Tuesday, 25 October 2011

Mixed Economic Signals as New Crisis Looms

As Europe’s leaders seek to contain the ever growing economic crisis in the eurozone, the countries in Central-Eastern Europe (CEE) are holding their breath.

When the first wave of the economic crisis hit Europe in 2008, the economies of CEE were amongst the worst affected. Therefore, whilst the average rate of economic decline in 2009 was 4.3% in Western Europe, the EU economies in CEE fell by 8%.

Although such a dramatic economic downturn is not currently being predicted, all indicators point to a marked slowdown throughout CEE. The European Bank for Reconstruction and Development (EBRD) has drastically reduced its prediction for economic growth in all countries in the region for 2012: down from 3.5% to 1.7%.

With the outcome of the crisis in the eurozone countries still uncertain, and the possibility of a new double dip recession in Europe a real possibility, then this prediction may be over optimistic.

Whatever happens, it is clear that a region struggling to emerge from a severe economic crisis is facing more turbulent times ahead.

Poland is still predicted to be one of the region’s best performing economies, with its estimated growth for 2012 cut from 3.5% to 2.2%. In the wake of the recent elections – when politicians begin turning their attention to realities rather than fantasies – the signals coming out of the Polish economy are mixed.

Despite the negative economic climate in Europe retail sales have remained strong, growing at an annual rate of 7.1% in the third quarter of this year. Industrial production has also continued to grow, rising by 4.1% in the third quarter of 2011. Will it be possible to maintain this course of positive economic growth?

Leaving aside events in the eurozone economies, it should be expected that the government led investment drive in the country’s infrastructure will continue at least until the Euro football championships in June 2012. Thereafter, the ability of the government to continue its course of public led investment will be decided by its own budget situation and the willingness of the richer EU states to contribute to the EU’s next budget, due to come into force in 2014.

More immediately there are worrying signs about whether the growth in domestic consumption can be maintained. Firstly, it seems that the error committed in the Western capitalist countries – of expanding an unsustainable credit bubble to drive economic growth – is in danger of being repeated in Poland.

During the past two yeas the number of Poles who have problems paying their bills and meeing their credit payments has risen by 25%. 2.08m Poles have difficulties with their credit payments, with the average debtor owing nearly 10,000 zloty. Overall private debt has now reached a total of 32.4bn zloty in Poland. With the possibility of a new banking crisis breaking out in Europe these are disturbing figures.

Another negative development in the Polish economy is the slowdown in the labour market. According to the Polish Statistics Agency (GUS) in September alone the number of jobs declined by 5,000 and employers have stopped creating new vacancies that could replace these. Whilst a year ago there were 18 unemployed people for each job vacancy, this has now risen to 27. In September this year unemployment stood at 11.7% (in absolute terms 1 862 800 people), which is likely to increase in the coming year. In such conditions, over the past year, those seeking work have reduced the average amount that they are prepared to accept as a monthly salary by 322 zloty. Such depressed wage demands will further eat into people’s consumption power, particularly as inflation currently stands at around 4.3%.

With the government facing a possible economic downturn it is already talking about revising its over optimistic budget for 2012, which it presented before the elections. The Finance Ministry predicted in this budget that economic growth would reach 4% in 2012 and that unemployment would be around 10%.

With the government determined to rapidly reduce its budget deficit, it is likely that it will embark on a new round of economic austerity. However – as shown by the experiences in other European countries – such a policy would only depress economic growth, thus placing further pressure upon the government’s finances.

Wednesday, 19 October 2011

Just when you thought it couldn't get worse......

The Democratic Left Alliance (SLD) seems determined to rub salt into its self-inflicted wounds.

It may have been hoped that the SLD would have learnt some lesson after suffering its worst ever election defeat. At the least it may have been expected that it would have sought to change its current political course and attempted to begin the process of opening itself up to other currents on the left.

