Thursday, 25 April 2013

Investment Not Destruction

Polska wersja tutaj....

These are times of austerity right? Economic growth is slow, government income reduced and public finances strained. Tusk’s government is seeking to reduce its social spending, freeze the salaries of public sector workers, increase the retirement age and maintain the increased rate of VAT. Times are tough and the belt needs tightening. 

However, in one area the government is rapidly increasing its spending, not just in real terms but in relation to most other European countries: the military. In 2013 the Polish government will increase its defence spending by nearly 7% - raising it to an annual total of 31bn złoty  – and plans to invest a further 100bn złoty on defence by 2020.

 In 2012, Poland was already spending more than 1.9% of its GDP on defence, one of the highest proportions in the whole of the EU. On average EU countries spend 1.61% of their GDP on the military. Only the UK and France spend more than 2% of their GDP on defence (as they seek to protect their failing imperial ambitions), with the next highest being  Greece and Cyprus that are hardly models for emulation when it comes to budget policy. Whilst the Polish government spends more on its military compared to most other European governments,  it also invests less on social security (18.5% compared to an EU average of 26.4%) and health (7% compared to 9%). 

The question to be answered is whether this disproportionate amount spent on defence is justifiable and brings Poland any discernible benefits. This can first be answered by assessing the usefulness of the country’s enlarged military and the degree to which it keeps the country safe from any outside threat.  

This can be looked at by comparing military spending in Poland with that of other countries in its geographical and political location (i.e. those Central Eastern European countries that are members of NATO and the EU).  Poland spends far more on defence than any other country in CEE. This is not only true relatively but also in absolute terms – with the second largest defence spender in CEE, the Czech Republic, having a defence budget that is more than three times less than that in Poland. Furthermore, the trend in CEE is for governments, such as those in the Czech Republic and Romania, to cut their defence spending.

In recent years Poland’s military spending has not just been geared towards national defence. Poland has been engaged in a number of costly offensive actions, most notably in Afghanistan and Iraq, sending the third largest number of troops to Iraq out of any of the countries engaged in this conflict.  Poland also committed itself to the building of the US National Defence Shield on its territory. President Komorowski has recently criticised Obama for cancelling this and declared that Poland should push ahead with its own project of building an independent shield. The justification for this is that it will be needed to protect the patriot missiles that the USA still propose to situate in Poland, although perhaps a safer and cheaper option would be not to allow these missiles into Poland in the first place? 

Michał Kalecki was one of the first to recognise how state spending on the military was partly used to help enhance economic growth; and how private capital preferred military spending over other forms of investment as it helped to boost private profits without competing with businesses in other more conventional economic markets. It may not be a palatable conclusion, but it is nevertheless true, that government spending on weapons can help to boost industry and employment. For example Huta Stalowa Wola has recently signed a deal with the military worth more than 500m złoty.

Whilst military spending can boost employment and economic growth, the AmericanKeynesian economist Paul Krugman has recently asked,  ‘why would anyone prefer spending on destruction to spending on construction, prefer building weapons to building bridges?’ To put it another way, would it not be better for the Polish government to build new hospitals and schools or use its steel industries to help produce wind turbines, rather than make weapons that kill children as they explode in Afghan villages? 

The more that resources are directed towards destruction, the less that we have for economic and social construction. As Martin Luther King once stated: ‘A nation that continues year after year to spend more money on military defence than on programs of social uplift is approaching spiritual doom’.

Tuesday, 23 April 2013

White doesn’t always mean privileged: why Femen's Ukrainian context matters

An extremely interesting article has been written by Agata Pyzik in the New Statesman on the controversy surrounding the Ukrainian feminist movement Femen. It places divisions within the feminist movement in Europe, including controversies surrounding Muslim women in France, in the context of the uneven development between Eastern and Western Europe. It is well worth reading:

Despite both the influence of the West over the impoverished ex-Soviet Bloc, and its westernisation after 1989, eastern Europe often seems worlds apart from its richer counterpart.
That's an important context to remember when considering the Ukrainian feminist collective Femen. They come from a country with an extreme and enormous sex industry, widespread abuse of women, and also "third world" levels of poverty. Femen's performances often take place in eastern European countries known for their lack of respect for hugly demonstrating in the west, stopping various international summits and ceremonial affairs.
 Read more.......

Monday, 22 April 2013

A Little Less Greener

The Polish Statistics Agency (GUS) has revised downwards its previous calculations for economic growth in the 4th quarter of 2012, from 1.1% to 0.7%. This means that the Polish economy grew by 1.9% (instead of 2.0%) in 2012. 

The major reason for this revision was that investment was found to have declined by 4.1% during the 4 quarter after previously calculating that it had fallen by just 0.3%. 

This increased decline in the rate of investment is the major reason for the slowdown in the Polish economy after the public investement led growth during the run up to Euro2012.

