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Mon, 7 Apr 1997 10:11:54 +0200 (MET DST)

The Rise and Demise of the European Union

Suppose, the eurocrats were right, what would follow from this? Clearly, if the Union were to be an instrument of world economic ascent and growth (as the euro-crats would have to believe, for - why else - should we have the Union at all), then the countries most integrated into the system should be the real tigers of the world.
The very geographical centre of the Union, Belgium, with the Union capital Brussels, would have to be on an equal footing with Hong Kong, Singapore, Thailand, and the founding member nations, like Germany, France and Italy, should have unemployment rates well below the outsiders, like Japan, Switzerland, Iceland, Malta, Norway, or even the Czech Republic after years of communism. Average EU unemployment stood at 11.1% by 1993 however (UNDP, 1996: 195), while outsiders as different from each other as the USA, Japan, Norway, Iceland, New Zealand, Switzerland, Malta, the Czech Republic, Latvia, Lithuania and Estonia, were all below, sometimes significantly below this average unemployment rate. The harsh critique by the growing number of eurosceptics among professional social scientists now precisely is, that the Union, as it is structured, is not the answer to the problems, but the very reason for them.
The political right in Europe, especially in German-speaking countries, has reacted to the growing (socio)liberal critique of the essence of the Union by disbelief and sometimes even aggression, as the now rightly famous infamous article in Frankfurter Allgemeine about the Jew Rifkind so well demonstrated. Grave is the sentence against those, who disturb Lohengrin in his dreams of the Reich; while the political left reacted and reacts in an almost fundamentalist way by denouncing growth itself, castigating it as Wachstumswahn and Wachstumsfetischismus. But that the Union itself blocks growth is a basically atlantic, liberal, and even British idea, entirely unintelligible to the Continental European mindset, confronted with 4 decades of euro-belief and 'Planungsdenken'. British neo-conservative de-regulation-fundamentalism, combined with post-BSE subvention across the English Channel made the intellectual debate all the more difficult..
The political project of transformation from communism in Europe is not only endangered by the contradictions, globalization creates in its host countries, it is also threatened by negative developments in the European 'anchor economy'. It would be a fatal conceit to try to disconnect the trajectory of the centres from the tendencies of globalization and destabilisation, which we have discussed above. Up to now, we studied the logic of world and East European development after 1980 on the level of global society, on the level of the less developed countries and on the level of the transformation countries. It is now time to turn our attention to the logic of development on the level of the developed capitalist democracies. Why is there a real danger of a European failure? In terms of the foreign policy choices on the European continent, there is no alternative to the Union of western democracies, now comprising 15 historically relatively stable Western democracies. The process!
of the unification of the European continent gathered momentum with the recent expansion of membership to Austria, Finland and Sweden, three countries, characterised by traditional world political neutrality and a social welfare state system. Among the Western European countries, only neutral Switzerland, the NATO-countries Iceland and Norway, and the small-states Andorra, Monaco, San Marino, the Vatican, Malta and Cyprus are now still left out from the Union. But with the upcoming European Union Government Conference in 1996, important decisions not only on the international political role of Europe in the world, but on the socio-economic future of the European Union itself will have to be taken. The problem is of course which Union. We concentrate here on these issues, which have a long-term strategic and theoretical relevance for the policy formulation in the new Europe. In order to provide a valid strategy to its member countries, the Union has to be an association of wor!
ld economic ascent and not a club for joint world economic decline. The fundamental question, why some nations are performing differently from the others, is applied here to the Western industrialised democracies.
Very early on, a group of European policy planning and development researchers, headed by the late Dudley Seers, challenged head-on the reigning visions of the development strategy of the Commission in Brussels towards the Third World and towards the European periphery (Seers, 1978; de Bandt et al., 1980). This theoretical challenge, still worthwhile reading today, was the first real and systematic question mark behind the policies of the Commission since 1958. The authors of that critique were a European-wide group of committed students of development and committed Europeans at the same time. Its leader, Dudley Seers, as one of the doyen of development and distribution theory among the world-wide profession of economists, having influenced the course of Keynesian economics over the whole post-war years in Britain, took up the issue of the centre-periphery relationship that characterises the South, Northwest and eastbound relationship of the Union (Seers, 1978). Several author!
