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Unemployment: Risks and Reactions, edited by N. Genov
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Publication of the "Personal and Institutional Strategies
for Management of Transformation Risks in Central and Eastern Europe" Project

UNEMPLOYMENT
RISKS AND REACTIONS

Nikolai Genov, Ed.


 

UNESCO - MOST, Paris
FRIEDRICH EBERT STIFTUNG, Bonn - Sofia

1999
ISBN 954-8443-07-4

PREFACE

Unemployment is a major social risk all over the globe. Even in East Asia where this phenomenon did not practically exist in the beginning of the nineties, the financial crisis brought it to the fore of public concerns. In other parts of the world unemployment is high and persistent. Indeed, due to global trends of technological and economic restructuring the issue of unemployment and especially of long-term unemployment is getting more and more relevant in economic, political and social terms.

This is the more so in Central and Eastern Europe. The nations from the region faced a dramatic rise of unemployment in the early stages of their transformation to market economy and democratic politics. In some cases the ensuing problems have been dealt with in a relatively successful manner. This is so far the case in Poland, for instance. However, in the majority of Central and Eastern European societies the open questions still prevail. Shall the recovery of their economies re-establish full employment? Or, is the prospect of a high level long-term unemployment more realistic? What should be done now in order to increase the probability of the first scenario and to decrease the probability of the latter one?

There are no ready answers to these questions. The regional development in the field of employment in Central and Eastern Europe very much depends on processes in the global economy and in the European Union. Factors from the national specifics also play their role. Therefore, the precise analysis and prognostication of unemployment in Central and Eastern Europe should be the subject of careful long-term studies having strong interdisciplinary, cross-national and policy oriented aspects.

These are exactly the major characteristics of the research project Personal and Institutional Strategies for Coping with Transformation Risks in Central and Eastern Europe co-ordinated by Professor Nikolai Genov in the framework of the UNESCO’s Management of Social Transformations Programme. The present volume contains elaborated papers which were initially presented at the Third International Conference on Transformation Risks held at the National Palace of Culture in Sofia in February, 1999 in the course of the implementation of the project.

The Conference was organised by the Bulgarian National UNESCO-MOST Committee and Friedrich-Ebert-Foundation. Results and prospects of the above mentioned comparative research project were in the centre of the discussions. They were very much stimulated by interventions of the participants in the International Research Group on Comparative Charting of Social Change, the President of the International Sociological Association Alberto Martinelli being among them. In this way, the study on processes in Central and Eastern Europe was related to social trends having a much broader geographical and historical significance.

The Secretariat of the UNESCO-MOST Programme and the Regional Bureau of the Friedrich-Ebert-Foundation express their gratitude to the scientists and decision-makers who supported the research project on transformation risks and participated in its implementation. Special thanks have to go to the Bulgarian National Commission for UNESCO and to the Project Leader. Mrs. Elissaveta Ignatova was very efficient in preparing the manuscript for publication.

Paul de Guchteneire
UNESCO-MOST, Paris

Michael Weichert
Friedrich-Ebert-Foundation, Bonn-Sofia


CONTENTS

Preface

Editor’s Introduction
Nikolai Genov, Sofia
Risks of Unemployment: Global, Regional and National

PART I
NATIONAL SETTINGS OF UNEMPLOYMENT

Theodore Caplow, Charlottesville, USA
Interpreting U.S. Unemployment Rates (in Word format)

Susanne von Bellow, Frankfurt am Main
Unemployment in West Germany: Current Aspects and Long-term Trends (in Word format)

Antonio Chiesi, Trento
Unemployment Policies in the Italian Labour Market Transformations (in Word format)

Gyorgy Lengyel, Budapest
Dual Economy and Unemployment in Hungary in the 1990s (in Word format)

Krzysztof Zagorski, Warsaw
Unemployment in Polish and Bulgarian Public Opinion (in Word format)

Vladimir Rukavishnikov, Moscow
Is Russia Really Becoming a Third World Country?
Unemployment Risks in the Time of Post-soviet Restructuring (in Word format)

Zhivko Nedev, Sofia
Long-term Unemployment and the Development of Human Capital (in Word format)

Ljubisa Mitrovic, Nis
Contradictions of the Post-socialist Society.
Unemployment in the FR of Yugoslavia (in Word format)

PART II
ASPECTS OF UNEMPLOYMENT

Pal Tamas, Budapest
Deindustrialisation in Post-socialism. Strategies for Co- habitation with Long-term Unemployment in Hungary (in Word format)

Mariana Zakharieva, Sofia
Social Isolation of Unemployed (in Word format)

Aivars Tabuns and Sanita Vanaga, Riga
Labour Market in Latvia: Employment and Unemployment (in Word format)

Anna Mantarova, Sofia
Unemployment and Hidden Economy (in Word format)

Galina Osadchaya, Moscow
Social Protection of Unemployed Families with Children in Russia and Finland (in Word format)

Kiril Kertikov, Sofia
Adaptation of the Roma Ethnic Group to the Conditions of Lasting Unemployment (in Word format)

Wielislawa Warzywoda-Kruszynska, Lodz
Long-term Unemployment and Hard-core Poverty in a Polish Industrial City (in Word format)

Vyara Gancheva, Sofia
Programmes for Job Creation: The Case of "Beautiful Bulgaria" Project (in Word format)


