: Twenty Years of Capitalism and Labour in the Central and Eastern EU New Member States

Article excerpt


It has been now twenty years since the transformation of the Central and Eastern European Countries (CEECs) from planned economies to capitalism. After the initial shock of transition, towards the end of 1990s, these countries were being praised as success stories. However, this evaluation did not incorporate the deviation between the performances in terms of GDP growth vs. the outcomes for the working class. This paper analyses the consequences of this policy framework on wages, employment, unemployment and income distribution in the CEECs after twenty years of capitalism, divided into three periods: 1) the transition crisis; 2) post-transition growth; and 3) the crisis episode of 2008-09.

The integration of the CEECs to the Western European market, and later Eastern enlargement of the EU, was expected to bring about the catching-up of these countries in terms of GDP per capita in the foreseeable future. This very optimism soon turned into an unquestionable dogma, particularly since any critique of the process was also perceived wrongly as constituting praise for the old, anti-democratic regimes of the region. The neoliberal economic policy framework maintained an uncontested hegemony under these historical conditions. The Eastern enlargement of the EU has also been designed as part of the neoliberal economic model, which perceives integration as being the extension of markets and the creation of new secure and profitable areas for capital mobility, with little concern for social cohesion. The official policy line of the EU was legitimised by the mainstream optimistic expectations from free trade and private capital flows, based on traditional trade theory. Different from the previous enlargement phases, during Eastern enlargement, the EU budget and the amount of structural funds have been very limited; and consistent with the neoliberal policy framework, the EU has abandoned the task of convergence to private capital flows and international trade. These are the objective conditions under which the Central and Eastern European new member states (CEENMSs) find themselves obliged to get involved in wage as well as tax competition in order to attract capital.

The global crisis of 2009 and its consequences for the region have now laid bare the major shortcomings of this policy package, which has few instruments to counter the shock. The effects of the neoliberal policy framework on macroeconomic performance proved to be far from sustainable during the global crisis, which made it clear that the dependence of the region on private capital inflows is a major source of risk. After the initial transition shock and a decade of restructuring, all the NMSs are now facing the costs of integration to unregulated capital markets, despite differences in their development trajectory.

The rest of this paper is organised as follows: the second section analyses the trends in labour market outcomes and institutions in the CEENMSs since the transition era. The third section discusses the expected consequences of the crisis both at a macro level and for labour; and the fourth derives the conclusions and policy implications.

Labour from transition to European enlargement

Labour market outcomes

The 1990s started with a severe transition crisis in the CEECs, with the cumulative loss in GDP ranging from 13.2 per cent in the Czech Republic to 22.1 per cent in Slovakia, and reaching up to 45 per cent in Latvia and Lithuania. Table 1 shows the period averages for annual growth rates in GDP, employment, productivity, and real wages. The transition crisis was replaced by a recovery in output starting in 1993-4 in the Visegard countries and Slovenia, in 1995-6 in the Baltic states, and in 1998-2000 in Bulgaria and Romania; but as the market transition matured, dramatic changes in the sectoral employment structure and wages emerged in the CEECs (Havlik and Landesmann, 2005; Boeri and Terrell, 2002). …

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