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.

As summer recedes, public figures resume their work a new waye of stupidity strikes?

Not only I have returned from a long vacation accompanied by a hopefully exceptional silence, but the public figures of Europe and with them the media is filled with a new wave of opinions regarding the crisis, its consequences and effects in the individual countries. As if nothing have happened, and the mood of the economic world wouldn't be impressed by the new leading theme of "recovery" the first appearances were nothing else than sheer stupidity. Moreover, the cacophony and the surprise developments can undermine the very hope for a fast and strong recovery, especially in ECE.

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....

Under the surface: normality?

Well, as I was writing long and boring posts in the recent weeks, considering problems not in line with my capacity to resolve and dealing with serious problems of human society (once again far from offering any viable solution) this post will be "something completely different". Even not really related to the crisis, or if it would be the case, only showing the flip side of the coin, business as usual. But "in the context of the worst economic collapse after the Great Depression, amidst the meltdown of hard won achievments of two decades of unfinsihed transition" such stories certainly can reveal that my seriousness in approaching the events, readily embracing its dimensions as age defining is not the only possible way, and perhaps not the most rewarding.

The SME published yesterday an article, reporting the foremost problem of Slovak dairy industry: the inflow of cheep and supposedly poor quality Polish "bryndza"! (Bryndza is a product from ewe cheese, cheese from cow's milk and butter, the former ingredients grated and mixed with the latter to make a homogenous, very spicy, somewhat bitter and acidic material, to a certain extent similar to cottage cheese made from cow's milk. It is very popular in Slovakia, another variant in Romania and it has many consumers in Hungary as well.) The Slovak producers are complaining that the Poles use only 30% ewe milk instead of the 50% usual in case of Slovak "bryndza". The Polish product is sold under the name "Tatranska bryndza" (bryndza from the Tatry Mountain) and as the Tatry (a part of wich lies in southern Poland)is a symbolic landscape for Slovaks, it is a not too subtle but certainly effective way to mislead consumers, who should be proud of the millennial production of this product.

Otherwise the story is quite typical, someone is cutting under others prices on the market, the consumers can buy cheaper product (and in the crisis it can easily be an important factor in their decisions regarding the type of "bryndza" they buy) and producers try to counteract not only on the market, but with such stories in the minds of their consumers. Business as usual?

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.

Welcome, Poland! - notes on exceptionalism IV.

The polish prime minister announced this day that his country approached the IMF and negotiationg on "cooperation". According to the PAP press agency the premier stressed that the move was not to get a loan, instead to have "witnesses" that Poland is capable to withstand the actual storm. Poland is not in a similar situation as other countries in the region, do not need to beg for help - said Tusk, sticking to his earlier assessment of the situation, infamously expressed at the last EU summit when he was among those heads of governemnts who were denouncing the proposals of the Hungarian prime minister regarding a regional package. Tragic and ridiculous.