Editor's Introduction

RISKS OF UNEMPLOYMENT:
GLOBAL, REGIONAL AND NATIONAL

Nikolai Genov, Sofia

What does right on work really mean if one-third of the world’s able-bodied population is underemployed or unemployed (World Employment Report, 1998: 10)? The relevance of the question cuts across continents, regions and national boundaries but it is especially burning in Central and Eastern Europe. Policies of full employment have been pursued in the region for decades since the fifties. Given the circumstances, they have been basically successful. However, the circumstances changed abruptly after 1989. The worst scenarios predicting 20 to 30 percent unemployment all over the region came true only in exceptional cases. But the local institutions turned out to be unprepared to cope even with the increase of unemployment reaching levels, which correspond to the Western European ones. The key issue is the lack of financial resources for job creation, training and retraining of unemployed, and for securing decent unemployment benefits.

Caught in all-embracing transformations and severe financial constraints, the societies in Central and Eastern Europe will most probably have to struggle with protracted unemployment in the foreseeable future as well. The most profound issue is that they have to cope with unemployment in the context of looming uncertainties due to the globalisation of production, distribution and patterns of consumption. Indeed, the major problem facing the societies in the region reads: How to adapt to globalisation by preserving and improving the employability of their workforce?

There is no simple answer to the question since the processes and the problems connected with globalisation are rather complex and complicated.
 

1. Globalisation, Employment and Unemployment

Whatever the meaning of globalisation in specific contexts, one point is indisputable: A powerful trend of growing interdependence of technological, economic, political and cultural processes is at work in all parts of the world. Our planet is becoming smaller and smaller in terms of space and time. They are getting more and more compressed because of easier and cheaper transportation and information exchange and because of the intensification of human activities.

Hopes for accelerated economic and social development as well as fears about detrimental effects of globalisation on countries, regions or particular groups are involved in the debates on the issue. It is already a common knowledge that there are no good prospects for protected or closed economies. Only countries which have opted for an active participation in the international division of labour and international trade have been successful with their modernisation in the long run. Thus, one may assume that the current liberalisation of trade is just an expression of globalisation and a major factor for its further acceleration in the same time. This might be the unavoidable and promising future. But there are overwhelming uncertainties as to the manifest and latent, short-term and long-term impacts of liberalisation of trade on employment and unemployment. What is already known and what seems to be open in this context?

First, the wide variety of paths of national development notwithstanding, there is a clear trend of expanding international trade (Progress Report, 1999: 28):

Table 1
Merchandise exports as percentage of GDP
in selected countries, 1820-1996
(Exports and GDP /PPP/ at constant prices)

  1820 1870 1913 1929 1950 1973 1992 1996
- Brazil n.a.  11.8  9.5  7.1  4.0  2.6  4.7  4.9   
- China n.a.  0.7  1.4  1.7  1.9  1.1  2.3  2.4   
- Japan n.a.  0.2  2.4  3.5  2.3  7.9  12.4  13.2   
- Korea, Republic of  0.0  0.0  1.0  4.5  1.0  8.2  17.8  23.8
- Netherlands n.a.  17.5  17.8  17.2  12.5  41.7  55.3  60.4   
- United Kingdom  3.1  12.0  17.7  13.3  11.4  14.0  21.4  25.4
- United States  2.0  2.5  3.7  3.6  3.0 5.0  8.2  10.0
WORLD TRADE/ GDP  1.0  5.0  8.7  9.0  7.0  11.2  13.5  16.0

This development has tremendous implications for all activities around the globe. Global markets of goods and services bring about universal technological standards of raw materials and energy consumption, of processing, design, safety, etc. It is the global market where differentials of added value and profit are tested, realised and revised. Its smooth functioning requires new patterns of international adjustment of diverging interests. This is difficult to achieve, since global exchange is increasingly dominated by multinational corporations which manage to escape national regulations and control by national governments. On the other hand, international agreements on liberalisation of trade (WTO agreements) meet persistent and sophisticated efforts to protect national and regional markets. Last but not least, global production, distribution and consumption become possible on the basis of a global culture and facilitate its further globalisation. This raises difficult value-normative issues concerning cultural identities.

The implications of these developments for the labour markets are far-reaching. Due to the growing interdependence of national economies, a global labour market is emerging. However, this is not because of the mobility of the labour force. The real point is that larger and larger proportions of subcontracting deals involve companies having various locations, national composition of capital, and labour force. Following the wage differential, production lines and services go to low wage countries and regions. This intensification of the global competition on the labour market raises fears about erosion of job segments in the most developed countries, or about a general erosion of the conditions of labour there. On the other side, there are widespread concerns in the less developed economies that both the economically stronger nations and the mighty multinational corporations shall effectively extort their natural and financial resources by using price differentials. This would negatively affect their employment, wages and salaries as well as the domestic investments and markets.

