Why are economic inequalities in Europe falling so slowly? The “new” Union must learn to negotiate

Filling the economic gap between the so-called “new” and “old” Union is a slogan that has been omnipresent in a political discourse. The former Eastern bloc, most experienced by historical and political turmoil, has many years to catch up, and often ages of economic arrears.

Former empires and colonial powers, such as Great Britain, France, Spain, the Netherlands and Germany, have worked for many generations to gain their economic position, not always with their own hands. It always happened in free market conditions. Eastern countries count their history in years rather than centuries. In addition, at the end of World War II, they were in the orbit of a socialist economy. As a result, they are now trying to catch up to this “better world”.

The common European market was supposed to facilitate and accelerate this process. The disproportions were to gradually decrease. And if you look at the pace of development, in fact, progress can be seen. If we compare the dynamics of Poland’s economic growth with the EU average, and even with the results of the eurozone, it can be seen that from the moment of the country’s entry into the Community, the distance slightly decreases with each passing year.

The increase in Polish GDP comapred to the GDP of the European Union and the Euro Zone

However, if you take a slightly different measure, doubts may arise. Because if we compare the nominal income of Poland and all the countries of the “new EU” per capita, it turns out that yes – the situation is clearly and definitely improving, but the disproportions do not decrease at all. The lower rate of development of “old Europe”, thanks to the higher base, does not mean a significant difference. In extreme cases, it is quite the opposite.

How much the “new” EU has gained on integration?

In 2000, the GDP (PPP) per capita per inhabitant of today’s eurozone was equal to 25,000 dollars. More than four times the Romanian or Bulgarian GDP (PPP) per capita (which was about 6,000 dollars). Today, these values are 42,000 and 20,000 dollars respectively. Not four, but twice as much. But nominally the difference has increased.

This is a statistical trick, of course. However, it helps to understand why voices are heard in the poorer countries of the Union that the West gained more on integration than the East. At little expense, it gained access to new markets, not necessarily accepting a cheaper competition in its own yard.

The recent posted workers directive, which forces companies that send people to work in other EU countries, to provide them with the work and pay conditions that are in force in the country of posting, complicates the matters even further. As commentators emphasize – this will limit the competitiveness of companies from poorer countries on the common EU market. And thus, it will slow down the rate of equalizing economic differences.

Will it be so in essence? Politicians in Brussels believe that the solutions will improve the situation of posted workers and thus blurring the differences will be easier.

Equality can be understood in many ways

Dr. Paweł Kowalski, a lawyer at the Law School of the SWPS University, points out that the European Union is not just an economic community. For three decades it has been also guided by shared higher values regarding individual rights and human rights. And in this context, attempts to harmonize working conditions can be understood. Reservations can be made to the methods used.

The problem, however, is that since the so-called “big enlargement of the Union” in 2004, it is much more difficult to find a compromise in the Community than before. There are more interest groups, and new countries do not always want and can make concessions. For the countries of the “old Union” is a new reality.

Even before Poland’s membership in the Union, it was known that poorer countries are more competitive in the field of services. Their entry into the common market did not change the picture of the EU economy, but the expansion of those countries that had cheaper workforce was clearly visible – reminds prof. Witold Orłowski, economist and representative of the National Development Council.

– We lost this fight not because new arguments appeared, whether it became more acceptable in the world, only Poland’s position in the negotiations weakened and we did not manage to create a coalition that would support us – adds dr. Orlowski.

All experts agree that the European Union is a great scene of political games. And on this stage, one should skilfully move, build coalitions and compromises to succeed. The fact that our country is nominally the largest beneficiary of structural funds in the EU’s history proves that it is feasible.

However, as regards the directive on the posting of workers, we are dealing with a political game that we have just lost – says dr. Orlowski. – Benefits for workers and trade unions in western Europe. And on the support of trade unions, politicians depend.

Difficult art of negotiations

Regarding the directive on posted workers, Eastern European countries clearly could not put on the table interesting proposals that could be discussed on the EU forum. New Union lost the case before the vote.

Our negotiators have not used the game theory or the theory of negotiation,” says Robert Gwiazdowski, expert at the Adam Smith Center. “The history of Nord Stream 1 shows this clearly. Poland absolutely disagreed with the creation of the Pieremyczka, a gas pipeline bypassing Ukraine.  Such a staggering opposition gave the Germans and the Russians an argument to show us as crazy, and unworthy of any meaningful conversation,” says Gwiazdowski.

And you have to talk to try to win something for yourself even when the case seems to be lost and on seemingly different grounds.

Photo: European Parliament