Quo Vadis, Central and Eastern Europe?

When communism ended in 1989, the future of the region seemed clear-cut. Today the picture is much more varied but also more controversial than one would have imagined nearly three decades ago.

When communist dictatorships with their centrally planned economies collapsed, triumphant liberal democracy and the free market economy seemed to offer an obvious and indisputable—indeed the only possible—alternative. The most successful of the post-communist countries (those in Central Europe and the Baltics) did embark on the path of liberal democracy and market economy, a  step that was underscored by their accession to the EU, NATO, and, in some cases, the adoption of the euro. However, as the example of Hungary and also Poland more recently shows, these countries can also get diverted from this course.

The deviation of Hungary and Poland from the model of liberal democracy and the free market economy is a glaring example, but there are many more.

The most striking example of a departure from the model of liberal democracy and free market economy is the largest and most important post-communist and post-soviet country, Russia. Putin has turned Russia into a  textbook model of illiberal democracy and corrupt state capitalism, which defies basic principles of liberal democracy and the free market economy. Moreover, Putin’s regime is also very active beyond the domestic realm, using every available means to threaten and curtail the values and principles of political and economic freedom. In the developed countries it does so by backing those political parties and movements that oppose the system or by waging information wars, while in former Soviet republics (Georgia, Ukraine), it does not shrink from using aggression and military power.

There Are Not Just “Marginal Deviations”

What poses an even greater problem is that Russia is not the only country in Central and Eastern Europe pursuing this course. The Belarusian autocrat Alexander Lukashenko, who started introducing this kind of system in 1994 (with Putin joining him only some ten years later), has, historically, the pride of first place in building and maintaining illiberal democracy and state capitalism. In Hungary, Viktor Orbán has been developing a similar model during his last two terms of office and has recently acknowledged this fact publicly. And, of course, we must not forget another key country, Turkey. The developments over the past year allow not the slightest doubt about where the country is headed.

However, the greatest problem is that we are not talking of just a “marginal deviation” occurring in countries with weaker historic, cultural, and civilizational preconditions for building a system based on political and economic freedom, openness, solidarity, human rights, and the rule of law. The deviation of Hungary and Poland from the model of liberal democracy and the free market economy is a glaring example, but there are many more. Brexit and Trump’s election as president provide the most decisive proof of the fact that the threat can emanate from the very “core.” The year 2016 was a wake-up call when it became clear that the problem is much more acute.

The world is changing fast and many people are fearful of these changes, feel threatened by them, and will not accept them.

So What Has Happened?

What has happened is that the model of liberal democracy and (mixed) market economy that had worked for decades in developed and wealthy countries of (especially) North America and Western Europe, and was later also applied to countries of Central and Eastern Europe along with the expansion of the EU, has increasingly come under attack both internally and externally. However, the main problem consists in the fact that while this model is far from flawless or ideal, the majority of the alternatives is far worse, as Winston Churchill pointed out a long time ago.

The current crisis of liberal democracy is natural since it is the result of the conflict between the old politics and the new conditions, to which “old” politics failed to respond promptly.

It is a well-known fact that the economy matters, and the economy has also played an important role in the crisis of liberal democracy and, of course, the market economy. Although the global economy has recovered and has started to grow again following the deep global financial and economic crisis of 2008-2009, the pace of growth is not as fast as it used to be. If we add to the mix the debt crisis, ageing populations and demographic crisis, plus growing income inequality, it becomes evident that contentedness and optimism are on the wane and that an increasing number of people in developed countries now face the future with worry and fear. Nowadays, the majority of the adult population in several developed countries is convinced that their children will be worse off in future than they themselves are today.

Many People Are Fearful of the Changing World

Fear of the future is exacerbated by the immigration crisis, the terrorist threat, and a growing sense that the state does not offer its citizens adequate protection against these dangers.

The world is changing fast and many people are fearful of these changes, feel threatened by them, and will not accept them. This is natural in principle and scientists have long shown that risk aversion (and thus also change aversion) is a  natural human trait. However, a characteristic of the present state, apart from the faster pace of change, is also the vastly increased access to false, unverified, or intentionally manipulated and manipulating information that aims to exacerbate the existing fears and frustrations, or create new ones.

On the other hand, the world has never seen more wealth, prosperity, and stability than today, the level of poverty has never been as low as it is today, and never before have fewer people suffered violent deaths or died of hunger and illnesses. This is a paradox, since this progress has been achieved primarily due to globalization, which is based on economic and political freedom and openness, i.e. the values of liberal democracy and free market economy. That is, thanks to the very things that are under threat today.