Second, there is an unmistakably clear trend of a rapid relative increase of the global financial exchange as compared to the volume of global trade of goods and services. The ratio of the world-wide daily turnover in foreign exchange markets to the daily turnover in trade increased from 56:1 to 79:1 during the period from 1989 to 1998 (Progress Report, 1999: 29):

Table 2
Daily world exports and turnover in foreign exchange
markets (Billions of US$, 1989-1998)

1989 1992 1995 1998
- Average daily net turnover
in foreign exchange markets 
590 820 1190 1490
- Average daily exports
of goods and services
10.6 12.9 17.1 19.1
- Ratio of net turnover in foreign
exchange markets to exports
55.6 63.5 69.7 78.9

The real issue is not the volume of the international financial exchange itself. In the form of foreign direct investments, the financial flows might be an effective and efficient mechanism for job creation and for a sound economic environment. The problem is the rapid increase of the short-term capital flows which comprise 95% of the international financial exchange (Altvater, 1998: 598). One may argue that they allow a fast and easy allocation of financial resources where they are most urgently needed. In reality, short-term capital flows are usually fluctuations of hot money searching for fast profits and disappearing at the slightest change of the financial conjuncture. They perpetuate a global virtual economy which rarely creates stable employment, if any. To the contrary, they bring about an increasing uncertainty about the availability of jobs or about the quality of existing and future jobs. There is already enough bitter experience with hot money fluctuations and instability of employment in Mexico (1994), East Asia (1997), Russia (1998), Brazil (1999). This experience allows to prognosticate a tremendous potential for future uncertainties on the global labour market since the volume and the intensity of short-term financial flows are growing fast. The general rule is that the big and politically stable national economies as well as the strong multinational corporations are better prepared to cope with the volatility of the financial flows. However, the larger part of economic players consists of unstable national economies or nationally based small and medium size companies. Their employment capacities are quite sensitive to the ongoing reversal of the relative importance of production and capital flows in favour of the short-term capital flows.

Third, technological innovations are the major factor for profit differentials and job opportunities in the global markets. However, technological innovations are increasingly capital in tensive and require huge investments of intellectual capital as well. In the context of global competition and easy transfer of capital and products technological innovations deepen the gap between the quality of jobs (higher requirements for education, skills and better payment) in the core countries of the global economic system and the global periphery or semi-periphery. This will inevitably sustain and strengthen the tensions in the global labour markets. We already witness the growing concentration of knowledge-based economic activities in the ‘global city’ (Schumm, 1999: 146-7). Simultaneously one can observe a relative decrease of challenging prospects for career development together with marginalisation of work force and declining job opportunities in other parts of the global economic complex which we may figuratively call the global ‘rural areas’.

Fourth, both the dynamics of technological innovations and market fluctuations permanently bring about new patterns of work organisation and employment. Companies tend to focus their organisational efforts on developing work teams, on flattering organisational hierarchies and on performance-based compensation (World Employment Report, 1998: 42). On the other side, willingly or not, more and more people move to part-time or temporary work contracts. In the course of only ten years part-time employment in the EU-12 increased from 10.7% of the employed labour force in 1987 to 16.9% in 1997. During the same period temporary employment increased from 8.9 to 12.2% (Progress Report, 1999: 32, 33). This development in the EU-12 is indicative for processes in other advanced countries as well.

These trends of rationalisation of work organisation and employment typically come about at the expense of the less educated and trained segments of the work force. They comprise the bulk of the statistical group of long-term unemployed which has established itself in most advanced economies as well as in other parts of the world. Part of the long-term unemployment is determined by the global restructuring moving labour force from one sector of the economy to another. A general trend in this respect is the shift of jobs from manufacturing to services. As seen from another point of view, underdeveloped legislation and control mechanisms along with economic fluctuations and cultural specifics drive an increasing part of the labour force into the informal economy. The latter shift is especially strong in Latin America. The legally unprotected salaried employment already covers from 30 to 60% of the active labour force in most countries there. The typical consequence is the erosion of legalised labour relations at the expense of the employees.

How do these global trends affect the regional development in Central and Eastern Europe?
 

2. The East-Central European Context of Employment and Unemployment

Even a decade after the start of the transformation in Central and Eastern Europe one might be confused by the deep decline of industrial production, GDP, employment and purchasing power in most countries in the region. It reached levels which could only be comparable to the effects of dramatic natural disasters or heavy military defeats. There are some specific causes and reasons for this development in each particular country (See Offe, 1996; Genov, 1998; Sztompka, 1998). But there are also conditions which determine the common features of the national transformations in general and the changes in their labour markets in particular.

Most societies in Central and Eastern Europe are still in a rather difficult situation with a view to their technological development. The fast dissolution of the Council for Mutual Economic Assistance might have been politically well substantiated. As seen from the point of view of its impact on the technological co-operation in the region, the decision had the effects of a catastrophe. In practice, there were no institutional provisions any more to continue the technological co-operation in the region. Thus existentially important technological networks were paralysed. They had been developed for decades and could not be replaced by others fast, if indeed. The technological effects of the hasty dissolution of the Soviet Union were even more disas-trous, although the continuation of technological co-operation was foreseen in the documents. Given the economic, political and cultural conditions and mainly the rising nationalism in the area it became practically impossible to implement these provisions. That is why huge industrial enterprises had to close although some of them had a fair technological level. They were planned to receive supply with raw materials, energy and pre-fabs from other parts of the CMEA and the major part of the output had to go back there. This technological exchange became increasingly difficult and was eventually put on ice in a number of cases.

