Groupism in practice

I must apologize in advance for being again narrow-minded and concentrating on issues seemingly of secondary importance, only very superficially connected to the crisis. But the abandonment of the US missile shield project in ECE caused some reactions that are great illustrations of a concept introduced into the nationalism studies recently and not the least can shed light to the thinking of ECE elites or at least a part of them.
The issue is quite simple, the Obama administration announced the abandonment of the plan of a missile shield with a radar station in the Czech Republic and ten missiles in Poland with the aim to intercept IBMs launched from Iran. The plan caused much tension between Russia and the US (and its allies in ECE) because it was perceived as aimed against Russia and - ironically - while the Bush administration never forgot to stress that it is not capable to counterbalance a strategic strike force as large as the Russians have, the Polish and Czech politicians saw in the realization of the project not only a chance to raise their importance in the US system of alliances, but an effective way to deter Russia from aggressive steps against these countries. Not that it would have been really popular, at least in the Czech Republic the plan was widely unpopular.
Anyway, the announcement caused uproar, at least among the elite. Some weeks ago a group of experts, diplomats and politicians, describing themselves as "atlantists" (i.e. personalities with a deep attachment to the idea of a firm alliance between their countries and the US) published a letter supposedly addressed to the Obama administration and warning the consequences of such a possibility, the perceived spread of a feeling among the population that the US surrenders the region to Russia.
Up to this point it is a pretty simple story, one would be justified to ask: what the whole series of events has to do with such unheard concepts as "groupism"? I will spare my readers (however few they are) from a detailed discussion of this concept, invented by Rogers Brubaker. The core of this idea is an observation and critical remark: many categories employed and applied by social scientists implies the very existence of the subjects of their analysis instead of asking for this fact. Social scientists tend to take the existence of such entities as nations, states, societies - all of them as entities acting their uniformly and unanimously on their own behalf - analysing such phenomenons as nations as if they could act as single actors, as their respective elites claim or describe. The idea was a productive one fro the social sciences, but as the reaction to the event mentioned above shows it is far from being universally accepted or applied.
The largest and supposedly best quality newspaper in Hungary (Népszabadság) published a small collection of different articles in order to place the decision of the Obama administration in a broader context. It published an interview with Zbigniew Brzezinski, a small report on a survey carried out by the German Marshall Foundation (Transatlantic Trends 2009) and some auxiliary information on the reactions in Poland and in the Czech Republic.
The whole story is covered as if such entity as Poland, Hungary or any country in ECe would exist and act as a single person. The results of the Transatlantic Trend survey are reported as a sign that contrary to the Western part of the continent Obama's accession to the presidency would have caused disappointment and disillusionment. The paper cites someone responsible for the research stating that the new administration is less popular because of its less confrontational approach to Russia. Surprisingly the survey results show that the Bush administration was less popular even in Poland where anti-Russian sentiment is really a mobilization force. And the other results signal not less, but more enthusiasm towards Obama, although not as strong as in Western Europe.
But this is not groupism, this is simple professional incapacity. Groupism as a basic concept of those whose thoughts are conveyed by the articles is revealed by such phrases like Poland or the Czech Republic is disappointed because of the abandonment of the plan, Eastern and Western Europe is worried by the dependence from Russian natural gas and oil etc. Even though these issues are usually confined to a very narrow group of the respective societies and the missile shield was - especially in the Czech republic - an unpopular issue, only supported by the elites, as long as those elites express their views as if they would represent the public opinion it is accepted s such. And the disappointment of some people in the elite is interpreted as widespread disappointment, sometimes contradicting the evidence. But as long as elites are seen as identical to their respective societies, groupism will prevail. And we will hear that Romania, Hungary, Poland, Slovakia etc. did something or felt somehow, however crazy such an assumption is.

Recovery everywhere - why to be scared?

