Wednesday, June 24, 2009

Why do statistical offices exist?

My preferred Romanian politician, Mr. Băsescu swung into action today again. At a conference entitled "The Future of Social Change: 1989-2009: Visions and Perspectives after 20 Years of Transition" he vigorously attaced the lazy and populist Romanian politicians as - according to him - Romania is in danger to become a country of peoples depending on social assistance. Mr. Băsescu - who recently began to play safe on economic issues, he even contradicted the optimistic forecasts of the Chair of the National Bank and predicted a lasting contraction of the economy - interpreted the facts quite peculiarly. It is probably true (I havn't checked it, I only rely on other data) that a half of the country's nominal population receive regular social assistance in the form of some payments. (It is actually more than half of the real population, as millions are working abroad.) But the alleged reasons for it - populist politicians, except Mr. Băsescu himself, of course, buying votes with social transfers - is a gross oversimplification of the social processes of the transition period.

According to official data the number of employed people in Romania, a country with a nominal population of 22 million, and a real one somewhere between 19 and 21 million, is at around 4,6 - 4,8 million. (Just a slight comparison: in Hungary, a country of 10 million, where the official rate of employment is not higher than 55-56% the sheer number is 3,7-3,8 million.) Moreover the ratio of active people and those who receive pensions - either regular or so-called agricultural ones* - is below 1, at around 0,98. That means: less than one working Romanian bears the burden of providing one inactive with some kind of benefits. It is usually not considered to be a healthy and sustainable situation. (It is true that the financial transfers of guest workers make this picture less disastrous, but as it is unofficial the state can not lift its responsibilities using it as a pretext, nor enjoy some decent income from it.)

The phenomenon was a result of the transition itself, when - not only in Romania, but in many other ECE countries - the suddenly rising unemployment was "cured" by allowing people to escape into the pension systems, momentarily relieving the states from the discontent of its citizens, but in the long run causing ever growing demands on the social systems. But even retrospectively it is not clear whether this treatment was a complete failure or more logical than it seems. In many cases (Hungary, Poland, Romania, Slovakia) the respective economies never really regained the lost workplaces (in Hungary the volumen is 1 million!) and even though outmigration was a factor rapidly depleting the reservoir of unemployed people in some cases (Romania, Poland, Slovakia) the rate of unemployment remained high. (Romania was seemingly an exception, but with the huge number of pensioners it is only a statistical trick.) The FDI focused policies were not capable to ensure a low level of unemployment in two decades and with the crisis hitting ECE and undermining the former economic model it is not clear whether the nearest future will bring further opportunities.

The situation is aggravated by the fact, that Romania experienced a long period of sustained high inflation and the wages remained relatively low in order to achieve competivity. The former led to a rapid loss of real value of social payments, the latter led to the necessity to rein in state income - due to lower taxes - to give a bit more to the "ordinary people". (It was also a core element of a perceived competivity advantage, although personally I consider this argumentation dubious.) Nevertheless, state income remained low not allowing to raise social spendings, but at the same time personal income was not growing rapidly as well (except in the last two years, but it was a result of overheated economic growth, tightening labor market, therefore unsustainable, and even with this rapid rise average wages remained the lowest in ECE, except Bulgaria, somewhere around 250-300 euros a month. Therefore it is not surprising that not only pensioners but other social groups need state assistance for various reasons. (For example some subsidy or support to the natural gas consumption, that can amount in winter months higher than the monthly income of a family.)

But, not denying the role of populist politics, in Romania and in other ECE countries, the main factor behind the extended social provisions - and their limited effectivity as well - is the process of transformation itself. There is no better example for it than Romania, with its large poverty stricken social sectors, shabby infrastructure (a source of balanced budgets in recent years was the lack of investment in those areas) lifting costs of social services and low wages in order to ensure competivity. From this perspective, Mr. Băsescu was not right, rather he completely missed the point: it is not a a shame but a necessity to be a nation of socially assisted people and the only option to alter the situation is to get rid of every kind of social responsibility of the state. (Even minimal ones, as for example average pensions are not higher than 100-150 euros per month, not a huge amount for decent living, but a real burden on a state household determined to lift every tax from enterprises.) But even in this case there would be a half of the population left without the necessary means for a subsistance.

* In Romania two pension systems exist, the regular one and the so-called agricultural. The latter is composed by people earlier working in agriculture during the communist era and paying contributions into a separate system.

