Capitalisms in Central Europe: Local Solutions to Local Problems?

Capitalisms in Central Europe: Local Solutions to Local Problems?

A recent book highlights the role of the state in creating the different varieties of capitalism that can be seen in the region.

Even if the majority of the world population lives in capitalism, the system is not the same for everyone, as a recent book by Dorothee Bohle and Béla Greskovits reminds us. While one person assembles cars nearby the Slovak city of Žilina, another cleans hotels in Tirol and yet another sews GAP T-shirts in India, even though she should be going to school. They all bring profits to their employees, but each of them works under different conditions. The book, Capitalist Diversity on Europe’s Periphery – which won the Stein Rokkan prize – shows the origins and outcomes of the different conditions of capitalism in the Visegrad countries, the Balkans and the Baltic states.

The most neoliberal approach prevailed in the Baltic countries while Slovenia demonstrated the greatest commitment to social solidarity. Despite the efforts of Mikuláš Dzurinda’s and Václav Klaus’s governments, in the Czech Republic and Slovakia respectively, the so-called embedded neoliberal model became dominant in these countries. This is a system that constantly seeks a compromise between market economy and social solidarity.

The crucial argument of the book is that governments and other actors were capable of influencing the direction of the particular national capitalisms even if the results were not fully in their hands: far from being the passive victims of neoliberal transition, the region’s governments were, in part, its authors. Bohle and Greskovits emphasize that whereas a large part of the Czech, Slovak or Polish elites was inspired by the neoliberal ideology, this perspective was not as attractive for Slovene politicians, nor for their electorate. In short, we each have what we voted for.

The book is useful for reminding us of the arguments that most of the mainstream media in the region ignore. It stresses that whereas socialist enterprises were highly inefficient, the previous regimes did provide the population with a good quality technical education and gave people the experience with industrial production. This experience was later to prove crucial in attracting foreign investors. The socialist regimes also secured large scale social programs. The popularity of these programs prevented the post-socialist governments from abolishing them completely. The return of capitalism, despite being harsh for many, had milder effects on large sections of the post-communist populations than it would have, if these programs had been cut entirely.

If the technical education and experience with industrial production were the main reasons for the FDIs after 1989 it is reasonable to ask whether it was necessary to compete with the neighboring countries by offering tax cuts and state subsidies for investors. The Slovenians managed to attract investors without having to offer the subsidies, so why did other states feel the need to do so? At the same time, tax competition in the region resulted in a serious weakening of the welfare state as budgets already strained by the need to offer subsidies were further reduced.

This proved to be crucial after the global economic crisis hit the region. Those who paid most dearly were the highly neoliberalised Baltic countries. On the contrary, the Visegrád countries (with the exception of Hungary) and Slovenia were less vulnerable because of their social and financial policies. The problem in the Baltic countries was not just the state debt, but also the indebtedness of the households. Running high levels of both state and household debt had generated what proved to be unsustainable economic growth. Slovaks and Czechs were hurt particularly by the loss of export markets. Early German “recovery” prevented more serious economic downturn in Slovakia and the Czech Republic.

These economic events point to the existence of what Andreas Nölke and Arjan Vliegenthart call dependent market economies in the Visegrád countries. Bohle and Greskovits rightly take a more nuanced approach and show the value of exploring the different varieties of capitalisms in the region. However, on closer inspection, these seem to be more like varieties of dependency. Apart from the already mentioned dependency on export markets, further features of such economies include that for example whereas German corporations make decisions also in relation to German shareholders or German banks that could be expected to have some kind of a relationship to Germany, decisions in corporations operating in Slovakia are subordinated to the preferences in the headquarters outside of Slovakia.

As these few points suggest, the book is generally written within the ideology of growth, and of ‘catching up’ with the West in the level of production sophistication, productivity and the size of the economy. This approach is strongly criticised by environmental social movements as well as non-economic social sciences, pointing to the need to go beyond the Bohle and Greskovits’ conclusions, while drawing upon their highly useful research.

Localisation of production is one potential middle-way between a radical break with the colonization of the social realm by economics and mindlessly carrying on down what has been shown to be a dead-end street. Not only would localisation decrease our vulnerability to external shocks and help people take back control of aspects of their politico-economic being, it would be environmentally beneficial as it would reduce the unnecessary transport of goods as well. A key conclusion that we can draw from understanding that forms of capitalism are locally specific, is to offer localized alternatives, but also to recognise that local political conditions prove to be significant obstacles to their implementation.