Why Did This Happen and What Is the Way Out?

On the one hand, the current crisis of liberal democracy is natural since it is the result of the conflict between the old politics and the new conditions, to which “old” politics failed to respond promptly. This kind of conflict is inevitable, sooner or later.

However, the current crisis might not have been as acute if liberal democracy itself had not been subjected to certain deformations over the past few decades. Primary amongst them, in my view, are political correctness, unbounded multiculturalism, the  challenging of tried and tested values, and, last but not least, a  flawed and deformed understanding of the role of state in society.

Political correctness hampers free discussion, which in turn ultimately not only prevents us from defining the causes of challenges and problems but also from seeking the best solutions to them (see, for example, the misguided and biased way in which the German media reported the refugee crisis in 2016). Unbridled multiculturalism and political correctness undermine the foundations of liberal democracy and open society, since they render it weak and vulnerable to such aggressive enemies of freedom as are radical Islam or Putin’s regime. An example that illustrates the muddled understanding of the role of government is the fact that the state does not adequately carry out its basic functions (such as protecting its external borders or the lives, health, and property of its citizens) despite the fact that redistribution is growing and the sustainability of the current model is decreasing (growth of indebtedness, ageing population, demographic and environmental crisis). At the same time, overly generous, demotivating, inefficient, and unsustainable welfare systems act as a magnet for economic migration for people from poor countries. This immigration is not properly managed and regulated through the failure of the state (or states within the Schengen zone) to protect its external borders. And thus the circle closes.

CEE Countries Should Remain Within the Core of a Multi-Track EU

This situation quite naturally provides more space for populists and demagogues to propose solutions whose common denominator is the questioning of liberal democracy, open society, and free market economy. Fences on borders, barriers to free trade and free competition, strengthening of the role of government in the economy as well as a curtailment of free and fair political competition are but the logical consequence of all this.

What is the real solution? Fighting for freedom, fighting for liberal democracy, for a free market economy and open society – but fighting not only against open enemies of freedom (racists, xenophobes, fascists, communists, and isolationists) but also against those who render liberal democracy, open society, and the market economy weak and vulnerable to its enemies.

What is the real solution? Fighting for freedom, fighting for liberal democracy, not only against open enemies of freedom but also against those who render liberal democracy vulnerable.

The crisis demands a fresh approach in each country. However, the challenges faced by EU countries are especially acute and grave. This is because the coordination and flexibility required to introduce policy changes is slower within the EU but also because the degree of openness and mutual interlinking (integration) within the EU is much greater than anywhere else (this applies especially to countries that are in the Schengen area and the eurozone).

Now, in the wake of the German election, we can expect an acceleration of the process of drawing up and implementing changes and reforms aiming to sustain the previously achieved degree of integration in these changed conditions.

In my view, what is fundamentally important for the countries of Central and Eastern Europe is to remain within the core of a multi-track European Union.

Specifically, this will affect the sustainability of Schengen and the euro. In terms of the former what is primarily required is a more rigorous protection of the common border and a stricter regulation of migration (including a joint asylum policy); in terms of the latter, it requires complementing the currency union with a  closer fiscal union. A variety of instruments can be used in both areas and a lot depends on which ones will be chosen. For example, a fiscal union can be based primarily on the principle of redistribution from the more successful to the less successful members or, alternatively, on establishing rules that will force the less successful ones to introduce reforms necessary to increase their competitiveness and make them more successful.

In my view, what is fundamentally important for the countries of Central and Eastern Europe is to remain within the core of a multi-track European Union. However, this will depend on the direction that further integration takes. And that is something nobody can be certain about.

One thing, however, is certain. There is no alternative to liberal democracy, the open society, and the free market economy. Certainly not one that would not be worse.

Ivan Mikloš

was deputy prime minister and finance minister of Slovakia from 2002 to 2006 and again from 2010 to 2012. In 1991-1992 he served as privatization minister, and from 1998 to 2002 he served as deputy minister for economy in the first government of Mikuláš Dzurinda, with whom he had co-founded the economic think tank MESA10 in 1992. In 2014 he joined Vox Ukraine, the international group of advisors to the National Reform Council of Ukraine, and since April 2016 he has served as the chief economic advisor to Ukraine’s prime minister. He heads the Strategic Advisory Group for the Support of Ukrainian Reforms.

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