Tuesday, 9 April 2013

Some Respect Please Mr Sikorski

Polska Wersja Tutaj...

I wasn’t going to write about the death of Thatcher. There’s too much emotion and invested interest in this subject for me to comment on the passing of an elderly woman. But then I read the tweet made by the Polish Foreign Minister Radosław Sirkorski, saying that a statue of Thatcher should be built in Poland.

 The divisions around Thatcher’s legacy are well known and although there is now an attempt to eulogise her as a great leader and saviour of the British economy, the experiences of those of us who lived through her governments, or with the lasting effects of the destruction that she wrought, understand the shallowness and one-sidedness of this narrative. 

The Thatcher governments unleashed a wave of de-industrialisation on the country, resulting in mass unemployment, rising poverty and increasing inequalities. But did this not improve the competitiveness of the British economy? Well, in the 31 years leading up to Thatcher coming into power GDP grew by 150%, whilst during the following 31 years it has increased by just 108%. Despite the huge boost of North Sea Oil revenues that her governments enjoyed, Thatcher’s neo-liberal experiment brought economic stagnation not growth. 

The lens of time always affects the way we judge history. If Britain were now a leading hi-tech economy, that had built alternative modern industries, developed its infrastructure and used its resources to better the living standards of its population, then Thatcher would be judged differently. Those that had lost their jobs in the old heavy industries, would look at the lives of their children and reluctantly admit that Thatcher had probably got it right. But they don’t see this. Rather what they see are communities that have been destroyed and jobs not replaced; social housing sold off and new dwellings not built in their place; an industrial base dismantled and replaced with a retail sector that could only grow when the de-regulated banks pumped credit into the hands of the people; an atomized society whose frustrations recently exploded in a wave of rioting.

Of course others will see things differently. The unequal distribution of wealth has benefited those at the top. The financial sector – so revered by Thatcher and then Blair – prospered for decades and when the bubble burst it temporarily forgot about the ideology of no state intervention and gratefully took billions from the British taxpayer. Those now running the country are the direct heirs of Thatcher, shaped by the culture of greed and privilege that she helped to create. And this is where Sikorski comes in. 

Sikorski studied at Oxford University alongside some of the most powerful people in Britain today; including PM David Cameron,  Chancellor George Osborne and the Mayor of London Boris Johnson. Furthermore, they all belonged to the renowned Bullingdon Group, an exclusive society at Oxford University that draws together the sons of the right-wing establishment. The favoured activity of this group has been to book a table at an expensive restaurant, to eat and drink to excess, cause as much damage as possible and then simply pay the bill. Those wishing to join the group are subjected to various initiation ceremonies – with Sikorski reminiscing that his room and its belongings were trashed by Johnson and his friends in the middle of the night before being told he had been elected into the group. All jolly good fun for the high-classes I am sure;  who revel in ostentatious displays of wealth, with no regard for others and no understanding of a things worth.

The likes of Cameron, Osborne and Johnson are now continuing the project of Thatcher and seeking to cut the benefits of the millions that are reliant on welfare; dismantle services such as the NHS that even Thatcher had to leave alone and breed a new culture of division as migrants and those on benefits are blamed for the country’s problems. Having shared in the company of such people and viewed British society through the perspective of its elite and privileged classes, it is little wonder that Sikorski is such an admirer of Thatcher.

It is nevertheless Sikorski’s right to hold his own opinions and to judge Thatcher as he wishes. Not having been bought up in the UK and having only experienced one side of its life, he will have a certain detachment to its history.  I understand this. Despite having lived in Poland for around a decade and a half my view of its past is not born out of personal experience or family connection. I can look at its Communist past  and whilst recognising its shortcomings and crimes, also appreciate that it industrialised, urbanised, educated and provided health care for the vast majority far beyond anything that had ever been done before. Those that lived through the experiences of Martial Law or the grim reality of shortages in the 1980s may have a different perspective  and it is one I respect. 

Yet from the likes of Sikorski it seems that this respect is not reciprocated. I have lost count of the number of time I have had to bite my tongue and restrain my response (not always successfully) when people in Poland have praised the ‘Iron Lady’. However, for the Polish foreign minister to propose constructing a statue of her is an affront to all those who suffered under the Thatcher governments.

The person who Sikorski describes as a ‘fearless champion of liberty who stood up for captive nations’ once described the greatest freedom fighter of our time, Nelson Mandela, as a terrorist. She was the closest political and ideological ally of Pinochet, a murderous regime that killed thousands of its citizens. She used the full force of the state (including media manipulation and police brutality) to defeat the trade unions. She unleashed a war in the Malvinas in an attempt to boost her own electoral popularity, in which over 900 people died (including 323 Argentinian sailors on the retreating Belgrano ship). Thatcher escalated the war against Republicans in Ireland, including allowing 10 hunger strikers to die in prison who were demanding to be treated as political prisoners. The list could go on: mass unemployment, the harassment of black communities, introduction of anti-gay legislation, the poll-tax, the build-up to the first Gulf War….. 

