What if..? - assessing what could have been is always tricky. Yet this does not prevent mainstream economists, politicians, journalists, as well as self-described right-wingers, from repeating with absolute seriousness and unshakable sureness the most repeated truth of the past 20 years: Slovakia's membership in the EU is a definite positive for our economy. Where does this certainty come from? From comparing the state of the impoverished post-privatization Slovak economy with the present. But when we compare the Slovak standard of living in 1948 and 1968 or 1988, we also find that it objectively improved. How then can we know that progress is not simply a function of time - that from decade to decade, we are generally better off (at least by some metrics)?
In this article, I will use publicly available data from the Statistical Office of the Slovak Republic, the National Bank of Slovakia, the European Commission, Eurostat, the World Bank and the Our World in Data organization and test the hypothesis that the Slovak economy benefits from our membership in the EU.
Due to the vagueness of the claim that the EU has a positive impact on the Slovak economy (and due to the ambiguous nature of the term "economy"), I decided to describe the trends in the economic development, its internationalization, as well as the quality of human life, infrastructure, etc. The goal is to find any indication of the EU's positive influence and thus provide the most informed view of the matter. Deeper analysis may reveal nuances that could have escaped attention due to the short scope of this work, but the purpose of the work is to reveal general trends.
The following will be examined: GDP and GDP per capita (in international US dollars), trade (total price of exports and imports) as a percentage of GDP, gross wages (and the respective growth rate), and the state deficit (the share of state expenditures in the state budget).
We will also look at the average life expectancy (and its year-on-year growth) as one of the indicators of the quality of life.
For a more comprehensive assessment of the impact of EU membership on the economy, the R&D, education and healthcare investments as a share of GDP, the state of railway electrification, the number of passenger-kilometres in rail transport and the extent of road infrastructure will be examined - education and infrastructure have an impact on economy, as they are a prerequisite for its development.
I will finish by comparing the amount of net income resulting from Slovakia's membership in the EU and the amount of surplus value (i.e. profits) produced in Slovakia that flows abroad. In this way I will try to determine whether thanks to the membership of the single market Slovakia gains more than it loses in lost profits going to foreign investors.
When working with data, it's important to take into account possible inaccuracies caused by the method of data collection or manipulation, as well as historic limitations. Some discrepancy between different sources of values for the same indicator is to some extent inevitable. That is why I do not rely on individual indicators in the analysis, but try to look at the bigger picture. I also try to focus on general global trends. At the same time, I take the presented data prima facie, since this data is commonly used by mainstream economics, which does not question their validity.
In 2008 there was a global financial crisis, the immediate consequences of which were felt at least until 2012 and the consequences, such as austerity, still shape the political, or economic decisions across Europe. On the one hand, this crisis presents a problem for the study of long-term trends, but on the other hand, it presents an opportunity to examine the impact of membership in the single market on the neoliberal capitalist economy.
Another limitation is the fact that the impact of membership in the single market can only be compared in two ways: by comparing trends in Slovakia before and after joining the EU, and by comparing trends in two countries – one member and one non-member. Both methods will be used, but primarily the first method. I present Serbia as a model non-member country. An obvious limitation is the fact that Serbia was fundamentally affected by the 10-year war and aerial bombardment of the entire country. This is one of the factors that could have influenced the starting line of the Serbian economy. In this analysis, I will assume an equivalence between Slovakia and Serbia, both of which are post-socialist neoliberal capitalist countries with experience of privatization in approximately the same period. Demographic and geographic similarity underline this equivalence, but they will not be taken into account.
Last but not least, in this analysis I limit myself to examining the economy, so to speak, separately from domestic politics. While the ideology of the governing party or coalition has an influence on the direction of the economy, its influence on the operation of the economy is minimized globally, especially in the case of membership in the single market, where limiting the influence of state interventions is one of the basic pillars (e.g. see the Treaty on the Functioning of the EU). In this context it is necessary to mention the Serbian accession negotiations, which started in 2014. The measures connected with this process could have an impact on the development of the Serbian economy. The analysis must take this into account.
Gross domestic product
Slovak GDP growth has been linear for more than 20 years, with the exception of stagnation in 1998 and the crisis in 2008 (Figure1). The annual growth rate of Slovak GDP did not significantly change after 2004 compared to the post-1998 trend. From 1994 to 2021, the Serbian gross domestic product remained stable at the level of 60% of Slovak GDP (see Figure 2), while its annual growth roughly copies the trends of GDP development V4 countries (except for Poland, which was not the subject of comparison). With the exception of 1999 (the bombing of Yugoslavia), Serbian GDP seems to respond to crises (2008, 2020) better than Slovakia, the Czech Republic and Hungary, see Figure 3. Considering the comparable behaviour of the GDP of non-member countries, it can be said that Slovakia's entry into the EU had no impact on GDP development.