There were not just these and a series of other decisions which brought about technological disintegration of most national economies in Central and Eastern Europe. Having lost the protectionist umbrella, managers had to learn anew about path dependency and, more specifically, about the impact of historical continuity on the present day technological situation of countries and regions. Actually, with few exceptions - parts of East Germany, of the present day Czech Republic, or Silesia in Poland - in modern times East-Central Europe has always been a technological periphery in Europe. After the Second World War tremendous efforts were invested in industrialisation there. Nevertheless, the technological level of production remained lower than in Western Europe and North America. In the average, comparable products were manufactured in the region during the eighties by using 3 to 6 times larger quantities of raw materials and energy than in Western Europe. Consequently, the countries from the Council for Mutual Economic Assistance lost the competition over the informatisation of production and services during the eighties.

In the beginning of the nineties it was widely believed that the new market regulations would lead to a fast reduction of the technological gap between both parts of Europe. Realities are different at the end of the decade. Mainly because of lack of investments, the technological gap between both parts of the continent has substantially deepened in most cases. Even in East Germany, Hungary or Poland, which were favourably treated by foreign investors, their investments often suppressed progressive branches of industry thus causing negative changes in the structure of employment. Where investments were rather scarce like in Bulgaria, the effects were even more pronounced. Electronics accounted for 13.6% of the industrial output of the country in 1989. In 1998 it accounted for less than 2 percent of the industrial output, which has declined by a half in the meantime. The ensuing losses for the national economy because of the dismissal of well educated professionals and trained workers in research, development, production and services in the field of electronics cannot be calculated but they are obviously tremendous.

Thus, the crucial problem is how to move away from the material and energy intensive production towards capital and knowledge intensive production. This kind of technological restructuring requires tremendous investments. They cannot be accumulated in the weak national economies in the region. Large investments cannot be easily attracted from abroad as well, since most countries in the region are already heavily indebted to foreign lenders. Moreover, the crux of the matter is the fact that the introduction of modern capital and knowledge intensive technologies usually leads to reduction of labour force.

Among the various economic transformations, the change in the ownership has the most relevant consequences in terms of employment and unemployment. One may observe a large variety of effects of privatisation. They range from the deindustrialisation of East Germany to the technological and economic diffi-culties after the dissolution of the big agricultural production units in Bulgaria and Romania. The radical changes started with the liberalisation of the domestic and foreign trade and were channelled and accelerated by the dynamic legislation in the fields of privatisation and restitution. Neo-liberalism was the guiding philosophy of these processes. Institutionally it was incorporated in the recommendations of the International Monetary Fund and the World Bank to the governments in Central and Eastern Europe. The key issues were fast privatisation, stabilisation of the local currencies, reduction of budget deficits by cutting social funds. As a rule, little attention was paid to the revival of production and trade.

The short-term economic consequences of these policies everywhere were the decline of production and the shrinking of consumption. For some countries in Central Europe - Poland is the most salient example - this period is already over. However, for most other countries from the region the short-term austerity measures of monetary stabilisation turned out to be unexpectedly long-term. The major reason for this is the fact that monetary liberalisation was introduced before the changes in financial institutions and in the social safety nets. No doubt, the relevance of the liberal reform strategy for introducing competition into the economic sphere cannot be underestimated. However, given the conditions of weakened social institutions, it facilitated the criminalisation of economy and the concentration of wealth and incomes. Both trends destabilise employment and are counterproductive to the measures for coping with unemployment.

Only by exception these economic processes were moved by the mechanisms of supply and demand. Actually, their major moving force were political decisions and institutional arrangements. In most cases - East Germany being the major exception because of the direct transfer of political institutions - the negative developments in economy were mainly determined by dysfunctions in political life. This applies to the weakening of state institutions above all. It was purposefully stimulated under the assumption that the authoritarian state-socialist political machinery should be driven out of economy and culture as soon as possible. In fact, the historical task of the transformation under scrutiny is exactly to differentiate major spheres of social life as an advancement towards the modern type of organic solidarity. In more specific terms, this means to break the far reaching political integration of state-socialist societies and to free the inherent dynamics of economy and culture.

In reality, the implementation of the strategy to differentiate action spheres became burdened with maldevelopments. Some of them were predetermined by this very strategy which focused on the fast and total dismantling of the state intervention in research and development, education and training, etc. This was required both by the international financial institutions and by local political forces. It was too late when the understanding came that the profound transformation cannot be rationally managed without the massive involvement of the functioning institutions of a ‘small’ but efficient state. The belated conception of this necessity was the reason for a series of political irrationalities like the weakening of the state control mechanisms in economy which predetermined the rise of the shadow economy. For a while, the state was the exclusive owner of productive assets who had deserted its managerial control over them.

To make things more complicated, the economic transformations included also a change in the managerial staff. Keeping in mind the coalescence of political institutions and economic management under state socialism, it is not surprising that both in the state apparatus and in the industrial management the negative personal policy took the lead. Whatever the intentions, broad strata of the economic management were thus purged which had an unavoidable loss of human capital as a consequence. Enterprises which were guided by new inexperienced managers had often to close or to dismiss workers because of inadequate management.

Thus, the countries from the region are still in the middle of a difficult restructuring of property rights on productive assets. Under these conditions, state institutions as well as the emerging structures of private entrepreneurship and civil society have rather limited capacities to effectively react to global trends and regional developments. In order to handle the situation adequately, all Central and Eastern European societies need national strategies for technological, social and economic development. After the dissolution of central planning it is not easy to develop institutional capacities to carry out this type of strategic reorientation of the national productive infrastructure. This is more so the case, since key decisions for investments and technological innovation are typically left to the new private owners.