Back from a long summer recess, although the lack of posts recently was not due to my activities (however overburdened I'm am with tasks and responsibilities) rather the lack of impulses and events. One could have seen a rising tide of good news (maybe even the favorite color has changed from green to a more ripened one), a series of countries posting positive growth figures for the second quarter (quarter-on-quarter, in yearly comparison it is rather pathetic) and economic sentiment soaring almost everywhere. As the latter is considered to be a so-called "leading indicator" (i.e. signaling in advance the trends of the respective economy) further economic expansion is expected in the coming month. The change was abrupt, and rather peculiar. While only a half a year ago (almost) everyone forecasted that the world is doomed, now (almost) everyone is prophesizing that our torture is already ended or it will soon end.

Never say reform again? - Despised words and obvious bias

The release of the GDP data gave an opportunity to quickly assess the situation in ECE and Reuters did it with an article yesterday. Although the piece is not unbalanced, it has some peculiarties in it, showing incoherence in the picture and the argumentation. (Although it is rather a report then a text expressing opinion, the concluding remarks disguised as a citation from Katinka Barzych, clearly shows the preferences of the authors, more reform is needed in ECE.) Especially the part about the two types of ECE economies is lacking any real factual basis and can only be interpreted as a sign of an effort of those analysts who visibly failed as experts, to uphold their views and their personal legitimacy. After yesterday's data it is really questionable to make a significant difference between so called reform countries - Poland, Czech Republic and Slovakia - and "reform laggards" like Hungary or Bulgaria (!). Especially in the case of the latter, where not only a budget surplus was achieved - that means having had more restricted public finances as in any of the above mentioned reformers, but that was also praised as a booming and investment and business friendly country. Other telling fact is the lack of Romania from the classification, wich was again pointed out as a model for the reform laggard(s)... Maybe it would have been too much even for our experts to qualify Romania as having brighter outlook after the country registerd the largest contraction outside the Baltics?

Even more contradictory is the classification of the Baltics. For years those countries were considered to be among the most reform oriented, most business friendly ones with flat-tax systems and budget surpluses, low redistribution rates and social expenditures,* while Hungary as reform laggard - implicitly even in the above mentioned article - was criticized because of its "high" social spending. The fate of the Baltics, simply dosn't fit into the framework of reform countries having a good chance to emerge early from the crisis, and I'm convinced that it completely undermines the whole argumentation. Moreover the "experts" expressed their views that countries relying on strong export oriented industrial sectors will have an earlier recovery, due to growing demands in their export markets as the recession fades. But the reform laggard Hungary has one of the strongest export oriented industrial sector that in itself performed quite well even under the strains of the restrictive fiscal policy of the recent years, with huge growth rates in production and export as well. Why do these so-called economists think that Hungary's export oriented companies wouldn't be able to use the growing demand in order to expand their production, especially as the country's public finances are in a significantly better shape then two years ago? And why do they think that the Slovak industry relying heavily not on a differentiated range of products but on three car producing companies will experience a growth similar to the one seen in the last years? Can they ensure that the demand for cars will remain the same? Can they predict that consumers will have the same amount of money to spend and will look after the same goods at the same amount? I would call it voodoo economics rather than expertise... Or, even worth the complete incapability to pose the right questions.

The similar effects of the crisis in ECE and the contraction far worse then expected in countries earlier expected to fare better than "reform laggards" can be a sign - besides showing those experts in their completely miserable condition - that the very model of growth implemented in these countries after the change of regime reached its limits, especially as the integration of the financial markets deprived the fiscal policy from its means to controll and influence the outside flow of capital.