After the turbulent changes related to the restoration of capitalism, trade relations stabilized in Slovakia, the Czech Republic, Hungary and Serbia around 2002 (Figure 6). With the exception of the slump in the volume of trade due to crises (2008, 2020), the volume of exports and imports in Serbia grew steadily and seemingly with only minor fluctuations (Figure 4; years 2010-2020 in Figure 6). Trade in Serbia is growing steadily and is catching up to Slovakia's level - in 20 years, compared to Slovakian trade, the volume of Serbian trade has increased by 16% (Figure 5). As can be seen in Figure 7, in Slovakia, since independence, exports have gradually gained dominance over imports since the crisis in 2008, respectively. 2009. Since then, the sum of import prices starts to overtake the exports again. This is related to the re-industrialization through foreign direct investments (FDI). Accession to the EU helped the re-industrialization process (D. Bohle in : Capitalist Diversity in Europe’s Periphery, 2012), but since the 2008 crisis import and export have reached equilibrium (Figure7). Gábor Hunya and Jan Drahokoupil (2015) argue that the importance of FDI for economic development in Slovakia and the rest of the EU periphery has been exhausted. The significance of the ratio of imports and exports cannot be evaluated without analysing the internal market or the nature of exports: a high level of imports can be a consequence of a strong internal market with a domestic outlet, but also a sign of a weak domestic industry. A high level of export can, on the other hand, mean a weak domestic market or a large volume of work with low added value.
Accession negotiations between Serbia and the EU, which began in 2014, do not seem to have had an impact on the development of the metrics examined within the period under review. Serbia's accession in 2007 to the CEFTA (Central European Free Trade Agreement), which includes the countries of the former Yugoslavia (without Croatia as of 2013) and Moldova, was also seemingly unaffected.
The accession of Slovakia to the EU did not affect the development of the overall volume of trade, at least not until the financial crisis in 2008. However, the accession to the EU affected the nature of work, or rather industry, with the help of re-industrialization and related neoliberalisation, which led to the emergence of a dependent economy (see Švihlíková : How the Czech Republic Became a Colony, 2015).
From the available data, it is not possible to reliably determine the impact of Slovakia's membership in the EU on the average gross wage. The nominal wage increase predictably depended on the inflation in the country. Considering the current uneven development of the inflation rate within the EU, it cannot be said that the single market should a priori have a positive influence on the development of wages (not to mention the debate that could be had on dependent economies and social dumping).
It follows from Figure 11 that the Slovak EU membership had no effect on the state deficit - a consistent decrease in the state deficit can be observed after 2012 until the outbreak of the pandemic in 2019. This decrease is therefore primarily attributable to the post-crisis consolidation of public finances. Gross foreign debt follows an exponential trend that can be reliably traced since the independence of Slovakia, while the tendency towards an exponential increase existed even before the crisis in 2008 and continued after it (Figure 12). Membership in the EU in itself seems to have neither a positive nor a negative effect on national indebtedness (and the share of interest payments, see Our World in Data), although the eurozone membership may have had a positive influence (Ban & Bohle, 2020).
R&D expenditures of Slovakia and Serbia follow the same trend and are basically identical, see Figure 13. In 2007, Serbia began cooperating with the EU in research, but its research expenditures began to rise rapidly after the initial underfunding, already in 2004, from then until 2011, they exceeded Slovak expenses by more than half. After 2014, the volume of research and development expenditures in both countries stabilized at ~0.85% of GDP. Slovak EU membership had no effect on the funding of education, which has long-term stabilized at ~9.5% of the Slovak budget (Figure 14).
The share of expenditure on healthcare funding did not change after joining the EU, see Figure 17. The change occurred only after the financial crisis in 2008, after which this expenditure increased by 0.6 percent. The reason for this may be either: 1) cuts in other areas of the state budget, which will automatically raise the share of health sector spending, unless comparatively significant savings are made in the health sector itself; or 2) a general deterioration in the health of the population as a result of the crisis and austerity. The same small oscillations can be observed both before and after the crisis, which suggests that it is actually more a result of cuts in areas other than health.
The life expectancy has been growing linearly for more than 30 years (Figure15). The growth rate, after a slight decrease of ~1 month per year in 1998, started to increase again after the accession to the EU, but has fallen significantly since the financial crisis. In 2019, life expectancy grew by 2.4 months year-on-year, which is just as fast as in 1991 (Figure 16). Overall, joining the EU had no effect on average life expectancy.
Figure 18 shows that joining the EU did not have a direct impact on the speed of construction or the number of newly built road sections. It is possible that this is a consequence of the existence of a more or less sufficient road network in Slovakia already before 2004. The impact on the speed of highway construction could not be determined due to the lack of data before 2004. Due to the lack of aggregated data, it was not possible to determine the impact of the EU on speed and volume reconstruction of the existing infrastructure. I deal with the issue of EU funds, which is relevant in this area, in the section below.
