Monday, December 26, 2005

The Sun Rises From the East

Came across this article from Der Spiegel. It's about Eastern European tigers who entered the EU in 2004 (via Pekka Nykanen & EU Rota).

All across the old Europe, unemployment rates are high, close to or above 10%, GDP growth is weak (Finland, around 2%, Germany, less than 2%) and people have less money to consume (high price level meets high taxes). The same can't be said about our Eastern friends, the so called "emerging markets", who entered the EU last year. Flat tax rate and more flexible labor markets are creating dynamic economic growth and unemployment rates are dropping along with corruption, which has plagued the Eastern Europe ever since Communism was forced upon them by Stalin.

This, the economic growth of Eastern Europe, is a great thing since it will set an example for the rest of us, for the so called "welfare" states in Scandinavia and Western Europe. The answer to our continuing problems is not that far away. One doesn't have to look all the way to the United States anymore to learn how to create a dynamic economy.

In East, Labor unions have not yet gained much ground, mostly because people are still sceptic of them. The unions worked as weapons of Soviet propaganda back in the days of Communism. At this point, labor unions could only stagnate the economical growth.

In the midst of all this is Russia, the shithole of the world. Corrupt and oppressed, run by former communists and KGB men, Russia has failed pretty much in every respect. Last week the Duma approved a legislation which severely restricts the rights and freedoms of non governmental organizations (NGOs). In Russia, starting a business is a pain in the butt, a process which takes time, extra money and extra motivation. Belarus is another example of a country that's heading toward its own failure.

And no - there isn't going to be any "mass migration" to Old Europe. Business is good - why would these people, the Eastern Europeans, leave their countries?

A lot remains to be done. There's still a lot of corruption, poverty, restrictions and unemployment, but they're definitely moving in the right direction, unlike the Old Europe.

"In the next 10 years, the gap between per capita incomes in the old and new EU member states will progressively close," forecasts Andreas Polkowski of the Hamburg Institute of International Economics (HWWA). "Some regions may even overtake us."

Merry Christmas!

Links: EU Rota, Der Spiegel,

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Anonymous jl said...

Although I agree to most of what you said in the post, I would like to point out that although liberalization is good to the overall well-being of the citizens of these states - and I fully support that - not EVERYBODY is better off (and no I don't propose state-intervention to "fix" that). Anyhow, there certainly is enough discontent there.

And as to mass migration, it IS happening at least in Latvia, from where about 50000 people have left to move to England and Ireland. This constitutes about the same kind of mass migration as Finns moving to Sweden in the 60-70's. Of course this is good for the intaking countries, just look at Ireland. And probably also to the workforce-exporting countries IF people eventually come back. I would be interested to see numbers as to what kind of employment - if any - people who left Latvia had before moving. Are they mostly the unskilled unemployed or the well-educated youth?

And the comment about Russia being the "shithole of the world", please, come on! Russia's GDP has been growing fast and contrary to popular belief in Finland also the incomes of many of the lesser well off (I know, I've seen incredible improvement even in small country-side towns I've visited). Sure, Russia could improve a lot of things, but compared globally they are doing more than fine. The "shithole of the world" title I would more likely ascribe to countries like zimbabwe, north korea and the like.

January 11, 2006 1:55 PM  
Blogger Mikko Sandt said...

not EVERYBODY is better off

It's unlikely that any system is able to fix that.

However, for as long as the responsibility belongs to the individual, I don't see anything wrong with the situation. In a free society no one prevents you from working to improve your situation.

Radical socialist attempts to remove economic inequality have led to situations where almost everybody are "equally" worse off.

And as to mass migration, it IS happening at least in Latvia, from where about 50000 people have left to move to England and Ireland.

This indeed seems to be happening, at least in Latvia, since there are some specific regions where poverty and unemployment are exceptionally high. However, Latvia is losing less people now than in 1990 and there's no doubt that the number of people leaving the country will drop as the overall economic performance improves (as it does).

More on the issue:

The "shithole of the world" title I would more likely ascribe to countries like zimbabwe, north korea and the like.

But the difference is that while the rest of the world seems to be taking steps forward Russia is anxiously taking steps backwards.

January 11, 2006 6:00 PM  

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