Disruptions in the technological innovation, dysfunction in the industrial management, purposeful or spontaneous weakening of state institutions and value-normative disorientations came about hand in hand with maldevelopments in the infrastructure and functioning of culture all over Central and Eastern Europe. Institutions of research and development were closed, state subsidies for science, education and cultural life were substantially cut.

What are the consequences of these complex, complicated and interconnected transformation processes on employment and unemployment in the region under scrutiny? Once more, putting aside the large variety of national specifics, against the background of the above experience, the consequences might be presented now in a sufficiently systematic way:

First, as a result of the depressive economic development the proportion of the employed population substantially declined all over the region (Economic Survey of Europe, 1998: 166):

Table 3
Total employment in Central and Eastern Europe
(1980, 1989, 1996, in %)

Country 1980 1989 1996
- Albania 77.9 100.0 77.5
- Belarus 95.4 100.0 84.0
- Bulgaria 100.0 100.0 75.3
- Croatia 87.4 100.0 74.5
- Czech Republic 95.3 100.0 93.4
- Estonia - 100.0 77.0
- Hungary 104.2 100.0 72.6
- Latvia 97.0 100.0 72.3
- Lithuania 93.4 100.0 87.2
- Macedonia 79.1 100.0 70.6
- Moldova 97.3 100.0 79.4
- Poland 102.0 100.0 88.3
- Romania 94.6 100.0 85.7
- Russia 96.9 100.0 87.2
- Slovakia 91.3 100.0 84.5
- Slovenia 84.0 100.0 78.7
- Ukraine 99.6 100.0 91.3
- Yugoslavia 83.4 100.0 84.8

A fragment of the people who dropped out from the statistical category of the employed joined the statistically covered group of unemployed. Another fragment mainly consisting of women and early pensioners stayed at home and will most probably remain there. In some cases like Bulgaria and Hungary the drop in employment is related to the substantial emigration as well. There is, however, a fragment which is not covered by the statistical offices since it has disappeared in the shadow economy. This fragment has a different range and composition in the particular Central and Eastern European countries. One may con-sider that somewhere between 20 and 50 percent of GDP in the transformation economies - Russia and the Ukraine probably having the highest proportion in this respect - is being produced in the shadow economy. This is quite a substantial shift in the employment structure which resembles similar trends in Latin America.

Second, a large group of unemployed appeared in most transformation societies and will remain there in the foreseeable future as well (Economic Survey of Europe, 1998: 67):

Table 4
Registered unemployed in Central and Eastern Europe,
September 1998

Country %   Country %
- Albania 17.2   - Macedonia 41.9
- Belarus 2.3   - Moldova 2.0
- Bulgaria 10.7   - Poland 9.6
- Croatia 17.5   - Romania 8.7
- Czech Republic 6.8   - Russia 11.5
- Estonia 4.5   - Slovakia 13.8
- Hungary 8.9   - Slovenia 14.3
- Latvia 7.6   - Ukraine 3.9
- Lithuania 5.6   - Yugoslavia 27.1

* September, 1997

There is no doubt that all over Central and Eastern Europe there was hidden unemployment during the eighties. It was brought about and sustained by the general inefficiency of the state-socialist economy and was not a subject of special attention because of ideological and political reasons. However, neither its volume nor its effects could be compared with the unemployment during the nineties. It is an entirely new and quite important phenomenon in all its economic, political and cultural dimensions. In order to understand its relevance one should keep in mind that it is higher than the official statistics indicate. For instance, in the Commonwealth of Independent States it is a common practice not to dismiss workers, but to allow them long leaves without payment of wages and salaries. This practice is the major explanation of the misleadingly low official figures of unemployment in Ukraine, Belarus and the Republic of Moldova. Another important point is the fast increase and stabilisation of long-term unemployment in Central and Eastern Europe at levels which are above or close to the level in countries from Western Europe having a stagnant long-term unemployment (World Development Indicators, 1998: 26):

Figure 1
Long-term unemployed as % of the total unemployed,
1992-1996

Figure 1

Third, the general decline of the employed population is accompanied by a substantial move from one sector of economy to another during the nineties. One may see the process as an accelerated tertialisation of economy since the work force freed from the industry is being mostly absorbed by the expanding services. However, the relative importance of the segment of the work force primarily employed in agriculture also increased. Thus, one may paradoxically call the current process of intersectoral mobility "agrarisation" as well. Neither the tertiarisation, nor the agrarisation can fully absorb the labour force freed from the industry, however.

Fourth, together with the decline of GDP a clear trend of decline of purchasing power took place across all strata of the previous social structure in Central and Eastern European societies. In the same time, a rapid differentiation of incomes, need satisfaction and life chances occurred along the lines of education, age, ethnic characteristics. A relatively small segment of 8-12% of the population performed various degrees of upward mobility. The newly emerging differences between winners and losers in the transformation will determine the economic, political and cultural trends in the region. There is no doubt that the major winners are the successful entrepreneurs. The major losers are the unemployed and mainly the long-term unemployed. The last group predominantly consists of low educated and trained workers, representatives of minorities, young people and women.

What are the most relevant links between the above analysed processes at the global level and the regional transformations in Central and Eastern Europe?

