Democratic Governance and the EU-s Political Integration Security Gap and Transition to Market Economy

Global Geopolitics Net Scholarly Papers and In-Depth Journalism Series

The European Central Bank is the central bank for the euro and administers monetary policy of the eurozone. The headquarter is in Frankfurt, Germany,April 2016 – Editorial credit: Yavuz Meyveci / Shutterstock.com

By Sedef Asli Topal, Master of Arts in International Relations – Legal and Business Perspective
The University of Szeged, Hungary

In the 1990s – during the pre-EU period – the Central and Eastern European Member States (CEEMSs) had developed their own unique form of democratic governance in which the political power was centralised, the rule of law was not fully adopted and the culture of rights was relatively weak. This tradition still exists in specific parts of their governmental systems today. The lack of a long-term democracy experience due to the geopolitical facts and the EU’s expectations for a quick but efficient democratic transition from Central and Eastern European Countries (CEECs) are the major reasons of this continuing tradition. However, there is also another important factor that must be focused on with more details on this issue: “transition to liberal market economy”

“The CEECs have not only transited to liberal democracy, but also to the market economy during the EU accession process. The West has been crafting not only democracy but also the market economy, security, and other matters.” (Zielonka 2001, 526) The desire of emerging new East European political and economic elites was to enter more fully into the global environment (Lane 1996). “The West created an environment conducive for democracy building and this has helped those local elites in Eastern Europe who were interested in accomplishing democratic consolidation.” (Zielonka 2001, 531) The negative impacts of the transition to a market economy on the people’s living conditions discredited the EU and its principles in CEECs. Correspondingly, the EU was perceived as an elite-oriented project and far away from understanding the needs of ordinary citizens among the public.

The ‘liberal’ democratic institutions have been eroded by the ‘liberal’ market rationality in last two decades, which became more remarkable since the Euro-zone crisis erupted in 2008 and resulted in a high inflation and unemployment rate in periphery countries of Europe such as Portugal, Spain, Greece, Italy and Cyprus. These countries recently face critical economic and political instability. Despite the bailout packages and strict austerity measures applied by the countries with the pressure of IMF and ECB, they haven’t weathered the storm yet. A similar crisis had been shaking the Central and Eastern Europe from the beginning of their transition process to liberal democracy and market economy.

Budapest, Hungary, 05 September 2016 – Building of the Hungarian parliament on the bank of river Danube, Budapest – Editorial credit: Dafinka / Shutterstock.com

For instance, in the case of Hungary, “Brussels primarily wanted guarantees that Hungarian markets, companies, banks and etc. would be accessible to its MSs. Like the other CEE associate countries which were compelled to accept the conditions of an industrial free trade without membership rights, although their economy could not be prepared in such a short time. Furthermore, the free trade did not include the agricultural export of Hungary into the community, which presented a significantly greater volume than their agricultural imports. The community continued to pursue a protectionist policy. Hungary gave unilaterally greater benefits to the Community than it received through the Europe Agreement”. (Valki 2001, 288)

At the beginning of the transition, or in other words, membership process; Hungary unexpectedly couldn’t receive a strong political and economic support from the Western Europe. After the collapse of Soviet Union, Hungarian economy became extremely fragile to the negative effects of internal and external financial crises. The most painful part of the transition was to liberalise the national economy which had been heavily depended on state enterprises for four decades. Hungary believed that the West, specifically IMF, would save the Hungarian economy which was teetering on the brink of bankruptcy (Valki 2001, 286). IMF recommended Hungarian Government to impose strict austerity measures in return for loans and credits. Although firstly the government refused to comply with these strict economic measures, it had to submit them later. “The community stated that there would be no more financial assistance if the Hungarian government did not reach an agreement with the IMF.” (Valki 2001, 286) The government was harshly criticised by the opposition parties and public due to its decision on accepting the implementation of austerity measures.

