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EU integration and Economics

Industrial economies, free-trade, and stable, long-term development

I've been getting a lot of questions from people regarding the speed of EU integration in the Balkans and I'd like to make a couple public comments in response. Of concern are two major points - one, the timing of EU integration in the short-term, and; two, the effects of EU integration on the less-developed economies of Europe.

1. The timing of EU integration in the short-term.

As of this week, all of Croatia's roadblocks toward EU integration appear to be lifted (or in the process of being lifted). Recent reports from the ICTY (International Criminal Tribunal for the Prosecution of War Crimes in former Yugoslavia) suggest that all major players in the wars of the 1990s are complying, if not fully, to a very significant degree with the tribunal. Croatia still has some information to produce regarding Operation Storm (in which the Croatian military, in conjunction with US military weaponry and personnel, undertook a massive program of ethnic cleansing, resulting in the expulsion of hundreds of thousands of Croatian Serbs from their homes over the course of 24-48 hours). Additionally, Serbia has yet to either find or turn over Ratko Mladic (the Bosnian Serb general responsible for the Srebrenica Massacre, among other horrendous acts) to the ICTY. However, the EU has issued a report that the pathway to ascension is largely clear.

Thus far, Europe has a hole punched in it running from Slovenia's southern border, along the Adriatic down to Greece's northern border and up against Romania and Bulgaria. That leaves Croatia, Bosnia and Herzegovina, Serbia (and Kosovo - status disputed), Macedonia (or Former Yugoslavia Republic of Macedonia - also a disputed issue), Montenegro and Albania knocking at the door of Europe.

The working assumption is that Croatia will join the EU in 2012, with Serbia following suit by 2014 or 2016. However, I think that the assumption is wrong, or at least poorly developed. I think that the likely outcome will be a bulk-integration, or phased bulk-integration of the Western Balkan states. If I had to guess, I would say that the first group to be admitted will most likely be Croatia, Serbia, Montenegro and Macedonia. Later, Bosnia, Albania and Kosovo, simply due to the larger structural hurdles facing those countries, and the significant degree of economic, political and judicial reforms necessary before they can come in line with the acquis communautaire.

Many Croats would bristle at my suggestion that they would have to wait for ascension until Serbia and Montenegro could also join. However, there are two issues which makes the group-integration more likely in my mind (none of which have any relation to Macedonia's membership bid): 1. Bringing Serbia, Croatia and Montenegro into the EU at the same time would be an effective way of limiting the sometimes petty squabbles that block ascensions. Take Croatia's bid, which Slovenia blocked due to a territorial dispute over a tiny bay in the northern part of Istria. The EU might not want to foster this sort of dispute between Croatia and Serbia, especially with the bad-blood that already exists. That isn't to say that there is a chance of violence, but only that there is a chance of unreasonable block-headedness. 2. A group integration could go a long way toward cultural reconciliation between Croatia, Serbia and Montenegro.

However, this still leaves a big fly in the proverbial ointment - the question of Kosovo, and the question of Bosnia...

Serbia's ascension, while Kosovo remains outside of the bloc, would potentially create an untenable political situation in the Balkans. Serbia has, for better or worse, refused to acknowledge Kosovo's unilateral declaration of independence. In so much, might Serbia choose to ignore any request by Kosovo for European membership (because doing so would be a de-facto recognition of Kosovo's sovereignty)? Such a move would be deeply unfair, but entirely predictable. Additionally, it would almost certainly cause a storm on Serbia's political scene, as many in Serbia would feel that ascension WITHOUT Kosovo represents a recognition of independence -- something that would almost certainly cost the political future of Serbia's pro-western government. As such, it might be absolutely necessary to grant Kosovar membership at the same time as Serbia's membership.

More than any other state, Bosnia needs structural help and political reconciliation. Leaving them out, while Serbia and Croatia walk into the EU, would be a slap in the face of the painful experience of the 1990s. It's wrong to lay wholesale blame on Serbia or Croatia-proper for the crimes committed by the Bosnian-Serbs and Croats. However, Serbia and Croatia operated with a degree of complacency in the dissolution of Yugoslavia and the horrendous crimes that happened on Bosnian soil. The result of Bosnia being left behind might actually be a deterioration of Bosnia's path toward stability -- something that should be avoided at virtually any cost.

With regard to Macedonia, they've only been stopped from joining the EU due to Greece's absolutely asinine claim that Macedonia's name implies the existence of an aggressive territorial claim on the northern Greek province of Macedonia. I don't even need to go into that, except to say that Greece and Macedonian diplomats are apparently getting very close to a solution. If Greece can't figure out how to play nice, though, I think that it's time the EU steps down on them hard -- which functions as a not entirely related, but a tenuous pivot-point toward the other big issue I want to address in this post.