First of all, the painful process of regional transformation cannot be interpreted otherwise but as a complicated and painful adjustment of the national economies in the region to the requirements of global production and global exchange. This implies exactly what one can see all over the region under scrutiny, namely transfer of production technology and know-how, of organisational designs and skills together with closures of ineffective production lines and lay off of labour force which cannot be utilised in an effective way. There could be no illusion - the moving force of these adjustments are not philanthropic ideals, but the mechanisms of capital accumulation. Nowadays they are the mechanisms of global competition. No wonder why the regional markets were flooded by imported goods and some potentially viable local competitors had to disappear from the scene laying off labour force. This is just one dimension of a process which is far from being harmonious or fair play. The societies in Central and Eastern Europe are being globalised by powerful players in order to become more or less adequate participants in the established global economic, political and cultural interdependence.

In full accordance with the global trends, the forerunners of this internally needed and externally guided transformation were the global financial institutions - the IMF and the World Bank. Their credits and the financial discipline they imposed on the societies in the region are effective mechanisms for local adjustments to the requirements of global production and exchange. The major problem which made their activities in the region complicated during the first half of the nineties was caused by the fact that they handled the issue of transformation as typical financial actors paying little attention to real production and trade. The effect was the convulsion of the real economy and the rise of unemployment in all cases where the shock therapy measures were implemented. Once the monetary stabilisation has been successful, one may expect also revival of production and trade. There is enough evidence to draw the conclusion that the revival might be protracted and painful in its own terms.

So, can one expect that the "blue banana" of the "global city" around Rhine marked by high quality well paid jobs will move its boundaries to the East soon, if indeed? The answer might both be "yes" and "no". Yes, since East Germany, the Czech Republic, Hungary, Poland and Slovenia will probably join the "global city" as a result of tremendous financial transfers and organisational efforts. The answer might be "no" concerning two or three other groups of countries. They will retain the characteristics of the global agrarian areas for unpredictably longer period because of path dependence and because of geostrategic calculations of the mighty global players.

It is in this last group of countries that one will continue noticing the predominance of the extraction economy over the production economy (Altvater, 1998). The labour force there will be especially vulnerable to the fluctuations of the short-term capital flows. These economies will continue to be marked by disintegration, inefficiency, budget deficits and by a strong shadow economy, i.e. by all characteristics of the chaotic capitalism (Lane, 1999).

The success of the transformation very much depends on the development of adequate value-normative orientations towards employment and unemployment. However, all over the region there are influential cultural traditions and motivational patterns which make the effective handling of unemployment and of its negative effects difficult. Besides the low or inadequate education and training, there are also problems connected with the lack of entrepreneurship, fear of risk, insufficient readiness for territorial or professional mobility.

The issue of unemployment in the region takes specific features in the context of integration of Central and Eastern European societies into the Western European economic and political structures as well. In the meantime, the European Union itself is in a process of reforms which will mainly concern its agricultural and regional programmes. Without clarity in this respect well substantiated visions about long-term handling of the structural causes of unemployment in Central and Eastern Europe are practically impossible.

What are the implications of this variety of global and regional conditions on the problems and prospects of the national labour markets in Central and Eastern Europe?
 

3. National Environments of Employment and Unemployment

Although some developments are not necessarily encouraging (see Table 4), the registered level of unemployment between 3 and 5 percent in the course of the restructuring of the national economy gave reasons to speak about a Czech miracle in employment policy. Only until recently unemployment figures kept to the low levels forecasted by Czech sociologists in the Autumn of 1993 (Illner, 1993: 29):

Table 5
Forecast of unemployment in the Czech Republic
till 2005, in %

Rate of unemployment 1992 1995 2000 2005
- Most probable 2.6 5.0 5.0 5.0
- Higher forecast rate - 6.1 6.0 6.0

Given the rapid increase of unemployment in other Central and Eastern European societies after 1989 (as noted, the low official unemployment rates in some CIS countries do not correspond to the complicated reality there), the question arises: How did it become possible to avoid the unemployment shock exactly in the Czech Republic? The answer cannot be but complex. One may start with the fact that Prague is located geographically more to the West than Vienna. This location is quite favourable in terms of time and space differentials when the division of labour and trade with the countries from the European Union became a priority for all Central and Eastern European states after 1989. The technological and organisational traditions of the well educated and trained Czech labour force also contributed to the success of the active employment policies carried out in the country during the first half of the nineties (Illner, 1998: 153). Geostrategic considerations of foreign investors certainly contributed to the success as well.

The coming years will show if the perception of unemployment as a low intensity risk to Czech society can be sustained since some crucial steps in restructuring of the country’s economy are still under way. Nevertheless, so far the public perception of unemployment in the Czech Republic, on the one side, and in Poland or Bulgaria, on the other side, are substantially different. It cannot be otherwise since both societies experienced a rapid increase of unemployment during the first half of the nineties (Statisticeski spravochnik, 1998: 44; Maly racznik statistyczny, 1998: 455):

Figure 2
Registered unemployed in Bulgaria and Poland
as % of the total workforce 1990-1998

Figure 2

After reaching its peak in 1993, the level of unemployment in Poland continuously declined thereafter with a tendency to stabilise on a one-digit level. This is basically due to the fast growth of Polish economy in the mid-nineties. Having reached the same high level in 1993 and declining afterwards, unemployment in Bulgaria started to rise anew in 1996 due to the negative growth of the national economy. In the foreseeable future it will remain at double-digit levels.