Sikorski may disagree with all of this. He may have an image of Thatcher single-handedly bringing down the Berlin Wall. He may believe that the full effects of Thatcher’s reforms are yet to bear full fruit and that once the present government completes its austerity programme so Britain will finally reach the promised land. Yet whatever his opinions are on these issues he should realise that his lauding of Thatcher and wish to build memorials of her in Poland are deeply offensive. They are offensive to the many that suffered and lost their lives; to those whose jobs and livelihoods were destroyed and to the millions of us that saw our country deteriorate. Perhaps before he sends out his next tweet he should reflect on these feelings for a moment and remember that he no longer just represents the Bullingdon drinking group.  

Monday, 8 April 2013

Transition Economies After the Crisis

I have an article in a special issue of Europe-Asia Studies, devoted to the economic crisis in the East Central Europe area, on the economic and political effects of the crisis in Poland.

There are also texts that look at the general effects of the crisis, the political economy of crisis management in the region and specific articles on the situation in Russia, the Baltics and Belarus.

Thursday, 4 April 2013

Cameron’s Anti-Immigrant Populism

The British Prime Minister, David Cameron, has made new friends across the English Channel, with the far-right Front National praising his recent speech on the right of immigrants to have access to Britain’s social benefits and public services. This underlines the dangerous turn made by Cameron, as he resorts to anti-immigrant populism in an attempt to divert attention away from his failed economic policies and rebuild the support of his Conservative Party that is trailing in the opinion polls. 

The background to Cameron’s speech is an economy in free-fall that continues to suffer from the government’s policies of austerity. Productivity is around 10% below the level it was at the beginning of the crisis; investment remains depressed; living standards are falling; public debt has risen; the country’s international credit rating has been downgraded and its currency is depreciating  Despite this catalogue of failures, the government has just announced a new series of spending cuts and pay restraints that will further push the British economy into the doldrums. 

Cameron’s attempt to blame external enemies is not new. He has previously spoken about the supposed burden placed upon the British economy by immigration and blamed the European Union for the country’s economic woes. His recent statements take this a step further, as he combines anti-immigrant populism with euroscepticism, focussing his attention on immigrants from EU member states in Central Eastern Europe. 

As Britain remains a member of the EU then it cannot prevent citizens from other EU countries coming to live and work in Britain (although temporary restrictions are presently retained on those coming from Bulgaria and Romania). As an alternative the government is seeking to restrict their access to social benefits and public services. Cameron announced that unemployment benefits would be stopped for EU immigrants after six months if they failed to prove they were seeking employment (part of the criteria would include an individual’s ability to speak English); those seeking social housing will have to prove that they have a 5 year so-called ‘local residency link’; and the government will be looking at ways to recoup the costs from the home country governments of immigrants using Britain’s National Health Service. 

All this may well please the right-wing in his party and the media that backs it; and Cameron will hope that it will dampen support for its rival the United Kingdom Independence Party (UKiP) that has recently gained support in the opinion polls. However, his arguments have no factual basis.

For example, of the 2 million net migrants in Britain, from the 8 CEE countries that have been in the EU since 2004, just 13,000 have ever claimed unemployment benefits. Furthermore, according to the government’s own calculations, just £10-20m could be regained from its proposals on the health service, from a total annual health budget of more than £100bn. Also, although Cameron stated that the number of immigrants in social housing has risen by 40% over the past 4-5 years, this is an increase from just 6.5% to 9% of the total number in such dwellings. In short, his proposals will have no impact upon the living standards of the British population

An alternative perspective, that is rarely raised by politicians or the media, is the positive impact that immigration has had on the British economy. Studies have shown that immigrants from CEE are on average younger and better educated than native British workers (despite being concentrated in the least skilled professions); they have a higher rate of activity in the labour market and they are 60% less likely to receive social benefits or use social housing than the rest of the population. This has meant that people from CEE pay on average 37% more in taxes than they receive in public goods and services – surely something that a government obsessed with deficit reduction should be encouraging! Also as all European countries struggle with the challenges of an ageing population, so this influx of young, educated and active people will serve to improve Britain’s demographic structure. 
The country’s mounting social and economic problems can only be solved by a comprehensive programme of investment. This is particularly needed in housing, where there is a chronic lack of social housing due to successive governments (both Labour and Tory) failing to build sufficient new homes over the past couple of decades. The Tory government continues to draw money out of the economy, which is increasing the hardships for millions of people in Britain. As this intensifies then we may expect that the government’s anti-immigrant populism will increase and that this will draw more praise from those those such as the Front National.  

 NB: For a very interesting analysis of the link between economic growth and immigration, see this article here