Wednesday, June 17, 2009

Crisis, but more than one? - Hungary

Well, on the one hand it is clear that at the moment the sense of crisis is receding (or only has receded?), "risk appetite" is growing, everyone is looking and seeing "green shoots" even though the data on real economy is at leats controversial and for more sober observers not really promising. (Just one example: the most prestigeous economic news and analysis website published a news yesterday with the title: Incredibly good news from the real estate market in the USA. In reality although in a m-o-m comparison the data showed growth the level of new construction works was only the half of the same indicator a year ago and only at about a fifth three years ago. It suggests that there is a long way to a recovery and a similar GDP level...) But with the present mood hysteria is not so dominant as it was some weeks ago and it also means that there is not really much to write about. As if normality has been returned ...

Otherwise - at the field of politics - spectacular events happened, but they can hardly be called critical, except in Hungary. For the superficial eye a strong correlation between crisis and the astonishing appearance of a strong and neo-fascist party (in the sense the concept is used by Roger Griffin) and the collapse of the center-left governing or majority parties would be obvious. But to treat the phenomenon in a so simplistic way would be misleading and a self-delusion. It's rather a sign of a more profound problem - if one whises, crisis - the huge divides in a country and in a society, accentuated by an economic and social model that was - as it is clear after two decades - incapable to bridge this gap and give at least hope for a fifth or quarter of the country. Incapable, although the model was once implemeted in a very servile way and later with more reluctance as well, in order to cushion the measures. The consequence: means relying only on market and imagining the solution of social problems in a market oriented way failed to deliver the opportunities for well defined geographical regions, quite the contrary, it led to a deepening difference between those areas and the more developed regions of the country. For example as in the early '90s the per capita GDP of the Northern Hungarian county Borsod was at almost 75% of the national level, today it is well under the 50% percent treshold, although investment in a material sense was not scarce in the last decade.

If one would like to sum up this process from a point of view of social history (or historical sociology?) it is quite similar to the process of spreading of capitalism into rural communities, at least in Hungary. The emergence of a capitalist economy in the 19th century was hardly a singular act, rather a long process, starting from certain centers and slowly diffusing into the countryside. Not only in a geographical sense, but in a social one as well. Even if one can detect a kind of enterprise or entrepreneurship in distant villages it is many times confined to individuals or a small fraction of the population. Meanwhile other models of the integration of localities in a capitalist market (world market) emerged and prevailed, like a strong cooperativist movement, wich were capable to preserve (though in many times in a transformed way) the earlier methods of running a local community and at the same time integrate this community as a whole into the broader framwork of a market. The socialst solution for this problem was surprisingly (or unsurprisingly?) similar. Integrate the rural communities around a heterogenous company, dealing with agricultural and some kind of industrial production and using extensively the labor of the villages in this process, while allowing some leeway for the individuals around their homesteads and imitating a kind of self-governance in this company (cooperative).

But after the change of regime - due to the reemergence of some political forces who's program contained the total restoration of agricultural property to those who owned it before the collectivization and due to ideological opposition to the socialist cooperatives as remnants of a failed system and compromised political power, a new model emerged, based on the gradual concentration of the landed property in the hands of a few who were capable to use state funds for investment in machinery, therefore reducing the demand for labor, and in remote areas even this kind of restructuring fell off, leaving there small communities with ageing populations and urban immigrants from the lower social strata at the fringes of capitalism, many of them belonging to the elargest ethnic minority, the rroma. (In many communities money is scarcely used, credit is given by the shopkeeper in forms of listed debts, work or commodities used as payment etc.) And in the last decades there was no sign of market mechanisms intruding in this space and transforming it... There is still a living memory of a rural countryside with opportunities and regular work and a sobering experience of present-day realities. (One can list other problems, unskilled workforce or people with obsolte skills, uneducated population, lack if iniciatives, ideas, capital etc.)

Quite telling is the fact, that under such circumstances no ideas of more active state policies were promoted, only the private initiative was emphasized and recently it took shape in the idea to implement the "bank for the poor" in some form, but not with state intervention, based solely on the finacial means provided by some charitable businessmen. And meanwhile public works are condemned as useless... Those are the regions, where radical opposition of the system as foreign and alien to Hungary scored good results and in some cases even electoral victory, revealing a more specifically Hungarian crisis, that is accentuated by the global one.

(P.S. It is no consolation that I fairly well foretold this political outcome, at least the collapse of the majority parties. Also I'm not relieved by the fact that I've found someone from Latvia who shares my concerns that the present policies can only lead to the abolishment of the state...;) )