Putting these developments under closer scrutiny, one has to recognise that the causes and reasons of the growing differences between the labour markets in Bulgaria and in Poland are fundamental. Although important tasks of the restructuring of Polish economy are still ahead, the stabilisation of institutions as well as the substantial foreign investments moved the process forward at a remarkably fast pace. To the contrary, privatisation in Bulgaria has been notoriously slow and inefficient. However, the lack of domestic expertise and the protracted institutional transformations can only partially explain the low level of foreign direct investments in Bulgaria as compared to the level of investments in the Visegrad countries (World Development Indicators, 1998: 254-255):

Table 6
Foreign direct investments in Bulgaria and in the Visegrad countries (1996)

Country Foreign direct investments
  As % of gross
domestic investments
As % of GDP
Bulgaria 8.6 1.2
Czech Republic 7.6 2.6
Hungary 16.5 4.4
Poland 16.4 3.3

Another explanation for this difference is the location of Bulgaria in the geographical, political and cultural space. While Poland enjoys the advantage of being geographically and geostrategically close to Western Europe and of belonging to this part of the continent in terms of historical traditions, Bulgarian society differs substantially in all these respects. The protracted crisis in former Yugoslavia contributed to the general instability of the South-Eastern part of the continent thus additionally reducing the attractiveness of the country to foreign investors. Moreover, public opinion in Poland is clearly in favour of the links with the Western part of the continent. The traditional cultural preferences in Bulgaria are more complex (See also Genov, 1999).

Because of all these reasons unemployment is more difficult to handle in Bulgaria than in Poland. At present, Polish economy is clearly better adapted to cope with the issue in the conditions of the new global division of labour and the global competition. The prospects are not necessarily too optimistic, however. The approaching integration of the country into the European Union opens promising prospects but also puts serious questions. The average productivity of Polish economy is at least 3.3 times lower than in the European Union. The structure of production does not meet the requirements of high added value. Moreover, like everywhere in Central and Eastern Europe, exactly the high-tech branches suffered the most in Poland in the course of the economic restructuring. Investments in research and development are rather low as compared to the level in the advanced countries. The quality of education and vocational training does not meet the high international standards. All these factors determine the trend of export of unemployment from the European Union to Poland (Kabaj, 1997: 105f).

The above trend causes more general concerns. Statistics indicate that the European Union had a deficit of 1.2 bln. US$ in its trade with the countries from Central and Eastern Europe in 1990. The situation reversed during the first half of the nineties. In 1995 the Union had already a trade surplus of US$ 8 bln. The EU surplus will definitely increase in the foreseeable future which would imply a tremendous import of unemployment from EU to Central and Eastern Europe in general (Kabaj, 1997: 122-123).

This threatening prospect is quite important since all countries from the region strive to accelerate their integration into the European Union. There are already some well prepared national strategies for coping with unemployment in the given context. They lay the stress on the active measures of creating jobs and training the unemployed (Kabaj, 1998). The reliance on personal initiative and responsibility counts high in this strategy. This is exactly the underlying philosophy of the new legal regulations concerning unemployment in Bulgaria as well. However, the dramatic weakening of the state institutions in the country during the nineties still meets widespread believes that it is entirely the task of state institutions to provide jobs to job seekers. This conviction loses influence in the course of the reforms but it is still deeply rooted in Bulgarian public mind:

Figure 3
Whose concern should job provision be?
1

Figure 3

Although the trend of moving away from the beliefs that the almighty state has to resolve the problem of unemployment is very promising at microsocial level, it should not imply any desertion of the state of its obligations concerning job creation and job security at macrosocial level. To the contrary, in the conditions of a lasting recession and unclear prospects of economic recovery the quality of decisions still to be taken by state institutions could be the only hope to deal effectively with the threat of protracted long-term unemployment and with the concomitant social tensions and conflicts.

The issue takes new dimensions when considered in the context of a cross-national comparison on samples of long-term unemployed in Pernik (Bulgaria, near Sofia), Lodz (Poland, near Warsaw) and Tver (Russia, near Moscow)2. When asked about the responsibility for their unemployment, the representatives of the three nations gave answers which strikingly resemble the changing time series of data from the cumulative studies on the Bulgarian population (See also Fig.3):

Table 7
Is unemployment mainly a failure of the
unemployed person, or of society? Long-term unemployed
in Bulgaria, Poland and Russia, in %

    Pernik Lodz Tver
- Mainly a failure of the person 1 2.9 4.9 2.3
  2 4.9 5.9 3.0
  3 23.9 40.7 19.7
  4 26.8 20.7 20.3
- Mainly a failure of society 5 41.5 27.2 54.0

The data show a substantial dispersion of the individualisation or socialisation of the responsibility for unemployment The unemployed in Lodz lay the stress on the shared failure of individual and society. The unemployed in Tver lay the blame on society first of all. The unemployed in Pernik are not that firmly convinced that the society is to be blamed as their Russian counterparts, but closer to their extreme position than to the more moderate position of the Polish unemployed.