Despite the possible objections and the important questions looming over ECE even if "experts" do not dare to ask after them, they sole advice is to continue reforms. Although the crisis and the events in the Baltics even before, revealed that the economic model so wholeheartedly advocated was not capabale to fulfil any of its promises - sustained and fast growth, growing incomes at the individual level, fast real convergence to Europe - they are sticking to these ideas. Peculiar. And not only peculiar. Sometimes it is complete blindness. Nigel Sharing expressed his opinion that: "“The Baltics have proven that they are flexible enough to carry out these reforms and wage cuts. The only danger is that public pressure could grow due to the rounds of budget cuts.” But it s a contradictio in adjecto. If the Baltics already prooved its flexibility then no danger of the abovementioned kind should exist. If such danger exists then the Baltics has not proven anything of its flexibility. Moreover, the political developments - recently the Estonian coalition practically collapsed, the rightist parties look after new possible combinatitons, excluding social democrats - shows that the pressure is growing. Why not, one should ask? It is not only the course of events to be expected in an economic crisis, but at the same time reveals another important part of the problem. The much advocated model ensured fast growth - at least seemingly and certainly only temporarily - but at the cost of social cohesion, with growing inequalities. Why shouldn't societies opt for a moderate growth - especally as the sustainabilty of the 6-7-8-9% rates in the medium term are highly questionable, at least after the recent crisis' experiences - instead of a faster one menaing only real convergence to Europe only for the highest 10% or 20% of the respective societies. Sometimes there is a reason behind the development that the phrase reform is more and more despised in some ECE countries...

Oh, and the Slovak press was once again true to its traditions. The SME summarized the Reuters article with the following title
"Reuters: Slovaks made refomrs, Hungarians didn't. We can see the result" Yes, we can see. Slovakia is falling from a higher cliff into a deeper canyon?

*A recent rankings of competitivity of individual economies, based on the data from 2008 (!) provided by the IMD Business School ranked the Baltics still higher than the other ECE countries, despite a huge loss of position compared to the previous year....

Doomsday or the truth revealed? - Q1 GDP data released...

It is almost official - Slovakia is always keen on overtaking Hungary either towards heaven or hell. The official (although preliminary) data on the economic growth in the countries of Hungary, Slovakia, Czech Republic and Romania is out. Every one of them was much better then the landlside experienced in the Baltics ranging from a 12,/% to a 18% year-on-year, but neither was very rosy. The Hungarian one 5,8% seasonally adjusted is slightly better then it was expected especially as the range of predictions/forcasts (or rather guesses, sometimes even bets) was between 5,5% and 10%(!). The other three publications were equally surpirsing, Slovakia with 5,4%,* Czech Republic 3,8% and Romania 6,4%. In these cases the data was far worse than it was expected, the contraction being twice or three times faster than predictions/forecasts (or rather guesses, sometimes even bets).

The conclusions? The situation is not rosy (ok, it is dire) but ECE is more homogenous than the "analyts' and "economists" were ready to admit. The predicted differences are less pronounced in terms of GDP contraction and if one compares the decline of the GDP with the year on year datas from the 4th quarter of 2008, then it is quite clear that Hungary, the economy of which fared worse in 2008, performed relatively better, not that it has any real significance among the present circumstances. The important issue is that those countries that were presumed to be more resilient either because being in the Eurozone and/or having a supposedly better tax system making them more competitive in the eyes of so-called analysts and economists underperfomed their forecasts. Those factors that were considered to influence the economic processes were seemingly not really importante in determining the economic contraction's pace. One can even dare to assume that they played no role in it. The broader framework of the world economy determines the fate of ECE not individual country's responses.

Moreover it is another question mark regarding the expertise of the analysts, who have a great influence on the image on the individual countries - conferring and/or conveying the opinion and judgment of the "markets" about those economies, and that way sometimes even deciding whether those will be financed or not - sticked to ideas clearly not really having roots in the present reality, namely that every country is an individual case and the main reason behind the depth of the crisis is the respective economic policy.

Otherwise the competiton is not finished. Slovakia is on the heels of Hungary and Romania is already leading the pack. Beware Hungarians...!!!

*Update: according to figures at the website of the Slovak Statistical Office the seasonally adjusted data for Slovakia was in fact 6% decline, that means even higher than the respective Hungarian one.

