Was it really better to join the EU?

[Undecided]

Jubilation seems to have taken over Eastern Europe as of late over their ascension into the world's new “USSR”. The world's largest beaucracy has extended it's tentacles to the far flung regions of the fmr. COMECON region. With those new states coming into the fold hope has taken over. But one can argue that hope is misguided. The three major new states being Poland, Czech Republic, and Hungary are not exactly growing greatly. What a difference exists across the new EU border:


But the Central Europeans have achieved everything they can gain from EU membership, and they will stagnate if they do not liberate themselves from the petrifying EU model.
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Meanwhile, in a development that has gotten little notice amid the EU expansion hoopla, the post-Soviet countries further to the east have been booming since 1999. The nine market economies in the former Soviet Union (Russia, Ukraine, Kazakhstan, Moldova, Georgia, Armenia, Azerbaijan, Kyrgyzstan and Tajikistan) have on average grown annually by no less than 7 percent for the last five years. The new tigers are Kazakhstan, Russia and Ukraine -- far more so than Poland, Hungary or the Czech Republic. The three Baltic countries are doing significantly better than the Central Europeans, but not as well as their eastern neighbors.
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Why are the post-Soviet market economies doing so much better than the Central European ones?
The truth, which may shock you, is that the post-Soviet countries have a more efficient economic model than the Central European ones because they are free from the harmful influences of the EU. This is most evident in public finances.

In Central Europe, public expenditures amount to no less than 46 percent of GDP, as in Western Europe. Consequently, taxes are high and social transfers excessive. The Hungarian economist Janos Kornai has labeled the Central European countries "premature welfare states." Worse still, the Central European countries have maintained an unsustainable average budget deficit of 7 percent of GDP for the last three years. They seem reassured that the EU will bail them out.

By contrast, the Russian financial crash forced the former Soviet republics to cut public expenditures sharply, to no more than 26 percent of GDP -- that is, just over half the level in Central Europe. Taxes also have been slashed. Russia and Ukraine have adopted a 13 percent flat personal income tax. Kazakhstan has undertaken a Chilean-style pension reform, privatizing its social security system. Even so, these countries have nearly balanced budgets.
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Another major difference between the Central European and former Soviet countries is that the Central Europeans have much more regulated labor markets and higher taxes on labor, because Central Europe has adopted Western Europe's strict regulations. As a result, Poland has an unemployment rate of more than 20 percent compared with Russia's 8 percent. Regulations might be intimidating also in the former Soviet countries as well, but most are circumvented.
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Thus, the economic dynamism in Kazakhstan, Russia and Ukraine is in no way sheer luck. Their new economic model is reminiscent of East Asia's. Japan took off after World War II, and it was imitated by four East Asian tigers: Taiwan, Hong Kong, Singapore and South Korea. China, Thailand, Malaysia and Indonesia followed suit two decades ago.
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The point, rather, is that the EU model generates stable democracy but little economic growth. Today, Russian economists no longer look to Poland for a desirable model but to the thriving free markets of Kazakhstan, Singapore, South Korea and Chile. To them, Europe is both inhospitable and stagnant.


http://www.ceip.org/files/publications/2004-04-25-aslund-washpost.asp

These states are living outside their means; they are now going to rely on the good graces of Brussels for economic growth. These states outside the EU fold had a comparative advantage in terms of labour costs, now that advantage is all but gone. The Western Euros invested in the East to escape the intense labour laws, and low wages. The more lax relationship btwn private enterprise and gov't seems to be doing the CIS wonders. They have been growing at quite amazing rates (to be fair much of the growth does come from high oil, and commodity prices, and their proximity to the burgeoning Chinese market). Although for all states involved they have one nagging and persistent worry. Depopulation, most of them have a declining population and Russia for all its economic growth is not even close to its Soviet era standard of living. Also many of the states are starting from a low base so fast and impressive growth is not unusual, for instance this year Chad is expected to grow 58% in GDP. Another thing is that all these states have to make up for what they lost in the Soviet period. For the CE states, they have a morbid economy which is not unlike most other Western European states. Europe is falling behind the US, China, India, Brazil, etc. With inflexible labour laws, high taxes, and an inefficient welfare state. Europe could take a que from at least the UK. There are major issues that Euro has to deal with if it truly wants to become that great new power.

[Undecided]

The economist has a extensive article on expansion (obviously), and a good map:

http://www.economist.com/images/GA/2004w18/PeterMapAnimation.gif

As usual the economist does not fail to meet only the highest standards...*kowtow*

[Undecided]

I think this map is significantly more important, it talks of the disparity btwn the new states and the old guard in Euro. There is a lot of time and money is going to be needed to bring those states up to par. With Latvia needing the most assistance, and the Slovenes almost there. Just goes to show the disparity of wealth, and how much politics plays a role in a state's future.

http://www.economist.com/images/GA/2004w18/SimonMap.gif

[whitewolf]

First of all, Undecided is being frantic again because some opinion got him excited.