The total length of the railway lines used did not change with the entry into the EU. However, there was a change in the extent of railway electrification. Between 1999-2004, the growing number of electrified sections stopped and even reversed – in 2020 the network of electrified lines was smaller than in 2004. These negative trends are more likely a direct consequence of domestic politics. Similarly, the consequence of the domestic policy is a rapid increase in the number of passenger-kilometers and an increase in the number of passenger cars - since 2014, the government (2012-2016) introduced free train transportation for selected groups of the population. The gradually increasing trend in the number of locomotives and passenger cars could be followed for a long time. The importance of European funds will be discussed in the next section.
Flow of capital
Slovak Republic annually generated (with the exception of 2015) more value for foreign investors than it received in the form of European funds. Their amount briefly levelled off only as a result of the crisis in 2019, see Figure 23. The volume of dividends increased significantly after 2004, which can be attributed to both the expanding market and the openness of the economy (both factors can be considered synergistic and interrelated). It is obvious that private shareholders in general and foreign shareholders in particular gained more from Slovakia's accession to the EU than Slovakia gained by drawing European funds.
This fact in itself does not question the tangible positive significance of European funds in specific areas. Namely, Eurofunds are primarily used for public benefit, while dividends end up in private hands and have no impact on the quality of life of the population, certainly not a positive one. However, it is necessary to realize what dividends are - it is a value produced by social labour which the society doesn't receive as the shareholders hold the legal right to it. In other words, thanks to the rules that enable the use of Eurofunds, it is possible to extract more value from the public sphere, and Eurofunds thus practically represent but crumbs from the pie produced by workers. It is a value that is (and can be) produced in one way or another, even without the existence of private shareholders.
Foreign vs domestic capital
Considering the proven equivalence between the Slovak and Serbian neoliberal capitalist economies and despite Serbia's non-membership in the EU, the discussion about the hypothetical flight of capital is unfounded. The loss of the ecosystem of economic relations, which would occur in the case of an unlikely flight of foreign capital from Slovakia, would of course be possible in the case of Slovakia's non-membership. However, in the process of the outflow of foreign capital as a result of Slovakia's exit from the single market, new contracts and customer relations could be created, which could, to a certain extent, replace this loss. Not to mention the possible positive impact of the departure on the development of the domestic market and therefore domestic ecosystem.
In other words, the role of the single market in maintaining Slovakia's position in the global ecosystem of market relations, or the discussion about it is highly dependent on specific circumstances. The disastrous experience of Brexit demonstrates the complex nature of such a situation.
The longer I look at this data, the more I feel that everyone knows about it, and we are just waiting for those who are stupid enough to cry that the emperor is naked. To be precise however, only the intellectual circles who do not want to admit not only their mistake, but especially their short-sightedness are the ones who are silent. Workers do not suffer from this ailment. On the contrary, the intuition of the working class is again proven to be correct when those who are not afraid to point out the shortcomings of the single market are not intellectual circles, but ordinary people. You don't have to look for a long time in graphs and figures for the fact that the EU does not fundamentally improve the life of ordinary people.
The advantages for ordinary people that are most often cited in connection with EU membership are common standards, a high level of legal protection, and freedom of movement. But none of these areas require participation in the single market! A functioning single market requires the harmonization of standards and the free movement of persons, but it doesn't necessarily have to work the other way around (recall, by the way, that Schengen, for example, is not an automatic part of EU membership). Moreover, what does the free movement of persons mean in a Union which siphons the value, and thus opportunities, from the homeland to abroad? Free movement of people is for many forced job migration! Moreover, this movement is West-ward, into the precarious position of cheap labour from the East. And for the EU periphery the free movement of capital means social dumping more than anything else.
The Slovak experience of the EU periphery should teach us that wanting to be in the club of countries like Austria or Germany means wanting to break free from the periphery by exploiting other peripheral countries. This is what right-wing vultures are proposing today, who see the military decimation of Ukraine and its possible membership in the EU as an opportunity for Slovak capital. We must strongly reject such parroting of the Western capital.
Implicit truth emerges from the presented data, namely that the capitalist class benefits from our membership in the EU disproportionately. At the same time, it follows that Slovakia is not actually dependent on European funds and, ultimately, not even on foreign investments. The positive historical role of the EU in the re-industrialization of Slovakia has been completed. Although the industrial base created in this way is currently the source of Slovakia's dependence on foreign capital, it also allows us to detach ourselves and look for a more dignified and self-confident future.
If a neoliberal capitalist economy can be relatively equally successful even without the EU membership, how successful an economic establishment in which the profits flow not into private pockets but into the state treasury, under suitable conditions, would have to achieve!
The biggest obstacle to building a better society today are empty promises and invisible shackles. The Treaty on the Functioning of the EU itself limits the member states from pursuing other than neoliberal policies in the management of the economy. It is obvious that the EU, whose original and main function is to maintain a single free market, cannot be reformed. The current EU must be overcome. And ideally, the member states themselves will overcome it with a different, non-imperialist arrangement.
Crises, economic or political, within the EU are not a threat, but an opportunity for the workers of all member states to force the necessary change.
member of the Socialisti.sk leadership