Slovakia still the frontrunner - irony and self-critic

As the data on the economic production and trends in the first few months in ECE is gradually revealed it is quite clear that the whole region is facing an economic downturn, regardless of earlier preformance and forecasts on possible growth. Last week the Slovak Statistical Office published its results on the industrial production in February, 28,2% year on year decline. It is very serious, especially as the industry makes up at about a third of Slovakia's GDP, but not suprisingly, given the effects of the crisis on the car making industry, of wich Slovakia's current ecenomics is based on.

The real surprise is the reaction of some of the Slovak newpapers, especially that of the SME's. The newspaper suddenly portrayed the situation very realistically, moreover we should find traces of self irony in the article. It is enough to emphasize the title, almost jokingly plyaing with the phrase "look at someone's back" in case soemone is hopelessly trailing the other. For months Slvakia was a frontrunner with its enomrous growth and Hungary was prophecized to be doomed, but the situation suudenly cahnged and at the moment it is not clear who is leading the pack in terms of velocity of the contraction. In this case Slovakia's "superiority" - that very popular idea - regarding the speed of decline is stressed and portrayed as faster than either the Czech Republic's or Hungary's speed of industrial contraction - turning around the whole concept.

Here I'm obliged to make some self-critic, the SME, that I was criticizing because the articles in the newapaper were sometimes reflecting the strong belief in Slovakia's superiority, moreover lecturing on the right economic policy, reacted very soon and changed its stance and did it with an obious sense of humor as well. Otherwise it is still the same perception of ECE, the eternal competition. But at least it is more digestible, and far easier to tolerate this way.

Who will be the next in the line?

Today the Lower House of the Czech Parliament expressed its no confidence regarding the government of Mirek Topolánek. It is far from being certain that we will see an early election in this country as well, but even though his fall is not so tightly connected to the crisis as in the case of Latvia or Hungary, Topolánek is the third head of government in ECE having his cabinet collapsed in the beginning of the crisis.

It would be misleading to interpret the event as a result of the crisis in its entirety. Topolánek's government was a minority one (and the country's president, Vaclav Klaus, the predecessor of Topolánek in the chairmanship of the party nurtured a very visible enmity towards the prime minister), it relied on to renegade social democratic representatives from the beginning and his coalitional partners slowly dissolved themselves. At the moment the governemtn has only 96 MPs, the opposition 97 and 7 "independents" are the tip of the balance. Topolánek survived 4 (!) no confidence votes, partly because such a move needs 101 votes from 200 in the lower house to succeed. It was from the beginning typical petty politics, with money paid for votes, blackmailing but on the other hand very typical in the Czech political culture even in the interwar period. The pretext for another proposal for the opposition was a leaked video depicting one of the premiers aides trying to obstruct the airing of a TV program dealing with one of the renegade social democrats, who allegedly took thick governemnt funding for non-existent activities in the recent years. But I suppose that the eventual collapse of the government is also a result of the crisis making the existing rifts in the coalition more emphasized, especially as the prime minister's party gained popular support in the last three months, but solely at the expense of its partners. (Therefore the coalition as a whole fared not better against the opposition.)

This last point makes the action from the social democrats to bring down the government at this moment a bit hastened. Maybe Paroubek was worried about the narrowing of the gap between his party and the ODS (Party of Civic Democracy), but it was only justified because of the narrowing of his options regarding a possible coalition after an eventual election victory. Two months ago it was highly feasible that he will be able to form a minority or a coalition government with the support of one of the junior partners in the present coalition (the christian democrats or the greens), as his party fared at 44-45% of the votes, easily bringing more than 90 seats in the lower house. (Although this assumption sounds certainly a bit inconceivable for strangers to Czech politics, the christian democrats participated in the governemnts led by the social democrats between 1998 and 2006*, and once again the forming of coalitions with parties from very different parts of the political spectrum belongs to the traditions of Czech political culture as well.) Now he would be reliant on the communists, the outcasts of Czech politics, because they are not only legal but ideological sucessors of the Czech Communist Party. (But once again an illustrative event of the Czech politics, they played an important part in the re-election of their arch-enemy, Klaus as president). And maybe Topolánek will be secretly greatful for his opponents to take the burden of the handling of the crisis that is affecting the country more and more. It is certainly not a pure coincidence that Paroubek proposes to set up a government of experts until this fall instead of taking the responsibility.