I can see similarity between USSR and EU, but these are completely different things, politically and economically.

Second of all, so what if it fails like USSR? Then it'll fall apart (much easier and less bloody to do), and countries will be recovering again.

Third of all, for now, it is a very good thing for countries that are recovering from USSR regime (my lovely country :P).

I only wonder what will happen as EU gets larger. All of Europe may want to join the club eventually. Then the world will be divided by continents.... And THEN.... well, we all know what may happen then.

[Undecided]

First of all, Undecided is being frantic again because some opinion got him excited.

Grrrrrr....you know it...

I can see similarity between USSR and EU, but these are completely different things, politically and economically.


Obviously the USSR and the EU are not exactly the same. There are major links btwn the two is geography, role, size, and relevance. Just that the EU is stronger economically, weaker militarily, but both are/were trying to integrate huge minorities into one political structure, and with that comes problems.

Second of all, so what if it fails like USSR?

I doubt it, but you never know.

Third of all, for now, it is a very good thing for countries that are recovering from USSR regime (my lovely country :P).


Of course living off Brussels welfare checks is a good thing, but only for a while. As shown in the article Russia is once again becoming quite a threat. Logically if Latvia wants to grow economically she has to adapt to a strong Russia. I personally doubt that Latvia is going too do much to the already saturated EU market.

I only wonder what will happen as EU gets larger. All of Europe may want to join the club eventually.

Look at the first map, I know that Russia is already countering this growth by reigning in the Ukraine, Belarus, Kazakhstan, etc. Should be interesting...

[Eluminate]

You know I finally agree with you somewhere... About Eu at least

The closest thing that reminds me of Eu is Poland in the 1650's and on. Where every group of people could organize a majority or a minority based on anything they wanted like; region, class, ethnicity, religion and a combination of other or political elements like liberal or conservative and every single group had a liberiutm veto. Which was basicly self destructive to the uttermost degree and the only course of action was possible if the vote was unanimous. This is so representative of EU its funny in a way. If they created some sort of a majority rule it might work but with every country having a veto it will just hurt everyone in the longrun because what needs to be done cannot be done regionally since that power is delegated to the Eu which could never act since all the decisions have to be unanimous and therefor things that dont effect a country will be bargaining chips and politicians will make the whole process a whole lot worse off by holding each other and nations by their throats.

I m gonna try to approach this from a slightly same and slightly different angle. As governments get bigger and bigger like the Eu infrustructure. The needs of the whole take on objectives in the top of the structure instead of the needs of the bottom of the infrustructure or the individual nation states which elect the mps to the Eu parliement. As innefficencies will build up so will resentment and public outcry in each state thats suffering from the objective thats followed in the top layers of the Eu higherarchy.

European Union could have been left alone as a trade infrastructure that streamelines trade and benefits everyone which it did and still does well. But the people at the top of this instution got power hungry and decided that if it works so great for trade issues it will work great for national identity and goal issues just as well. Trying to route as many functions of the national gov'ts into its fold not wanting to realize that not all issues are best served on a global/united scale. This hurts those whose needs are neglected or thrown aside for the "Greater Good", or "The Future" neglecting the PRESENT and the needs of people its supposed to serve. This reminds me of the old Soviet slongans a bit where everyone strives for the greater good and improvements are abuntantly coming but the living gets worser and worser.

The breakup of USSR wasn't very bloody but you have to consider the national closeness of some of the republics which broke off. Eu is completely different its operating on a purely socio-ecconomic level while USSR was operationg on a purely war-readiness level. The breakup could be just as bad though if not in physical and bloody terms but in ecconomic ripple effect of devastation if it happens. Regional interests will begin to sway back and forth until they crack some ground.

I feel Russia would be best served to try to create a monopolisticly structured grain arm that would unite with Ukraine but work just like the Australian grain monopoly marketing arm works. This would be very painful for Europe long term especially compounding growing grain prices. A Russian, Ukraine, US, Australian, Canadian(not sure if it should be included) grain exporter coolition would be a cool thing to see.

[Undecided]

The breakup of USSR wasn't very bloody but you have to consider the national closeness of some of the republics which broke off. Eu is completely different its operating on a purely socio-ecconomic level while USSR was operationg on a purely war-readiness level.

I disagree that the USSR served primarily as a military machine; it did have a socio-economic edge to it. The EU is trying to be a USSR in the sense that it wants to become an “acultural” organization that dictates the lives of many cultures. The major difference btwn the EU and the USSR is that in the EU states joined because they wanted to, not because they had no other choice. That factor alone makes the EU a much stronger entity then the USSR ever was. Also the EU is not fooling anyone; it's a capitalist market system with heavy public sector welfare safety net, which works. The problem comes from the fact that Europe is going to have a ever greater public sector pressure as the population gets significantly older, and the expectant population decreases the EU is in for some serious problems, but not as bad as Russia.

