Earlier this week, Der Spiegel published a sobering article about how the global economic crisis is battering the Friedmanite petri dish that is post-Soviet Eastern Europe:
After joining the EU, the Baltic countries in particular made enormous progress in catching up with their Western neighbors, sometimes growing at double-digit rates. Romania, a latecomer to the EU, recorded the largest number of new registrations of Porsche Cayennes worldwide in 2008. In downtown Warsaw, the Stalin-era Palace of Culture and Science, once the city’s only skyscraper, disappeared behind new steel-and-glass office towers within the space of a few years. The Czech Republic still enjoyed almost full employment in 2008.
Now the once-booming Eastern European economy has ground to an abrupt halt. The worldwide economic crisis, which began with the bursting of the real estate bubble in the United States, is now making itself felt in the former communist countries. And it is hitting them with more force and more quickly than the newcomers to capitalism, spoiled by success, had expected.
The Estonians, Latvians and Lithuanians, who for years could enjoy growth rates of between 7 and 10 percent, must resign themselves to the fact that their economies are shrinking. Hungary has already tapped the International Monetary Fund, the World Bank and the EU for €20 billion ($27 billion), and Romania will need just as much. In the fourth quarter of last year alone, the Poles produced 5 percent less than in the same period in 2007. In the Czech Republic, unemployment has risen to 12 percent.
The fact that the crisis in the West is now pulling down the East is largely attributable to a single mistake. For years, Eastern Europeans took out loans denominated in euros, Swiss francs and Scandinavian kroner. The loans stimulated domestic consumption and allowed the economies to grow. Many new member states imported more goods than they exported. Now the mountains of debt are high, and the current account deficits of countries like Lithuania and Bulgaria are a massive 15 percent of GDP.
Capital flight and declining demand from the West have pushed down exchange rates. The currencies that are not pegged to the euro have experienced particularly drastic slumps in value. In the last six months, the Romanian leu lost more than 16 percent of its value and the Hungarian forint close to 20 percent. Private citizens and even governments can no longer service their foreign-currency loans.
Massive bankruptcies in the East are now affecting the reckless lenders in the West, which also happen to control about 70 percent of all banks in Eastern Europe. Austrian banks alone have outstanding loans in Eastern Europe worth €293 billion ($396 billion). Thomas Mirow, the president of the European Bank for Reconstruction and Development in London, expects that up to €76 billion ($103 billion) in Western loans will come due this year in EU members in Eastern Europe and Ukraine. Concerns about the creditworthiness of Eastern businesses could deter cash-strapped Western banks from issuing loans for investments. According to Mirow, a vicious circle is developing as Eastern European economies run out of steam and the crisis gains momentum.
At any rate, it will not be possible to fulfill the promise of the revolution of 1989 — freedom and prosperity for all Europeans — as quickly as promised. Instead, citizens in the new EU member states can expect to see their wages stagnate at lower levels compared with those in the West, assuming they have not already been cut drastically. In addition to mass layoffs, ailing Eastern European business owners have resorted to wage cuts of up to 30 percent in recent months. And someone who is out of work in the east quickly finds him- or herself in a very tight spot. Governments are out of money, and social services were cut back in many places during the boom years.
Scary shit. But the following passage, buried in the middle of the doom and gloom, caught my attention:
Now trouble is beginning to brew in these young democracies. In Bulgaria, Latvia and Lithuania, angry citizens have taken to pelting government buildings with eggs, rocks and — weather permitting — snowballs. In the Latvian capital, the government of Prime Minister Ivars Godmanis was even forced to step down. Meanwhile in Hungary, Prime Minister Ferenc Gyurcsany announced Saturday he was resigning, saying he was an “obstacle” to the reforms needed to help his country overcome the financial crisis.
Chris Bowers at OpenLeft points out something that should be common fucking sense–“When people aren’t angry, politicians aren’t responsive”:
To me, as a political activist, the lesson is that we should be generating as much anger as possible, all the time, because it is about the only thing that appears to make politicians in D.C. responsible to our concerns.
Democracy doesn’t begin and end at the ballot box. Sometimes we have to remind our leaders of this–make the powerful FEAR the people. Because, quite frankly, there are more of us than them. Strength in numbers. Is why divide and conquer is a key part of their strategy. We see that in the anti-EFCA effort, with the business lobby trying to stir up the resentment of non-unionized workers towards those who are organized.
Reading about how the global economic crisis is hitting Europe is both depressing and, perversely, inspiring. Their anger isn’t impotent, expressed not in water-cooler griping, but rather abductions, rock-throwing, mass labour mobilization. Public outrage–visceral, undiluted rage–gets shit done. Governments have stepped down after being held accountable by the will of the people; corporations have been forced to renegotiate severance packages for laid-off workers.
Anger. Gets. A. Response.
Somewhere, Emma Goldman is smiling.
Recommend this post at Progressive Bloggers