It was in this spirit that 7 SLD MEPs wrote to the SLD's national MPs urging them to vote for a leader of its parliamentary group that would begin this process. It was pretty obvious what this meant: vote for Ryszard Kalisz instead of Leszek Miller.

Although the political programme of Kalisz may not be radically different from what had come before, many believed he would begin a process of instigating internal changes within the SLD that would allow it to rebuild some support amongst the left in Poland.

But the SLD MPs decided that the best way forward was to re-elect Leszek Miller. Miller represents more of the same and will only dispirit those with any hope that the SLD could reform itself (see here, here and here for previous articles concerning Miller.) It will also allow Miller to consolidate his position before the run up to new leadership elections scheduled to take place in January next year.

Oh and Napieralski has still not resigned as leader (sigh).

Thursday, 13 October 2011

15th October Agreement

The '15th October Agreement' movement has called its first action in Warsaw tomorrow, which will start at 12pm outside of the gates of Warsaw University.

This is how they describe themselves and their activities:

The October Fifteen Agreement was established at the initiative of several young people above all students of Wielokulturowe Liceum Humanistyczne im. Jacka Kuronia.

The Agreement is thought to became a platform for joint action, above all to show our solidarity with Ruch Oburzonych w Hiszpanii, as well as to submit similar demand to Polish authorities.

Form of cooperation which we propose is (after Spanish movement) quite loose coalition platform of groups which are combined as the opposition and with general direction of their criticism. Basic requirement is that (again after Spanish movement) we strive to avoid physical violence as a form of protest.

The Agreement is not responsible for the content and views voiced by organizations which are going to join The Agreement. ‘Some are progressive, others more conservative. Some are religious, others not. Some are politically defined, others – apolitical.’ – so it was in Spain and we want it to be in Poland. Our solidarity with May 15. and that we are outraged are what is going to unite us.

We are as an initiative group open for your propositions and cooperation. Beyond the direct action we will also be grateful for any additional help with spreading the information (posters, leaflets, printing houses, news channels) and also with theoretical background (arranging meetings, discussions, film screenings) around October 15

Wednesday, 12 October 2011

The End of the 'Post-Communist' Left?

When the former President Aleksander Kwaśniewski said on election night that this could be the last time that the Democratic Left Alliance (SLD) enters parliament, he wasn’t exaggerating.

The Polish left has now reached its nadir. Not only has it scored its worst result in any election since the end of Communism, but it has also been overtaken by a liberal populist movement (the Palikot Movement – RP) that is trying to portray itself as the new party of the Polish left. The left is facing the very real possibility of extinction from the political mainstream in Poland.

It goes without saying that the SLD – under the leadership of the hapless Grzegorz Napieralski – ran a poor and ill-thought out election campaign. Napieralski had led an energetic campaign during last year’s Presidential elections and was able to represent himself as the young alternative to the two candidates from the right. Although he failed to articulate a political alternative to the right, he did manage to accumulate enough political capital to help strengthen support for the left in the run up to the parliamentary elections.

However, rather than reaching out to other activists and organisations from the left – who had previously become disillusioned with the SLD – Napieralski turned the party both inwards and to the right. Napieralski came to embody the worst features of the post-communist left in Poland. In the all-important game of deciding who should be in which position on the party’s electoral list, Napieralski chose his friends and close allies above genuine activists. This meant that in the run up to the elections there were a number of high-profile defections (both to PO and RP) that weakened the support of the party.

The most galling aspect of this political manoeuvring was the re-integration of former PM Leszek Miller into the leadership of the SLD. Miller was given first place on the party’s electoral list in the winnable seat of Gdyńia and became a high-profile figure during the election campaign. The political influence of Miller upon the political strategy of Napieralski became all too clear. This was particularly symbolised by the party’s decision to sign an economic pact with the Business Centre Club - an organisation that had openly praised the former Prime Minister.

