A curious trend in the Balkans

2000-2004: Under the rule of the Social Democrat Party (PSD) and Prime Minister Adrian Nastase, Romania enjoys four consecutive years of rapid economic growth. Romania’s GDP increases by an average of nearly 6% per year; for the first time since the end of Communism, the country has four years without a recession. Meanwhile, Romania joins NATO and is accepted for EU accession in 2007.

December 2004: voters reject Nastase and PSD, voting in the opposition in a weak coalition government.

2001-2005: Under the rule of the National Movement Simeon II (NDST) and Prime Minister Simeon Saxecoburgotski, Bulgaria enjoys four consecutive years of rapid economic growth. Bulgaria’s GDP increases by an average of around 5% per year; for the first time since the end of Communism, the country has four years without a recession. Meanwhile, Bulgaria joins NATO and is accepted for EU accession in 2007.

June 2005: Voters reject Saxecoburgotski and NDST, voting in the opposition, which now appears likely to form a weak coalition government.

2001-2005: Under the rule of the Socialist Party and Prime Minister Fatos Nano, Albania enjoys four consecutive years of rapid economic growth. Albania’s GDP increases by an average of about 6% per year; for the first time since the end of Communism, the country has four years without a recession. Meanwhile, Albania is accepted into the Partnership for Peace and moves from being an impoverished semi-pariah to a serious candidate for EU accession sometime in the next decade.

July 2005: Voters reject Nano and the Socialists, returning to former President Sali Berisha, out of office since 1997. Berisha will form a coalition government with several minor parties.

What’s going on here?

Various thoughts, not necessarily consistent with each other:

1) Running a transition country in Southeast Europe is hard and thankless work. Voters have short memories, and are constantly comparing themselves to the much wealthier countries of Central and Western Europe.

2) Even relatively rapid economic growth won’t make them happy, especially given that most of these economies contracted in the 1990s, and a lot of people are just getting back to the relative prosperity that the enjoyed 15 years ago.

3) Voters are outraged by corruption, the entrenched privileges of the new elite, and the detachment of the political class from daily realities and indignities. Since corruption and detachment are very prevalent in these countries, it’s hard for any government to get elected against the tide of popular indignation.

4) Much of the economic “growth” is going to a relatively small elite. Thus, the impressive GDP numbers conceal a sharp growth in inequality combined with stagnating living standards for much of the population.

Still… I’m no great admirer of either the Nastase or Nano governments, but they did have some real accomplishments: peace, stability, steady growth of foreign investment (albeit from a very low base). Clinching the deal on EU membership should have been a strong card for both Nastase and Saxecoburgotski. Yet all three are out of work.

Nobody else in the region has elections soon, so it’s hard to say if this is a trend or an accident.

10 thoughts on “A curious trend in the Balkans

  1. 3 and 4 seem to be the factors that people I’ve talked to who voted against Nano and Saxecoburgotski stress the most.

    Raw nationalism plays a role too. Saxecoburgotski is accused of not even speaking proper Bulgarian (his speech is in fact merely a little archaic) and Nano is accused of being a Greek puppet with a Greek wife.

    Discovering that the alternatives may be even more corrupt, venal and tied to narrow interests will be a hard lesson, but it has to be learnt sometime. Client-patron relations are unfortunately deeply imbedded in the Balkan political scene, as Greece’s experience has shown. A bloated state with historical origins in political change and opposition to occupation rather than in economic development tends to produce that effect.

    BTW Doug, how are people reacting to what seems to be a fairly definite north-south split in the Albanian results? What role do you think there will be for Agim Shehu in the new Albanian administration, and are you confident that, when the time comes, it will relinquish power without violence? Not that Nano is going gracefully, but at least the army isn’t out in the streets yet.

    http://www.seeurope.net/en/Story.php?StoryID=55969&LangID=1

  2. Perhaps a useless historical parallel, but essentially the same phenomena happened in post-unification Italy over a hundred years ago.

  3. Such an interesting post! I’ve just spent the last 5 years living in Romania and am now living in Albania- does the trend have something to do with me?? (haha!) It just leaves me shaking my head.

  4. Hi John,

    Nationalism definitely played a part in Albania; Nano’s “Greekness” — his partially Greek ancestry, Greek wife, and general Hellenophilia — has long rankled with nationalists, especially in the north. And, yah, the Gheg-Tosk split seems to be alive and well, alas.

    I agree about patron-client relationships. Balkan politics do not map perfectly, or indeed very well, to Western models. (Note, though, that Romania’s state is relatively non-bloated by regional standards… it’s percentage of GDP is now lower than Greece’s.)

    I /think/ Nano will blink in the end. The key determinant IMO will be when and if foreign governments — especially the major EU governments and the US — start recognizing the election’s outcome. Which so far they haven’t, but probably will after the Election Commission issues its decision on July 28 (this Thursday).

    cheers,

    Doug M.

  5. Doug, honest question: were the rewards of faster growth equally distributed among all Romanians and Bulgarians? In Bulgaria, from what I hear, factory work is paid at the same absolute levels it was five years ago. Both Romania and Bulgaria were *officially* quite egalitarian economically until a decade ago. Is it still the case?

  6. Hi Talos,

    No, I don’t think the rewards of faster growth have been evenly distributed. I think they’ve gone disproportionately to the rich (who, in this part of the world, are almost entirely ex-Communists.)

    The key question, of course, is /how/ disproportionately. For instance, Romania’s GDP is supposed to have grown by almost 6% per year in the last five years. Has all of that growth been absorbed by, say, the richest 10%? Or has some of it trickled down to the rest of the country; and if so, how much? If the top 10% are eating half the growth, that still leaves a growth rate of around 3% for the rest of the country… which is as good as most Western countries, indeed better than many.

    My completely impressionistic, off-the-cuff impression is that the top 10% have indeed eaten between a quarter and half of the growth. On one hand, that helps explain why Romanians aren’t happy. On the other, it’s not a complete explanation… 3% – 4.5% growth is still nothing to sneeze at, and is enough that nonrich Romanians should be feeling noticeably richer after five years.

    This deserves a more rigorous look, so watch for a post from me sometime in the next few days. I’ll be talking about something called a Gini Index, which is a formal measurement of inequality.

    Doug M.

  7. If the top 10% are eating half the growth, that still leaves a growth rate of around 3% for the rest of the country… which is as good as most Western countries, indeed better than many.

    There will also be geographical imbalances. If you figure that in, the rest of the country, outside the capitals, will get even less.

  8. In my opinion corruption and bureaucracy played a role as well, as frustration and unreasonable expectations of the population that things will get better fast. The economic growth happens slowly and it takes years until you can see the results. This means that the last government should not assume all merits, because some merits belong to previous governments. All governments since 1990 have worked towards joining Nato and UE. I think the voters understood that. Assuming an optimistic 4%-6% percent increase in real wages, that’s not enough to make a difference when you start from the very bottom. PSD has lost by a narrow margin in Romania and they could have won just as well.

  9. One thing is sure: GDP growth tells you very, very little about what is going on in a country.
    The actions of madman Mugabe destroying houses of people by the thousands will not have a significant effect on the GDP immediately: he is fighting illegality after all.
    We should be using is an indication of median (as opposed to average) income.
    Fellow dutchman Jasper Emmering (blogging in english) of the blog Hollandaise (see linklist) recently had very interesting posts on the subject of GDP.
    this is a link to the most interesting of this posts
    The comments have some discussion on the issue of median per-capita income too.

    PS: I write “this is a link” on purpose. Links are hard to discern here on this otherwise very beautiful site

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