The breakup could be just as bad though if not in physical and bloody terms but in ecconomic ripple effect of devastation if it happens. Regional interests will begin to sway back and forth until they crack some ground.


An EU breakup is possible, if not feasible, but I personally do not see it. These countries would be way to interdependent on each other to merely allow the Union to collapse. Also the EU will always be a better alternative to Russia or even the Islamic South.


I feel Russia would be best served to try to create a monopolisticly structured grain arm that would unite with Ukraine but work just like the Australian grain monopoly marketing arm works. This would be very painful for Europe long term especially compounding growing grain prices. A Russian, Ukraine, US, Australian, Canadian(not sure if it should be included) grain exporter coolition would be a cool thing to see.

The US would prevent that from happening; she is the largest producer of grain and as a result can change prices. China/India is also up and coming mass consumer of grains, prices will go up, as will most commodity prices this century. Also let's say that this cartel is only going to be those states aforementioned, other states like Brazil, Argentina, Uruguay, even some African states would make more of x grain thus lowering prices and increasing their share of the export market. Unlike oil, grains are much easier to exploit.

[Fraggle Rocker]

What a difference exists across the new EU border.Well that was really a fantastic job of twisting statistics to make an invalid point. Have you seen any actual photographs or read any actual interviews with the citizens of Ukraine or Belarus? Fifty percent growth (or whatever it is, the "reply" window always deletes the original quotes) when your GDP starts out in the toilet isn't anything to get excited about. Ukraine and Belarus are not economic powerhouses beckoning to the Slavic and Baltic peoples with a better way of life. Ukraine and Belarus are destitute, the closest thing Europe has to Kenya or Bangladesh. Their unemployment rate is almost equal to their employment rate. They've got inadequate supplies of food, clothing, and energy, virtually nothing to sell anybody, and no industrial base or even the infrastructure for smokeless manufacturing or an information economy.

They would be utterly delighted to join the EU. As it is, the EU may be shamed into pouring megabucks worth of charity into the two countries anyway, rather than watch them starve to death on their own doorstep.

The Asian former SSRs, as you say, have got petroleum to prop up their economies. Moldova will surely be reunited with Romania before long. The Georgians, Azeris, and Armenians march to their own drummers. Belarus and Ukraine are the last victims of the Soviet experiment. The way the rest of the human race chooses to deal with their plight will say a lot about us.

[Undecided]

Well that was really a fantastic job of twisting statistics to make an invalid point.

Well I didn't write the article. The states east of the EU border have massive problems no one here is denying that, surely I didn't. You have a dictator in Belarus, you have a shift back into more authoritarianism in Russia under Putin, and the Central Asia states are filled with corruption, and chronic misgovernment/mismanagement.

Have you seen any actual photographs or read any actual interviews with the citizens of Ukraine or Belarus?

Oh of course, I have seen the horrors that some bastard did to some Belarusian’s. They took their money claiming to be immigration officials from Canada, but were really scamming them out of their life savings. The situation in those regions is not great, I never even insinuated as such. But what is being said is that the economic prospects do look somewhat better in those states then the new EU member states. Consider they don't have such large gov't expenditures, they have low taxes, lower labour standards, what do you think that means? European investment into those markets. Is what I am saying ethical, is it right? No, it isn't but neither is capitalism. It has always been Eastern Europe’s greatest tragedy being the sweatshop of Europe. The states which just joined the EU will grow at first (of course they have too, they have to reach EU standards) but it will eventually fizzle and it will eventually stagnate (again) like her more advanced neighbors.

Fifty percent growth (or whatever it is, the "reply" window always deletes the original quotes) when your GDP starts out in the toilet isn't anything to get excited about.

That's what I was saying; Chad an African state has shit all before the discovery of oil which is boosting the GDP by 58%. I already explained in the initial post.

Ukraine and Belarus are not economic powerhouses beckoning to the Slavic and Baltic peoples with a better way of life. Ukraine and Belarus are destitute, the closest thing Europe has to Kenya or Bangladesh.

I never insinuated otherwise, but what I was saying is that these states because they are starting from a lower base it's better for them. Look at Poland, of the Czech Republic; they are living above their own means. Those states are living within their means, and they are reaping the benefits of such now. There are major governmental problems that those gov'ts face, but they are going to grow.

They've got inadequate supplies of food, clothing, and energy, virtually nothing to sell anybody, and no industrial base or even the infrastructure for smokeless manufacturing or an information economy.

But their economies have been growing consistently above the European average since 1998? There is something going on in these countries, all developing states start from a pretty crappy base. It's like condemning Malaysia back when it was one of the poorest states when it gained independence. Its takes time, pain, and patience.

They would be utterly delighted to join the EU. As it is, the EU may be shamed into pouring megabucks worth of charity into the two countries anyway, rather than watch them starve to death on their own doorstep.

I don’t doubt that, but they are not economically stable, or advanced enough to join. That’s why they have to develop independently.

The Asian former SSRs, as you say, have got petroleum to prop up their economies.

Only Kazakhstan really...