It should be remembered what damage Miller has done to the left in Poland. It was Miller who was PM when support for the SLD declined from over 40% to 11%. His government was seeped in corruption scandals, which helped build the image of the SLD as a party of privilege and power. It was Miller who reneged on his promises to tackle the privileges and power of the church and reform the abortion law (policies on which the SLD was elected.) It was Miller who argued that the left should become supporters of neo-liberal economics and even advocated introducing a flat-income tax rate. Finally, it was Miller who followed Bush and Blair into their disastrous military adventure in Iraq. Yet, while even the mention of Tony Blair’s name at the Labour Party conference is met with jeers and boos nowadays, Miller returned to parliament this week.

The problem for the SLD is that for more than two decades it has been trying to be accepted as part of the mainstream. At the start of the transition – during a time when the legal right for those connected to the old system to participate in politics was under question – it did all it could to convince people that it was committed to the course of reform. Once this had been established, it then sought to show that it was not an ‘anti-clerical’ party and would not challenge the authority of the Church.

However, while the SLD remained stuck in this ideological straightjacket, Polish society was changing. Over 80% of society believes that the Church should be separated from politics. Young Poles lead life-styles that are far removed from the doctrines of the Church and are closer to those within the majority of European societies. It is not that Poles have suddenly stopped believing in God, but they have certainly realised that the privileges and power, accumulated by the Church hierarchy over the past two decades, are excessive.

It is in these conditions that Janusz Palikot was able to usurp the SLD and win the support of that part of the electorate that is the most liberal on social and cultural issues. After splitting from PO, Palikot became the champion of policies such as removing compulsory religious education from schools, making priests pay taxes, supporting the state-funding of in-vitro treatment, supporting same-sex legal partnerships and legalising marijuana. This strategy allowed him to successfully win the support of those parts of the electorate that were dissatisfied with the conservatism of PO and the timidity of the SLD.

Despite Palikot’s stance on these matters he is no man of the left. Alongside this array of social and cultural policies he advocates an economic policy of more neo-liberal reform. Most strikingly, he supports the introduction of a flat tax (18% for VAT and income and business taxes) and advocates no programme of economic redistribution at a time when social inequalities are once again growing. RP is setting itself up to be the leading advocates of reform in parliament and it is to be expected that this will include them pushing for the government to introduce further liberal economic reforms. It will be interesting to see whether those in his movement that are genuinely from the left will oppose these moves.

While some of the policies of Palikot are progressive, and many of these are supported by the majority of society, his overall programme is not. For the past few years Polish politics has become dominated by symbolic cultural conflicts that have disguised the real socio-economic problems and challenges facing the population. Palikot’s aim is to harness the frustration’s of the middle class through waging a cultural war in the country and attack his opponents in an often primitive and offensive manner (such as claiming that Jarosław Kaczyński was responsible for the Smoleńsk tragedy.) In many ways he replicates the so-called ‘new atheists’ in the West, who use progressive liberal principles as a guise to promote regressive political aims (such as banning Muslim women from wearing the veil).

Palikot has already become enemy number one for the Law and Justice Party (PiS), who will attempt to show how Palikot, in alliance with PO, represent an immoral elite that ignores the economic difficulties faced by the majority of society. The danger of such a situation is that social and cultural liberalism will become further regarded by some as the preserve of the privileged few and that the causes of economic inequality will be hidden behind artificial cultural conflicts.

For the left the situation is more complicated. In order to reassert its independence it needs to consistently support progressive social and cultural reforms, whilst also developing a clear left economic programme that promotes economic growth, develops public services and reduces social inequalities. As the economic crisis worsens in Europe it needs to maintain a clear political stance of ‘investment not cuts’ and oppose attempts to shift the burden of this crisis onto the poorest sections of society.

For these reasons the left has to rebuild itself in opposition to and not in alliance with the Palikot Movement. Immediately the SLD should open itself up to all those on the left and help instigate a process of creating a new organisational framework that can represent the left’s pluralism. All of the left at this moment should realise its common interest and understand the seriousness of the challenges that lie ahead of it. For if it doesn’t act now then it may be too late.