These basic attitudes are a good starting point for understanding the personal activities for coping with the precarious situation of unemployment in Pernik, Lodz and Tver. The already stabilised Polish economy can supply resources needed for active measures for coping with unemployment. Most popular and most effective among these measures are vocational training and re-training. It is obvious that in Poland there is already a functioning system of training courses:

Figure 4
Activities of the long-term unemployed during
the last 12 months ("Yes" answers, in %)

Figure 4

One of the plausible explanations for the unfavourable situation with the training and retraining of the unemployed in Pernik is that they traditionally expect an active state intervention for resolving social problems. The situation is by no means hopeless, however, since they also show an intensive wish to invest personal initiative to resolve their major problem:

Figure 5
Desirable activities of long-term unemployed
for the next 12 months ("Yes" answers, in %)

Figure 5

The labour office in Pernik is facing a tremendous challenge since the expectations to organise training and retraining courses are mainly directed to it. The challenge is more substantial, however, because there are no financial resources to meet the expectations for training courses. Moreover, there are no realistic prospects for alternative employment in the municipality at present. So, to train for what type of job? This is still an open question in Pernik as it is the case in many other municipalities in the country.

Considering the intensive desires and high expectations of the long-term unemployed in Pernik for the coming year, there are serious reasons to expect trouble. More specifically, the wish of every fifth long-term unemployed to search for a job abroad would produce predictable tensions with the neighbouring countries even in case that only a fragment of this group would undertake practical steps to make the wish come true. The legal channels for achieving such an aim are limited enough. Thus, one may expect a pressure on the legal system caused by efforts to establish and maintain illegal channels for emigration.

Against this background of wishes and desires which cannot be materialised because of legal, organisational and financial constraints, the accumulation of protest potentials is unavoidable. This applies first of all to the unemployed in Pernik:

Table 8
Would you participate in protests and demonstrations? (%)

  Pernik Lodz Tver
- No 37.3 43.9 55.3
- Probably no 8.5 23.3 19.7
- Probably yes 18.0 10.8 11.7
- Yes 31.7 14.8 7.3
- Not sure 4.6 7.2 6.0

A striking outcome of the comparison is the registered apathy of the Russian unemployed. Given their precarious material situation (See the articles by V. Rukavishnikov and G. Osadchya in this volume) the only explanation might be the feeling of hopelessness. Both apathy and hopelessness might be destructive in personal and in social terms. The situation with the Polish unemployed is different (See the article by W. Warzywoda-Kruszynska in this volume). They might already rely on functioning social institutions which are able to support them. The shock of the unemployment and the concomitant impoverishment is obviously the strongest in Pernik. It happened to be a prosperous region relying on metallurgy, machine building and coal mining. This structure of the local economy predetermines prospects for deep depression. Given the financially weak state institutions and the lack of alternative employment opportunities, one may expect lasting social tensions in the region due to long-term unemployment.
 

4. Conclusions

The analysis leads to conclusions having both general and more specific character. To return back to the beginning, unemployment is undoubtedly a very grave limitation on basic human rights. However, it takes its specific meaning from the broader economic, political and cultural context. What does this mean in the case under scrutiny?

First, the experience from the accomplished transformations teaches that the visions of fast and easy transition to market economy and democratic political institutions in Central and Eastern Europe should be definitely forgotten. The transformation in the region as a whole, as well as in particular countries, is going to take decades and imply high social costs. The major reason for this conclusion is the experience that far reaching changes come about in all action spheres and in all types of action during the transformation.

Second, the increasing differentiation among Central and Eastern European countries is not an exceptional case in any respect. One can identify similar trends in particular countries, in regions or on the global level as well (the deepening difference between the North and the South world-wide, for instance). In general terms, there are structural causes (path dependence) and motivational reasons (quality of decisions) for these developments. As seen from the point of view of social sciences, the most fruitful approach consists in paying close attention to both types of factors which determine social change as well as to their unique combinations under specific circumstances. The proper taking into account of both types of factors is also the intellectual background of effective policies.

Third, put in more specific terms, the deepening differences between societies from Central Europe and the Baltic states, South-Eastern Europe and the European part of the Commonwealth of Independent States cannot be a good promise for the progressing European integration. One might refer to the tremendous transfers from the European Union’s budget to the less developed countries and territories in the Union itself. In some cases like Ireland transfers turned out to be quite effective. In other cases like in the South of Italy the analysts discovered reproduction of underdevelopment. The massive foreign investments into the Central European economies are probably going to cause some kind of repetition of the Irish development. Provided the combination of negative path dependence and low quality decisions would continue in other parts of the region, they might follow the pattern of South Italy. This is certainly not a desirable development neither for the affected countries themselves, nor for the integration of Europe.

Fourth, one of the most relevant indicators for the impact of path dependence and quality of decisions both at macro- and microsocial levels is the state of unemployment. On its part, high and long-term unemployment influences national economy and politics negatively to the extent of becoming a destructive factor of path dependence. Moreover, high and stable unemployment negatively influences quality of decisions in all walks of social life. That is why the effective handling of unemployment is the major field for overcoming negative path dependence and for implementing high quality decisions in modern societies. In fact, the quality of dealing with unemployment in most Central and Eastern European societies has become the key social issue for large segments of them and will remain so with all economic, political and cultural consequences for the countries, for the region and for Europe.
 

NOTE
1All data from national public opinion polls in Bulgaria stem from the annual cumulative surveys on Risks of Transformation carried out by a team headed by the present author at the Bulgarian Academy of Sciences.

2The comparative study was carried out on 300 long-term unemployed in each of the three towns in December, 1998 - January, 1999 by applying a standardised interview. The study is part of the UNESCO-MOST comparative project Personal and Institutional Strategies for Coping with Transformation Risks in Central and Eastern Europe lead by the present author.

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