Monday, 29 July 2013

Ongoing Social Protests In Bulgaria

Over the past six weeks there has been a wave of social protest in Bulgaria. These protests are driven by economic frustrations and a feeling that political corruption and oligarchism are responsible for the economy's failings. The protest movement reveals a number of contradictions. Whilst left-wing anti-capitalist currents participtate in the protests they are led primarily by a young, professional urbanites. As is common in the 'post-communist' world they often see the inefficient and corrupt state as being the source of their problems and some are drawn to an idealised vision of a free-market economy. Unlike many of the protest movements in Southern Europe the protestors tend to be pro-EU and leading EU politicians have openly expressed their sympathy for the demonstrations. 

An interesting article by Claudia Ciobanu from Inter Press Service discusses some of these issues: 

For more than six weeks now, Bulgarians have been on the streets demanding an end to oligarchy and corruption.
Under the label DANSwithme, inhabitants of Bulgarian capital Sofia have been taking to the streets every day since Jun. 14. The protests were sparked by the Socialist government’s decision to appoint 32-year-old media mogu Delyan Peevski head of the national security services (DANS).
Despite Peevski’s snap removal following the public outcry, Bulgarians have continued protests to demand resignation of Prime Minister Plamen Oresharski. On peak days, crowds are in the tens of thousands.
Urbanites, often youth and professionals, have vented their anger and also celebrated the rather new experience of street action. They are a colourful bunch, bringing along kids, often wearing theatrical costumes, using art installations to send political messages, and broadcasting it all on social media. Read More......

Monday, 8 July 2013

An Impending Recession?

The LSE European Politics and Policy Blog has published an abridged version of my article 'A Green Island Sinking in a Sea of Red'.

In comparison to the rest of Europe, Poland has experienced stand-out economic performance since the beginning of the economic crisis in 2008. However, Gavin Rae warns that this performance is largely based on the Polish government’s ability to leverage funding from the EU. With a declining EU budget that now focuses on innovation over infrastructure, as well as increased budgetary pressures, Poland may now face the real possibility of recession. 
Although the global economic crisis severely affected Central-Eastern Europe, Poland is the only EU member state not to have undergone a recession in recent years. Poland’s GDP rose on average by 3.5 per cent between 2008 and 2012, down from 5.5 per cent in the years after joining the EU. Now, declining investment in infrastructure from the EU may mean such growth rates will be a thing of the past.

Poland was able to avoid an economic recession due to a unique combination of internal and external factors. Firstly, the country suffered no significant collapse in its banking and financial sectors. Personal debt in Poland remained low and the banking sector relatively well regulated. Secondly, Poland was not as dependent on the inflow of private credit and capital as some other small economies in the region, nor so heavily reliant upon exports. Thirdly, Poland had not joined or tied its currency to the euro and therefore could retain some competitiveness through devaluation. Finally, throughout the crisis, the Polish government continued to increase spending, particularly by raising public investment through utilising the money gained from an inflow of EU structural and cohesion funds.

Sunday, 7 July 2013

Poland and the Great Depression

The Social Democracy for the 21st Century blog has compiled an interesting set of data on the loss of real GDP for 22 European countries during the Great Depression of the 1930s (see here).

 As we can see below Poland suffered the second largest decline in GDP of over 20%:

Nation | Real GDP Loss | Years of Contraction
(1) Austria | -22.45% | 1929–1933
(2) Poland | -20.70% | 1930–1933
(3) Czechoslovakia | -18.19% | 1930–1935
(4) Germany | -16.11% | 1929–1932
(5) France | -14.65% | 1930–1932
(6) Yugoslavia | -13.69% | 1930–1932
(7) Bulgaria | -12.72% | 1934–1935
(8) Netherlands | -9.46% | 1930–1934
(9) Hungary | -9.36% | 1930–1932
(10) Switzerland | -8.02% | 1930–1932
(11) Belgium | -7.89% | 1929–1932
(12) Norway | -7.75% | 1931
(13) Greece | -6.46 | 1929–1931
(14) Sweden | -6.20% | 1931–1932
(15) Spain | -5.81 | 1929–1931
(16) UK | -5.80% | 1930–1931
(17) Romania | -5.57% | 1932
(18) Italy | -5.47% | 1930–1931
(19) Ireland | -4.84 | 1932–1933
(20) Romania | -4.57% | 1929
(21) Finland | -3.97% | 1930–1932
(22) Ireland | -3.75% | 1937
(23) Denmark | -2.62% | 1932
(24) Spain | -1.95% | 1933
(25) Bulgaria | -1.91%* | 1929
(26) Portugal | -1.23% | 1930
This fall in GDP occurred over just four years: with output declining by -4.63% in 1930; -7.23% 1931; -7.8% 1932 and -2.77% in 1933. 

It is worth considering why Poland underwent such a rapid and deep recession at this time. As a newly created independent country, the Polish economy grew in the 1920s through attracting foreign capital and loans. However, the 1929 financial crash severely affected Poland as this inflow of capital dried up and the prices of agricultural products collapsed (during this time 75% of the population lived in the countryside). 

The economic collapse had severe social consequences with unemployment soaring and the wages of agricultural workers falling from an index of 100 in 1929 to 54 in 1931. The total industrial production in 1932 was about 40% less than in 1928. 1932 was the worst year for Polish economy, with unemployment beyond farming estimated at 44%

However, the Polish economy had returned to growth by  1934 and in 1937 was increasing by over 19%. Unable to attract sufficient capital from abroad the Polish government sought to accumulate capital internally and embarked on an economic strategy known as 'Polish etatism'. The government took control of savings banks, the foreign exchange operations, foreign trade and cartels. Furthermore it instigated a huge investment programe in public works and the stimulation of private intiatives. Industrial production (taken as an index of 100 in 1928) grew from 45.5 in 1932 to 125.8 in 1939 and the percentage of those working in industry rose by 25%. Public financing of investment increased from 1.094m złoty in 1932 to 2,067m złoty in 1938.

The most outstanding achievement of this period was the development of the Central Industrial District in the middle of Poland, that had been an area of high poverty and neglect. This project was begun in 1936 and was the beginning of a 10 year plan to develop first the country's military, then transport, next agricultural production, and finally industrialisation and urbanisation. 

This project was of course cut short by the division and occupation of Poland and the destruction wrought by World War Two.

For more details see chapter two in my book Poland's Return to Capitalism