Under the circumstances, Hungary had been highly disadvantaged until it became part of the EU. Unfortunately, the disadvantageous situation hasn’t changed much after it joined the EU owing to the extensive privatisation programme and austerity package that the government carried out during the 1990s. “The Antall Government sold the supermarket chains to Western investors who bought products from their traditional Western suppliers. As a result, Hungarian farmers and food industry were unable to sell their own products…” (Valki 2001, 290) The privatisation programme has significantly weakened the Hungary’s competitiveness capacity. Today, the capacity is limited with few Hungarian companies which are producing basic foodstuffs and low-tech materials. “The Hungarian consumers were compelled to buy expensive Western goods” (Valki 2001, 290), which has been decimating their purchasing power.

In addition, the Czech Republic has nearly the same experience with Hungary once the Europe Agreement governing the trade liberalisation came into force in early 1995. “The Agreement provided for a steady liberalisation of trade over a ten-year period, with exceptions in agriculture and other sensitive areas. Instances of EU protectionism, such as the 1993 total ban on the import of livestock, meat and dairy products from Eastern Europe, risked discrediting the EU among the Czech public.” (Vachudova 2001, 330)

“Each time Western actors appeared to give priority to economic or security objectives they were accused of betraying their commitment to democracy. The economic project is largely about financial profits, while democracy about distributive justice. The security project is largely about stability, but concern over stability in autocratic states prevents any democratic breakthroughs.”(Zielonka 2001, 527-528) In other words, Western actors subordinated the establishment of well-functioning liberal democratic regimes to the establishment of well-functioning liberal market economies and security alliance in the case of CEECs’ EU membership.

At this point, the Western Europe could manage the tension between the market’s will and public’s will without annihilating the social welfare state thanks to their on-going colonial activities as the Eastern Europe failed to cope with the same tension. The Western European Member States (WEMSs) could compensate the negative impacts of market rationality on the public with their strong civil service system as the CEEMSs were deprived of it. In relation, Kaldor and Vejvoda (1997, 74) have stated that “What is specific to the post-communist condition is the lack of resources in state budgets adequately to finance their civil services in particular their law enforcement agencies. This lack of resources in turn related to the inadequacy of tax collection because of weak law enforcement, which is in turn paralleled by the growth of a shadow economy and the emergence of various mafia-type networks, often with links to the administration. The situation is most extreme in Romania, Bulgaria and Baltic States.” Today, Romania and Bulgaria are still the most troubled countries that must get over the problem of weak law enforcement and mafia-type organisation.

Consequently, I think that where the liberal market rationality comes together with an economic and social underdevelopment, it is very difficult or unlikely to build effective liberal democratic institutions. Even the WEMSs have been badly influenced by these uncontrollable market policies in last three decades. The abolishment of state interference in national economy and removal of trade barriers among the nations have made the countries highly vulnerable to the external political and economic crises. In particular, it has weakened the power of working class in the bargaining process with employers.

Multi-national corporations and transnational financial actors such as IMF, Moody’s and Standard & Poor’s are now able to shape the internal policies of the countries to a large extent. “The tragedy for Central and Eastern Europe lies in the fact that its pre-democratic crisis coincides with Western Europe’s post-democratic crisis.” (Kaldor and Vejvoda, 1997, 81) The question is ‘where had been the EU while this was happening?’ “Which part of the EU’s budget devoted to the Eastern enlargement was meant for promotion of democracy? Is there any evidence that the Union’s ambition to establish workable democracies in Eastern Europe is matched by an adequate economic commitment to the project?” (Zielonka 2001, 529)

According to Raik (2004, 568), “The EU has applied a range of instruments of democracy promotion – most important, the conditions for membership and financial assistance- but the impact of these tends to be overestimated. In the 1990s, an average of only 1 per cent of total EU aid to the CEECs was directed toward democracy.” Therefore, the EU may have not financially supported the CEEMSs especially with the aim of establishing liberal democratic governments because the EU’s aim of creating liberal democracies in Eastern Europe doesn’t seem to be matched by its market economy project.

© Copyright 2017, Sedef Asli Topal.

This article is the first in an ongoing series of scholarly or academic papers to be presented on the Global Geopolitics net site. Scholars and journalists are welcome to submit papers with more in-depth analysis for publication as part of this series.