Normally I try to steer well clear of politics (with a capital P) and stick to the things I know something about, but a piece in Business Week has got me going about a topic which I think is important: the transition in Eastern Europe. Far be it from me to offer any strong opinion about the future of Iraq. The internal situation seems to be extremely complicated, and the external one even more so. What concerns me is that in many of the arguments relating to Iraq, the precedent of the Eastern transition is held up as a model. Well that is the last thing it should be. In my book all these countries are still essentially in a state of schock - traumatic shock most likely - as a result of the impact of the 'transition process'. The evidence for this: look at the population numbers (I have yet to really write up my thoughts on the 'transition countries' but some indication can be found ( here )).
In the demography debate the list of former Eastern bloc countries looks more like a parade of 'usual suspects'. Belarus currently 10m, 2050 projected 7.5m, Bulgaria currently 8m, 2050 projected 5.25m, Czech Republic currently 10.2m, 2050 projected 8.5m, Estonia currently 1.3m, 2050 projected 0.65m, Hungary currently 10m, 2050 projected 7.5m, Poland currently 38.6m, 2050 projected 33m, Romania currently 22m, 2050 projected 18m, Russian Federation currently 145m, 2050 projected 101m, Ukraine currently 49m, 2050 projected 31.7m. In addition to the dramatic population decline we can also expect a radical aging process: Belarus currently under 15 18.7% over 60 19.3%, 2050 projected under 15 14.2% over 60 37.6%, Bulgaria currently under 15 15.8%, over 60 21.7%, 2050 projected under 15 13.9%, over 60 38.1%, Czech Republic currently under 15 16.4% over 60 18.3%, 2050 projected under 15 13.4%, over 60 39.5%, Estonia currently under 15 18.0%, over 60 21.2%, 2050 projected under 15 14.6%, over 60 41.4%, Hungary currently under 15 17.0% , over 60 19.7%, 2050 projected under 15 14.1%, over 60 36.0%, Poland currently under 15 19.2%, over 60 16.6%, 2050 projected under 15 14.5% , over 60 36.2%, Romania currently under 15 18.2%, over 60 18.9%, 2050 projected under 15 14.7%, over 60 34.9%, Russian Federation currently under 15 18.0%, over 60 18.5%, 2050 projected under 15 14.5%, over 60 36.0%, Ukraine currently under 15 17.8%, over 60 20.6%, 2050 projected under 15 13.7%, over 60 37.7%.
Now a number of points need to be made. Firstly no-one (yes: no-one) knows what the consequences of this 'other' transition will be, or even if at some point this dramatic population implosion will reverse itself. One thing is however sure, the reality will be a difficult one. These countries are approaching this traumatic change in poverty, and with retiring cohorts with very little in the way of accumulated wealth. Given their relative poverty, and the important immigration needs of their more affluent western European neighbours, it seems unlikely that they will attract significant immigration: the contrary is in fact more likely (and in fact as my own personal experience with Bulgarian immigrants here in Spain confirms), that the able bodied under 50 leave to work in the west, sending money home to help elderly relatives. This 'individual' solution will, in fact, only make the collective problem worse.
Secondly, I am not trying to hold anyone in particular responsible for this 'outcome'. The reasons for this unique situation have yet to be adequately analysed, and its consequences appreciated, but one thing is sure: no-one should be claiming this catastrophy as a victory for liberation. When you meddle you destabilise, and when you destabilise you don't know (and can't in principle predict) the consequences. Nor am I saying that there is any direct comparison with Iraq here (although looking round the world from Russia to Venzuela to Nigeria to Saudi Arabia having petroleum seems to be more of a curse than a blessing - in fact I think Adam Smith already understood why this would be - and it remains to be seen whether Iraq can be the exception that proves the rule. Suffice it to say that I have my doubts, and that thinking about the difference between Texas and California may help to see why it is reasonable to entertain such doubts). No what I am saying is that the eastern 'experiment' has produced results which are far more problematic than is widely recognised, and even though the road to disaster may well be paved with the best of intentions (the euro??), playing with other peoples lives to test ideological principles can only make bad things worse. Now why do I find it difficult to convince myself that this lesson has been learnt in the White House?
From Basra to Baghdad to Kirkuk, U.S. and British forces are still mopping up combat operations and restoring order. But retired Lieutenant General Jay Garner, director of the awkwardly named Office of Reconstruction & Humanitarian Assistance (ORHA), is eager to get going on rebuilding Iraq. Still forced for security reasons to cool his heels with his staff of 350 in Kuwait City, Garner is itching to move to Baghdad to oversee his "Iraqi jump-start program." The plan is to restart oil production, award key telecom contracts, and provide small-business loans within three months.
Garner & Co.'s effort will mark the start of another monumental experiment in economic transition -- one that could prove every bit as complex as efforts to transform Eastern European and Soviet economies in the 1990s. Like many of those former communist governments, Iraq has operated under an inefficient command-and-control system for decades. Its economy has also been ravaged by three wars, including the current one, since 1980, and more than a decade of international sanctions. Although Iraq's oil reserves of 112 billion barrels offer tantalizing prospects, the industry sorely needs investment.
And while little is known about the rest of the economy -- few nations have been isolated for so long -- there's no doubt it's a wreck. More than 600 state-owned companies have been run into the ground, Garner aides estimate. Planners will have to sift through the ashes of the Finance Ministry, destroyed in Baghdad, for clues as to how the government finances were run. "The restructuring of this economy to meet national needs is going to take, at minimum, a half a decade," predicts Anthony H. Cordesman, a prominent expert on Iraq at the Center for Strategic & International Studies in Washington. "I would have hoped that we learned from the Russian experience that a command economy that has been warped for 30 years is not going to be 'jump-started."'
Source: Business Week
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