Wednesday, June 01, 2005

The Central European scapegoats

In an increasingly globalised world structural economic change is inevitable whether people like it or not. The world has changed dramatically in the past ten to fifteen years – from the Indian sub-continent all the way to China economies are developing at a rapid rate and challenging the economic superiority of western industrialised nations. The alternative to reform in the Western economies is a return to protectionism, which will mean developed market states being seen as trying to keep less developed ones in a state of relative poverty; this latter scenario will of course increase geopolitical tensions in a world that is already tenser than it was five years ago. It is up to world leaders to find a balanced solution, but as the European Union has recently discovered such solutions are not always easy to find, and the compromises not always popular.

Related to the above. I have seen quite a bit of anti-central / eastern European diatribe in the past few days much of it blaming EU Enlargement, and more specifically the new EU member states, for undercutting "old" EU members states on corporate tax and the cost of labour. It is also the case that a number of “No” voters in both France and the Netherlands blame EU enlargement for the problems their economies now face.

This attack on the Central & Eastern European nations is curious because the level of increase in “old” EU members export trade into the region has increased whilst the number of corporate re-locations has actually slowed in the CEE region since EU accession. Furthermore, the cost of labour is rising fast and business are actually relocating out of the region eastward to China! The majority of the corporate relocations, and taking advantage of cheaper labour costs, took place in the decade before EU enlargement. This process would have happened anyway regardless of whether these countries applied to join the EU or not. What exactly is it that some of these French / German / Dutch etc. "social model" adherents want? A sign on the door in all the new EU member states that reads "Keep us poor & Open for exploitation”???! The irony of so-called socialists behaving so selfishly is palpable.