s, most notably Inotai and Malcolm, developed these arguments from a later, liberal perspective. With its emphasis on structural protection, Inotai maintains, the Union increases rather than decreases the long-term cleavages between the centres and the peripheries inside and outside the boundaries of Europe. Today, it is no secret, that 90% of all EU expenditure, union-wide, must be categorised as subventions. With each expansion to semi-peripheral regions, the protective element increases. Simple, as the diagnosis might sound, it strikes at the very heart of the conventional Union wisdom on matters of external economic relations. A good part of professional economists the world over, liberal and radical social scientists alike, have later taken up this theme. They maintain that the Union, by its market protecting arrangements with the outer rim of its orbit of influence leads to a secular negative balance of trade of the periphery regions with the Union, and thus prolongs str!
uctural underdevelopment (amongst others such divergent authors as Hickman, 1994; Inotai, 1993; Kennedy, 1993; Amin, 1994). The arguments of such Union critics cannot be dismissed a-priori and out of hand. Western Europe loses in terms of world market shares vis-à-vis the countries of the Pacific; the dynamics of growth in the world economy seem to work to the detriment of the old European centres. The European Union shortcomings vis-à-vis the Pacific in terms of world export markets for manufactured goods, in terms of comparative labour costs, in terms of technological and scientific development and in terms of employment are all too obvious and were described in recent literature in all detail (Inotai, 1993; Kennedy, 1993; Tausch and Prager, 1993). The fundamentals of the European Union still reflect the realities of the late 1950s and still comprise the following sectors (i) the coal and steel community (ii) agricultural self-sufficiency (iii) the customs union. The new int!
ernational division of labour, that characterises the world economy since the late 1960s, is the prime challenge to the logic of the Union, built around and evolving from the Franco-German alliance of the late 1950s (Inotai, 1993). Precisely these sectors are most seriously affected by world economic and technological changes. The annual cost of the common agricultural policy of the Union is now estimated to be $ 45 thousand million, more than 10% of this is believed to be paid to criminal channels (Malcolm, 1995: 57). It dominates the Union's external trade policy, distorting the world market and preventing the poor countries from exporting.
Our dire prediction in the context of the theory of globalization is, that the Union, as it is now structured, is not a strategy of world capitalist ascent, but rather a strategy for the acceleration of world economic decline of the European countries. A major problem, which has to resolved first and foremost, is Germany's apparent inability to comprehend and play its role as a highly developed Mexico in the world economy. Similar in population size to that of Mexico, and with a share of roughly only 8% of world GNP, Germany's first and foremost role would be that of a highly specialised trade and current account surplus economy in the heart of a Europe, oriented towards the West and towards the Atlantic and the Pacific, still and increasingly the major centres of the world economy. But Germany is estimated to have spent $ 14 thousand million alone to prop up in vain the Italian Lira recently. In 1993 alone, Germany poured another 9.1 thousand million $ down another sink - thi!
s time German aid to Russia. Insiders estimate, that only 10% of Western aid to Russia reaches its targets. How Germany projected (once again in history) in vain her dreams to become a 'Weltmacht' (world power) is to be judged from the fact, that a country with the mere population size of Mexico and a share in world GNP of only 8.1% took over 43.7% of the burden of reconstruction of former communism - from Frankfurt at the Oder to Wladiwostock during the period 1990-1993. Germany's official and private flows amounted to 32.7 thousand million $, out of a total of 74.8 thousand million $ (our own compilations from OECD, GD (95) 41: 'Aid and other resource flows to the Central and Eastern European countries and the new independent states of the former Soviet Union in 1992 and 1993', Paris 1995). But the foundations of Germany's dreams to become a Weltmacht are shaky indeed, as the meagre position of Germany's transnational corporations vis-à-vis their international competitors, a!
nd the losses of even companies like Mercedes-Daimler-Benz to the tune of more than 1 thousand million $ and the recent strikes at Volkswagen, Wolfsburg, all too clearly show (see also maps above). For the transformation countries nearer to the European centre, such economic mismanagement means lost opportunities to stabilise democracy at a vital moment of world history: the Polish GNP amounted to just 75 thousand million $ in 1992 (UNDP, 1995; Malcolm, 1995). Germany with its current account balance of just + 2327 million $ in 1994 is in a too weak position to be the European 'growth engine' anymore:

Graph 8.1: current account balances in the world system, 1994, in millions of $

Current Account Balances above + 10000 million $ and below - 10000 million $, 1994. Compiled from Fischer Weltalmanach, 1996

Regional concentration in the West of Eastern Europe should have been the aim of G-24-aid to Eastern Europe from the outset. Limited resources allow only limited aid activities. Economic stagnation and unemployment will significantly rise due to rent-seeking that is enhanced by the way European institutions are built at the present. In terms of the environment, government subventions to declining productive branches will increase technological backwardness and preserve transport intensity, and hence, pollution. Economic inequalities threaten to increase with such a structure, and in turn will form a block of its own against world economic ascent. The expenditure for research and development in the Union budget 1994 was just 3.6%; general and professional education received only 0.8% of the total Union expenditures; the energy sector, EURATOM and the environment another meagre 0.2%; while expenditure for agricultural subventions consumes 53.5%, and structural policies for regio!
ns, for agriculture, traffic systems and fisheries another 30.7% of the total budget (our own compilations from Fischer Weltalmanach, 1995). Not only the internal problematic needs urgent reform, also the relationship to the outside world.
Inexorably, the centres of gravity of the world economy are shifting towards the LDCs, here most notably the countries of the Pacific. Graph 8.2 shows the tendencies of world-wide investment from the end of the last Kondratieff cycle onwards, while Graph 8.3 projects these data up to the year 2000:

Graph 8.2: the world-wide recipients of transnational investment, 1984 - 1995

Graph 8.3: projections of the inflows of world-wide investments until 2000

Graph 8.4: Triad fortresses? The share of intra-regional trade, trade with the other parts of the triad and with the rest of the world in a time-perspective

Graph 8.4: for the world economy, triad protectionism indeed might be an abyss...Intraregional trade in a time-perspective

Legend: our own calculations and projections from Stiftung Entwicklung, 1996, and Hallett, 1994

The effect of the Europe-agreements between the EU and the countries of Eastern Europe seem to repeat the experience of Lomé and can be summarised in one word: a massive positive balance of trade in favour of the Union and to the detriment of the partners in the East, that leads to political and economic friction (Hickman, 1994; Inotai, 1993). It is shown in this chapter, that Lomé indeed is such a negative experience on the level of the LDCs. A growing number of academic critics of present Union economic policy maintain that the EU-approach to foreign trade and relations with the semi-periphery and the periphery is based on two fatally erroneous assumptions. First, the gradualism of trade liberalisation; second, the protectionist answer to the current economic malaise in Western Europe. The transformation process of the East would be supported efficiently only, if the East could expand rapidly its exports in those areas where the East has a comparative advantage - agriculture!
, steel, textiles and clothing. But precisely such sectors are protected by the EU. The agreements reached up to now reflect the outdated and orthodox EU trade policy, designed in the late 1950s. The situation of the East is made all the more difficult, because there is no Western European willingness to make major concessions in other areas, most notably migration, partly a consequence of deteriorating external economic relations, partly a consequence of rising internal inequalities.
Samir Amin (1994) puts a heavy blame on the Europeans for prolonging the underdevelopment and stagnation of their own 'backyards'. A look at the UNDP 1996 data about the European inner and outer periphery in comparison to the European leading economy Germany confirms this dire hypothesis. Germany is under a desperate pressure to redress the negative current account balance, and to have high export surpluses again:

Sub-Sah- Arab Eastern Germany
ran Africa States Europe

life expectancy 50.9 62.1 69.2 76.1
real GDP in $ PPP 1288 4513 4164 18840
human development index 0.379 0.633 0.773 0.920
gender related devel. index 0.366 0.513 - 0.883
gender empowerment index 0.366 0.513 - 0.654
millions without health s. 205 36 - -
illiterate adults in millions 121 59 2 -
million malnourished chil-
dren under 5 years 22,5 3,1 0,475 -
% low birth-weight infants 16% 12% 7% -
terms of trade 90 98 99 100
current account balance be-
fore official transfers in
millions of $ -8022 -10937 -12413 -1222
arms exports/imports in
millions of $ - -3844 -59 +462
government consumption 18% 25% 18% 20%

Source: our own compilations from UNDP, 1996

But what, then, Eastern Europeans should do? Western Europe's barriers to Eastern trade will only increase the pressure towards migration, towards the 'second economy' and towards political instability in the East.
The experience of East and Southeast Asia has precisely shown, that ceteris paribus three conditions for successful capitalist development now hold (i) the existence of a reliable anchor economy (ii) substantial net transfers (iii) free market access to exports (Inotai, 1993). The failure to realise such a strategy vis-à-vis the CEFTA-countries results in the growing trade balance problems of the transformation region (Hickman, 1994). By enlarging the Union to the South, the protective tendencies precisely in those sectors, which are also important for the semi-periphery and the periphery, have grown. The effect of this is a growing world economic inefficiency (Nuscheler, 1993). The most visible result of this is the high unemployment in many Union countries at the beginning of the 1990s: in 1993, France had a 11.6% unemployment rate; Finland 17.7%; Denmark 12.4%; Ireland 15.6%; Italy 11.5%; Spain 22.6%. The entire European Union now has over 17.3 million people out of work (1!
0.9% unemployment rate); in Eastern Europe, willing to join the Union early on, another 6.6 million unemployed persons would have to be provided with jobs, if the foreign policy objective of the eastward expansion of the Union should become in any way realistic. The recent new Union members, Austria, Finland and Sweden, which joined the Union on January 1st 1995, are not free from employment problems themselves and have to adapt to the new Europe with a stock of 932000 unemployed persons, that is to say, almost another million, within their own borders. Most notably, unemployment in Finland is very high and reaches 17.7%. To put the proportions of unemployment in even more drastic words: the unemployed workers of the EU - excluding their families - would already be the 6th biggest state in the Union - bigger than the 10 smaller European Union countries. The unemployed workforce in the former GDR is still excluded from most international statistics, so that in reality, the coun!
try of the EU-unemployed would be still having more inhabitants.
Including the GDR-unemployed, and including the families of the unemployed workers, the up to 40 million persons, affected by unemployment, probably would form the 5th biggest state in Western Europe, only surpassed in size by Germany, the UK, France, and Italy. With around 40 million inhabitants like Spain, this 'country' should play a major role in the EU and should one day be in a position to take up at least the EU-Presidency...
To expect, that a further rapid expansion of the European Union would solve even only half the problems that it will create, is already an illusion: the developing world made important headway in social performance over the last 30 years and some countries have now absolutely overtaken Eastern Europe regarding the human development index. Israel, Hong Kong, South Korea, Uruguay, Trinidad, Bahamas, Argentina, Costa Rica, and Malta have a better human development index value than Portugal, the poorest European Union country in terms of human development; these Third World countries together with Singapore, Brunei, Venezuela, and Panama are socially more advanced than Bulgaria and Poland according to the HDI-index. Colombia, Kuwait, Mexico, Thailand, Antigua, Qatar, Malaysia, Bahrain, Fiji, Mauritius, the United Arab Emirates, Brazil, Dominica, Jamaica, Saudi Arabia, Saint Vincent, Saint Kitts could claim to become a member of the European Union with pretty much the same human de!
velopment index justification - or even a superior one - than Romania; and Syria and Ecuador rank higher on the HDI-index than Albania, number 76 in the 173 nation list, calculated by the UNDP in 1994. Thus, the poverty curtain, now separating Europe, is as high in terms of the human development index as in the case of other pairs of developed and developing contiguous countries in the world system. San Diego is everywhere, San Diego is the future of Europe, and especially Frankfurt at the Oder, Goerlitz and Drasenhofen will become the European San Diego, once the Schengen accords become full reality.
Globalization affects to a differing degree the 20 most developed and still relatively stable long-term democracies of the world, Sweden, Israel, Iceland, Finland, Belgium, Denmark, Ireland, Austria, New Zealand, Norway, Australia, Italy, the UK, Germany, the Netherlands, Switzerland, Canada, Japan, France, and the United States of America. Of course, the term 'stable democracy' is only relative, since the increase of new populist or neo-fascist parties in Europe is a significant phenomenon, while old parties disappear. On average, populists drum up 7.4% of West European votes; neo-fascists 2.2%. Countries with well-known populist phenomena are Austria (23%), Denmark (16%), Italy (21%) and Norway and France (both at 12%), while neo-fascists are strongest in Italy (14%) (Taggart, 1995: 45).