But even if the collapse of this government is easy to be attributed to internal factors it highlits a very dangerous possibility: there is a not altogether slight chance for more and more political convulsion if the EU won't be able to stabilize the situation both in its core and at its periphery. Governemnts can fall one by one, social unrest can conquer the mind of the parliamentaries or the streets and spread towards the West. Even if the succesors of Topolánek or Gyurcsány will try to counter the crisis, the recipes offered at the moment won't be capable to calm down a gathering storm. What if the Polish government, having a populist opposition and president, will be compelled to admit that its budget is flawed and it will need harsh cuts? Unions in Romania are preparing demonstrations because of freezing the wages in the public sector. Ukraine is divided, its government is fighting with the president again and again while the economy's prospects are very dire. Bulgaria's unpopular government is facing a populist opposition as well. The EU elections will give an opportunity the unpoularity of the governments to be expressed, only to raise the pressure on the politicians. All those threats won't be relized necessarily but a domino effect is not the least probable scenario and a series of collapsing governments will once again, certainly in a strange way, call attention for the existence of ECE. Even if it is probable that almost every government in Europe will have to face very serious defeat in June.

(Actually the Czech Republic holds the rotating presidency of the EU for the first half of 2009 and the collapse of the government can be a serious blow to the community itself. But as the most important decisions regarding the crisis can be made by the large countries and the European Central Bank - that means the eurozone member states - it is not a real obstacle in the way of more determined action.)
*I should ask for my readers' forgiveness, as actually the first social democratic cabinet led by Milos Zeman was a minority government tolerated by Vaclav Klaus' ODS, the christian democrats were among the parties forcing Klaus to resign in 1997 and they only joined a coalition with the social democrats after the 2002 elections.

Doomsday reports? - notes on exceptionalism V.

Although I have my doubts regarding economic forecasts - especially in case of longer periods - and in these times it is hardly possible to make a prognosis valid even for a few weeks, today's newsreel contained two interesting pieces. The estimated growth of Germany was cut by many economic institues, while a London based research center published a series of prognosis regarding ECE, painting a dire picture of the regions outlooks. I won't discuss these analysis in detail, neither at this occasion nor later, but in this case it is not unnecessary to point out the most important elements, at least from an East-Central European perspective: Germany's recesion is forecasted in the 4-5% range, and as this country is the foremost export market of ECE countries (for example the correlation etween Hungary's and Germany's growth is extremly tight)and the strengthening of internal demand is not really possible due to the importance of the credit bubble in it's earlier drive, it is very likely that the region as a whole will be affected. Similarly important is the revision of growth estimates for the Czech Republic and Poland for this year. Up to this point these countries - with Slovakia - were considered as positive examples of prudent economic policies making them capable to weather the storm. (The specialist press here, in Hungary even now treats these countries as examples of very tiny positive growth in this year.) The forecasts for Slovakia were modified a couple of weeks ago (it has passed the Hungarian public's attention unobserved) and now the Czech central bank, having even in January a forecast of 2,9% growth changed it's view and now they are counting a -2%. The Londoners published a -3% forecast for Poland as well, a sharp reduction from earlier positive estimates and accompanied in this model with a 5% budget deficit as a ratio of GDP. Even though the perspective outlined for Hungary is worse (-7,5%) the whole picture depicts a catastrophic situation. (-15% and -10% in the Baltics, -5% in Bulgaria, -7,5% in Romania etc.and the revision for Hungary are now very modest compared to the estimates for other countries, not that it is very important.) The processes seem to be very similar and even if some differences will remain the direction is the same: no country will remain unaffected, and every one of them is heading towards a very dire ecnomic situation, regardless of earlier "good" or "bad" behaviour. It is highly feasible that at the end there won't be a defence line left on country level, no means to counterbalance the effects of the crisis.