Monday, 10 October 2011

Tusk Bucks the Trend

The victory of Donald Tusk's Citizens' Platform party (PO), at yesterday's parliamentary elections, is significant for two reasons.

Firstly, this is the first time in the country's history (which includes the inter-war period) when a governing party has been re-elected in an open and free election. PO has not only won the largest share of the vote, but has gained enough seats to continue its coalition with the Peasants' Party (PSL). It really couldn't have wished for a better night.

Secondly, the victory of PO goes against the current trend in European politics. The expanding crisis within the eurozone has had its own affect upon the political scene in most European countries. One result has been the strengthening of the conservative-right, which has used the ideologies of reaction and division (such as racism and xenophobia) as the liberal consensus is undermined by growing economic hardship.

It is true that the Polish political scene does not replicate those in the vast majority of European countries - dominated as it is by two right-wing parties. Nevertheless, there is a measurable difference between many (although not all) of the social and cultural policies of PO and its more conservative rival the Law and Justice Party (PiS). Furthermore, with the liberal populist Palikot Movement (RP) winning more than 10% of the vote, it can be seen how there has been a shift to the left in this election on social cultural issues; and to some extent on economic issues, as PO has had to temper its more neo-liberal rhetoric.

Yet, although the parties of the conservative right have been strengthened in many European countries, they have still suffered their own defeats. The more general trend in recent European elections has been that nearly all governing parties have been ejected from power as the social effects of the economic crisis have been felt. Any governing party that is able to be re-elected in today's Europe is doing well, let alone in a country which has never done so before in its history.

PO have managed to extend their support into some of the heartlands of PiS and re-establish themselves as the hegemonic party not only of the right but of Polish politics. The graphic below shows how PO has extended out of its western heartlands and won in regions previously controlled by PiS.


How has it been possible for PO to claim such an impressive victory? Well, its the economy stupid. It's been oft repeated that Poland has been the only EU country to have avoided a recession since the outbreak of the economic crisis. Although critics have rightly pointed to the growing hardships for many social groups and the terrible state of many public services, it still has to be accepted that growth is better than decline.

Tusk has proven himself to be a pragmatic leader with a political skill and instinct rarely displayed by his rivals. He has avoided confrontation with the teachers and its strong trade union by raising their wages; and he has sensibly partly reversed the compulsory private pension system - an act of ideological treason for some.

The major slice of political luck for this professed heir of Hayek, has been that while the invisible hand of the market of has been paralysed, the state has been able to flex its muscles. The influx of funds from the EU (and lets call this what it really is - progressive economic redistribution directed by state institutions) has allowed public investment to rise as private investment has collapsed.

Furthermore, the PO government has maintained a relatively high (although not excessive) budget deficit and has not embarked upon a policy of economic austerity that is currently driving many European economies into a double-dip recession.

Yet, as Tusk reflects on his victory today he will realise that it may not be so easy for him during the next four years. The widening economic crisis in the eurozone is knocking on Poland's door and there are already signs of an economic slowdown in the country. The government is committed to quickly bringing down the budget deficit and could embark on its own austerity drive. Also, although it is unclear how much Poland will receive from the next EU budget in structural and cohesion funds, it is certain that the current wave of infrastructural development will slow following next year's European football championships. Add into the mix the possibility of a prolonged economic downturn in the eurozone – including perhaps in Germany - then the challenges for the Polish government are huge.

It should also be remembered that although PiS has lost another election it still enjoys over 30% of the vote. It may have retracted into its heartland and hardened its rhetoric but it is well placed to capitalise on any future decline in support for PO.

Unfortunately the same cannot be said of the left that is in its weakest position since the end of Communism. Another reason for Tusk to feel particularly self-satisfied today.