The efficiency of the European Union at the level of 20 stable western democracies

We now start our multivariate analysis of the basic problems of the European Union (as to the variables used, see Appendix, Variable List). The basic equation, already described in Chapter 2 of this study, can be expanded in the following fashion:

(7.1) stagnation and development blocks in western democracies (lack of economic growth; inflation; lack of human development; unemployment) = constant + b1 * age of democracy + b2 * state sector influence (like state sector expenditures per GDP) + b3 * years of European Union membership (like state sector expenditures per GDP)

The empirical results show the alarming and significant effects of years of European membership on growth, inflation, human development and unemployment. Results, which are significant at the level of 10% (one-tailed t-test) are printed in bold type2. The reform needs of the Union are omnipresent in the light of these politometric results for the 1980s and beyond. Each important economic performance indicator, growth, inflation, human development and unemployment, is influenced in a fatal and significant way by years of membership in the European Union. The longer you stay inside, the more rent-seeking, stagnant, inflation and unemployment-prone and the more lacking in terms of human development your economy and society could become in comparison to the other Western democracies:

(7.2) Growth, inflation, human development and unemployment. The effects of years of European union membership, age of democracy and central government expenditures

Dependent variable
Independent Variable growth inflation HDI unemployment

years of European -0.022 +0.68 -0.00 +0.16
Union membership (1.55) (1.59) (2.25) (1.91)

age of democracy -0.013 -0.22 +0.00 +0.06
(2.20) (1.25) (0.18) (1.69)

central government +0.003 -0.68 +0.00 +0.03
expenditures (0.35) (2.20) (0.13) (0.53)


constant 3.29 2.53 0.94 -0.52


R^2 29.4% 27.5% 30.9% 29.3%

F 2.22 2.03 2.39 2.21

df. 16 16 16 16
df. = 16; p < .05 = 1.746; p < .10 = 1.337. Significant coefficients at the 5% level are printed in bold type; significant coefficients at the 10% level are printed in bold indented type. Cells in parenthesis are t-values. UNDP data 1994

Government expenditures lose their significant negative effect on development indicators, once we introduce years of European Union membership into the equations. Years of Union membership significantly affect all four vital development indicators in a clear-cut and detrimental way. They decrease growth, human development, and they increase inflation and unemployment. The basic reason for such unpleasant results is the emergency support philosophy of the Commission, that strengthens euro-wide a rent-seeking mentality. The most important reason, why the North America-Pacific triangle is gaining ground in the world market is the pattern of specialisation based on co-operation with less-developed partners that significantly cuts production costs (Inotai, 1993).