2. The effects of EU integration on the less-developed economies of Europe.

I'm a hesitant, yet still enthusiastic (try reconciling that!) supporter of EU-integration. My support for the EU experiment stems from my belief that political and economic integration is good for decreasing the propensity for bloody conflict. After all, who wants to fight when: a. you're comfortable, and; b. fighting would harm not only the economy of your neighbor, but your own economy. However, I'm hesitant due to the actual methodology employed by the EU and other free-trade blocs.

The recent crisis in Greece (along with Spain and Portugal) gave (what should have been) voice to my criticisms of predominant free-trade institutions. Namely, my criticism goes to the necessity that capital actually remain in a geographical area for true development to occur. Generally, capital development is the result of a period of significant domestic industrial development. Take Germany or the USA, both of which industrialized heavily during the first 75-years of the 20th century, before becoming service-based economies. In these so-called "post-industrial" economies, the standard of living raised as a result of long-term domestic development. Capital exists independent of manufacturing (regardless, and I'm not going to delve into it too deeply here, there has been a decline in the standard of living in both the US and Western Europe as a result of the shift to a service-based economy, which complicates my analysis). In contrast, places like Argentina, where previously there had been a significant degree of capital investment by the Western powers due to the low wages and lack of labor-protection, there remains comparatively little investment due to the flight of capital to yet cheaper destinations in south-east Asia. What good is industrial development when capital ownership (and therefore the flow of money) gets up and leaves?

Greece, in many respects, is the victim of similar problems. In the decades prior to Greece's EU ascension, Greece was subject to a right-wing dictatorship which isolated them politically and stymied development. Greece underwent virtually no industrial development during that period (similar things could be said about Portugal and Spain). When Greece walked into the EU, the EU was effectively nothing more than a free-trade bloc with a customs union. In effect, Greece's pre-industrial market was wrenched open and German, French and British goods were rammed in -- resulting in a shift to a post-industrial service economy (without any of the benefits of being post-industrial). The only jobs created were low-pay and lower-benefit. On top of that, with these established, post-industrial giants, where was Greece to develop economically? Instead, Greece took the reasonable approach that all post-industrial states should (at least in my estimation) and expanded social-services to a significant degree to make up for the lack of (possible) economic development. At the same time, the Greek economy was bleeding Drachmas (and now Euros) due to the dramatic drain that neoliberal economics have on domestic economies -- only ~10% of every Drachma/Euro spent in the Greek territory actually stays in the territory, because the profits move to where the capitalists live: Germany/France/UK/etc... This leaves little tax-base, little spending power, and little developmental potential. Greece was a sinking ship from the beginning - (mostly) not because of their own mistakes, but as a result of the zealous expansion of the European free-trade zone.

What about Croatia, Serbia, Montengro, Bosnia, Macedonia and Albania (and Kosovo)? They're maybe slightly better off than Greece (and in varying degrees), but many of those states forwent a decade or more of economic development due to a combination of war and overbearing international market forces at the exact wrong time (I would happily delve into this more if it wouldn't require its own multi-page analysis).

I'm worried about what might come as a result of EU integration in the Western Balkans. Namely, I'm worried that the unified EU market will eliminate the chances for significant capital growth domestically (some development will occur, sure, but we'll never see Serbia reach parity with Germany unless space is made for Serbia's domestic development), while at the same time, austerity measures will do much to harm the political stability of the EU, and thereby undermine the stated goal of the EU -- to reduce squabbles and warfare between European states.

My solution to this problem is every bit problematic as it is untenable. However, I can't think of an alternative solution: the EU needs to make space for a modicum of economic protectionism within the fledgling and hopeful member-states. To me, I can't see another way in which Serbia, Croatia, Bosnia, etc... could generate the tax-base necessary to support a strong, post-industrial social-state (which I see as necessary, in turn, to maintaining a stable, war-free Europe). Unfortunately, I can't imagine a main-stream economist proposing such a resolution to the problems facing Europe (and the developing world), nor can I imagine Germany/France/UK/etc... agreeing to such a proposal, considering the decline in real-wage values that happens to be plaguing the various post-industrial service economies.

One thing is certain, though: for Europe and America to move forward in prosperity, we need to jettison the neo-liberal mentality that market-forces are next to god and realize that a greater degree of economic-leveling needs to happen. Nothing is more dangerous to humanity than powerful people without obligation or accountability. After all, economic power is not really a thing-apart from political power.

Posted by DavidJFabe 06:20 Tagged educational

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