Globalization, East European reconstruction and the fatal conceit of euro-centrism

The most basic process of change in our time is the shift of gravity in the world economy away from the old industrial regions of Europe towards the Pacific. 29 countries with a Pacific coast now already control over 53% of the world GNP, and the Pacific rim-lands tend to be the countries with the highest growth-rates in the world economy.
This 'earthquake' has set free powerful forces of change on the European landmass, both East and west of the Iron Curtain, while the power of the world depression during the 1980s and beyond brought new centres of gravity of the world economy to the fore. At the same time and by the very same process, the new international division of labour restructures the old industrial centres and creates new conflicts. The share of the industrial labour force in total employment in East Asia (excluding China) is now 34% and is thus higher than in the established industrial countries.
The moment of victory over communism in Europe becomes the moment of the fundamental weakness of both Europe and North America in a changing world economy. The current account balance of the European Union in 1992 was - 42.9 thousand million $, that of Canada and the United States - 70.4 thousand million $, while Japan, Hong Kong, Singapore and China achieved a joint surplus of + 132.6 thousand million $ during the same year (our own compilations from UNDP, 1995). Faced with a growing trilateral competition between economic power blocs (Japan + Pacific/USA/Europe), that could even one day become a bilateral competition between the Pacific and an expanded Europe, the danger arises, that the losers in the trilateral economic power struggle are unable to provide their 'spheres of influence' with the kind of advantageous economic relationships, that would be necessary to be able to break the deadlock of semi-peripherization and partial underdevelopment in regions like Latin Americ!
a, Africa and Eastern Europe. Mexico and Argentina alone now have a joint negative current account balance of 31.3 thousand million $, while Sub-Saharan Africa and Eastern Europe and the former USSR, the main peripheries and semi-peripheries in the European orbit, had to suffer a combined negative current balance of 17.9 thousand million $. For Europe, faced with the danger to fall behind, the temptation is great to increase unequal exchange with its own 'backyard' in Africa and Eastern Europe (Amin, 1994). Even Germany, the biggest economy in Europe, had a negative current account balance to the tune of - 1.2 thousand million $ in 1992, a far shot away from 1988, the year before the Berlin Wall fell, when the then old Federal Germany had still a surplus of 60.3 thousand million $. These data also testify to the economic decline of Europe in general, whose leading economy should be expected at least to have large current account balance surplus, if the project of a future stro!
ng role of Europe in the world economy were to be realistic in any way.
If we roughly divide the world market into the following zones with available UNDP data for 1992 (UNDP, 1995):

European Union
NAFTA (USA, Canada, Mexico)
Central Eastern Europe (Poland, Czech Republic, Slovakia, Hungary, Slovenia)
Japanese co-prosperity zone (Japan, China, Singapore, Hong Kong, South Korea)
Rest of the world economy

we again grasp the total uselessness of an exclusively 'Eastern' option for the new democracies of Eastern Europe. Even an exclusively West European option is doomed to failure, because in between them, NAFTA and the Japanese co-prosperity zone partition already more than half of the world market. To this we must add the march of the Japanese multinational corporations and multinational banks towards control of large sections of the most dynamic industries around the globe and their success in those 14% of the 'rest' of the world economy that comprises huge markets like Brazil (432.2 thousand million $, thus greater than Russia's 418 thousand million $), Argentina (205.9 thousand million $), and India (274.2 thousand million $). Germany, the main anchor economy of Eastern European transformation, has an approximate share of only 8% in total world product.
In the transformation countries themselves, Poland, Romania and Russia were among the main losers of international exchange. The negative trends in the current account balance continued after 1992 especially in Poland and in Hungary. In the Czech Republic, too, the world economic tide of current account development seems to have turned definitely against the new democracy. According to our calculations on the basis of recent estimates and projections by the country risk department of Austria's largest bank, Bank Austria (East-West-Report, August 1995), Poland, Slovenia, Slovakia, the Czech Republic and Hungary, the most hopeful candidates for European Union membership and democratic stabilisation, will have lost 12.9 thousand million $ on their current account balance from 1992 onwards through to the end of 1995.
In studies published as far back as 1991, it could be shown that for the political project of a united Europe that is economically under the leadership of Germany, many dangers could arise out of such a constellation (Balibar, 1991; Tausch, 1991a). The capitalist world economy, we have already remarked above, is seen to be of a cyclical nature, and in the depressive B-phases of the world economy, under the weight of the world depressions, there have always been reform attempts in Russia and in Eastern Europe going all the way back to the times of Boris Godunow. Since the Nordic War of 1700 such periods always were German-Russian alliances. But whenever there was an upswing in the world economy, and the Russian regimes hardened - as could be observed in all world economic upswings - these alliances between Russia and Germany, that were a result of the depression, broke apart, with Germany and Russia clashing over their respective spheres of influence in Eastern Europe.
Secular negative trends in the current account balances of nations are seen to be very strong motivations for international conflict. The rise of nationalism, anti-Westernism and anti-Germanism could receive a powerful ammunition by the ongoing post-transformation economic performance of the reform countries of Eastern Europe, dominated by the inability to find a (legal) export-oriented growth model, which is the underlying cause of the official negative current account balance. The balance of trade of the reform countries was by the end of 1995:

Table 7.1: trade balances in Eastern Europe

a) 1995

Poland - 4000 million $
Slovakia - 800 million $
Slovenia - 500 million $
Czech Republic - 4000 million $
Hungary - 3270 million $

Total - 12570 million $

All too often, the shadow economy balances such trends. From 1992 onwards through to the end of 1995, these 5 transformation countries have a cumulative trade balance of 33.5 thousand million $. No tigers are thus in sight in this part of the world.
The present author agrees with the general perspective, provided by students of the present international political economy, like Joshua Goldstein: the underlying logic of the capitalist world economy is a logic of conflict, intrinsically linked to the mechanisms of unequal exchange between the power centres of the world economy, and if the next 25 years are not being used for the creation of durable peace on earth, we could be threatened by a repetition of the same long-term cataclysms, that already led to the Thirty Years War, the Napoleonic Wars and the World Wars of this century.
Even the integration of the 'Near European East' - that is to say, the Czech Republic, Poland, Slovakia, Hungary and Slovenia, will be a painful process. For a long time to come, the balance of trade and the balance on current account will be negative, a powerful force in the motivation of economic and political nationalism against the West. The 'extractive economy' (Tausch and Prager, 1993) is a term used to describe a situation, when exorbitant energy consumption is used to produce a shrinking or stagnating, or at least not very rapidly growing amount of welfare. Our hypothesis is that Poland and other former or continuously communist countries play precisely such an 'extractive role' in the emerging cycle of the world economy.
The East, unable to reap the benefits of technical progress and being forced to export what there is, is thrown back to the old patterns of the extractive economy. No major advances in the energy/income balance are in sight. We witness a heavy or even increased reliance of the export sector on the extractive branches of the economy, and the inability to change the price mechanism, partially because losses in the terms of trade and the 'scissors' of lagging (legal) exports and rising imports dictate that the urban and rural poor cannot pay higher energy bills. The result is one more reason for the rising tide of nationalism:

Table 7.2: The extractive economy on a world scale. Poland by international comparison

Economic region Energy consumption in kg oil
equivalent per 100 $ GDP

1965 1991

World - 36

All developing countries 142 80

among them:

Sub-Saharan Africa 166 59
Latin America + Car. 119 43
China 195 187
Algeria - 154

Industrial Countries - 27

among them:

North America 180 36
Japan 145 13
EU 165 19
Poland - 155
Bulgaria - 403
Romania - 254

Source: our own compilations from UNDP, 1995

Research and technology should be at the centre of the development path, together with savings creation and (legal) exports. Savings and (legal) exports in Eastern Europe are small compared to the 'tigers' of Asia. Poland, whose struggle contributed so much to the downfall of communism, found itself left alone in a peripheral position in the hour of victory. This is at least, what nationalists will assert, and hard economic and social data about societal development in the post-1989 world unfortunately have to support their lamentable assertion.