Forwarded:
Don't know if anyone's interested but yesterday's Times contained
this rather negative and depressing report on the situation in Russia
and elsewhere.
-- jP --
My comment: hey, big surprise, what?
=================================================================
Michael Binyon examines a devastating UN indictment of how, in the
Nineties, privatisation in east Europe's former communist states has led
only to human misery
Maimed by embracing the market
Attempts to transform the state economies of Eastern Europe and the former
Soviet Union into a market system may prove to be the biggest departing
mistake of this millennium, a United Nations report asserts. The
transition of these countries has, in reality, been a Great Depression,
plunging more than 100 million people into poverty, with many millions
more hovering precariously above subsistence.
This indictment of the way former communist economies have been privatised
is made in the latest report on the region by the UN Development
Programme, and is sure to provoke huge controversy. It claims that the
social and economic upheavals of the 1990s have been calamitous for a vast
swath of eastern Europe and Central Asia, leading to widespread poverty,
alarming falls in life expectancy, widening inequalities between the
sexes, falling investment in education, the collapse of public health and
the spread of disease, crime, nationalist violence and suicide.
The report, one of the most negative assessments of the change from
communism to capitalism ever issued by a world organisation, paints a
picture of human misery stretching from Hungary to Kyrgyzstan, from the
Black Sea to the Arctic Circle. Basic security, freedom from hunger,
economic and social rights, proper housing and decent pensions have all
been swept away by the ferocious sacrifice of everything to the market,
the report says.
Centrally planned economies that overlooked political choice and
individual rights have been replaced by policies under which individual
responsibilty took centre stage without much consideration for those left
behind, says Anton Kruiderink, the UNDP regional director for Europe and
the former Soviet Union and author of the report. Neither blind trust in
centralised authority nor in the market have proved capable of producing
the democratic instruments needed to correct the distortions that both
ideologies produced.
In a foreword to this bleak document that could almost have been written
by a diehard defendant of the old communist system, he cites World Bank
figures showing that in 1989 about 14 million people in the former
communist bloc lived on less than $4 a day. By the mid-1990s that number
had risen to about 147 million.
The main criticism of the report is that across Eastern Europe and Russia,
the state has become too weak and institutional reform has been neglected.
Society's values have been turned upside down, dissolving the glue that
held them together. The new nations enjoy neither proper democracy nor
proper regulatory instruments to make a market economy reasonable and
equitable.
"When transition becomes only a partial process, benefitting primarily the
young, the dynamic, the mobile, the connected, and leaving behind the
vulnerable, then the surge in poverty, already so visible, will
destabilise societies and reverse whatever this new economic growth is
capable of," Mr Kruiderink says.
He adds: "Growing human insecurity is at the source of human violence, and
when democracy gets equated with misery, its hope will turn into
disillusionment, with many more volatile societies coming our way."
There are, the report concedes, some bright spots. Slovenia and Poland
have recouped their lost output and appear to have laid the foundations
for a prosperous future. Similarly, although the Czech Republic, Hungary
and the Baltic states face numerous difficulties such as falling birth
rates, high suicide rates, growing unemployment and widening income gaps,
they have made "noticeable progress" towards creating dynamic and
efficient economies. However, the gains of a few countries are "all the
more poignant" in view of the suffering of others.
The report's harshest condemnation is reserved for the former Soviet
Union, where almost nothing seems to have gone right. "These societies
have unravelled in a traumatic manner," it says. "The largest of these
imploding societies is Russia, which continues to stutter from one crisis
to the next."
Such sweeping judgments are bound to draw sharp criticism from the
governments of the 27 countries surveyed in this report, and will be
refuted by Western politicians who have long argued that only the private
market can deliver human rights, wealth and economic growth. But the UN
has assembled an impressive array of statistics, many drawn from the
countries surveyed, to back its harsh judgments.
The most devastating is the cost in human lives. During the ten-year
transition since the fall of the Berlin Wall, there has been a decline in
life expectancy almost across the region, with falls of at least four
years in countries such as Russia, where the latest figures show that men
are living only until the age of 58 on average. Several million people
have not survived the 1990s who would have done so if the life expectancy
levels achieved by the start of the decade had been maintained.
Accompanying this sad trend is a grim rise in suicide and disease.
Tuberculosis and other diseases once all but vanquished are returning as
big killers, especially in the former Soviet Union. Aids and sexually
transmitted diseases are also spreading rapidly, coinciding with a huge
rise in prostitution among impoverished women, drug abuse and the
breakdown of societal values.
A third cost of transition identified by the report is an extraordinary
rise in poverty. In Armenia, according to a household survey conducted by
the Ministry of Statistics in 1996, about 55 per cent of households were
poor, judged by a modest official poverty line based on a minimum
consumption basket. Of these, half were "very poor". In Kyrgyzstan,
according to the National Statistics Committee, 71 per cent of the
population had an income below the poverty line - which was based on the
assumption that 60 per cent of total income was spent on the food needed
for survival.
Human poverty, defined as a lack of basic human capabilities, has also
risen. Malnutrition affects millions. The number of pregnant Russian women
suffering anaemia trebled between 1989 and 1994. In Moldova, a survey
showed that between 20 and 50 per cent of children had rickets from a lack
of Vitamin A.
Throughout the former communist world, pensioners have been especially
hard hit by the new market economies. The disabled have lost access to
benefits. Migrants and refugees have been exposed to acute financial
difficulties. And single families are particularly vulnerable.
Poverty has often been caused by the state's inability to pay wages. In
Ukraine and Russia these arrears amount to about 4 per cent of GDP; in
Kazakhstan they are estimated to amount to some 40 per cent of GDP.
The fourth cost of transition is the widening inequality in wealth and
incomes. This is exacerbated by inflation, which tends especially to
affect the price of food, a large item in the budgets of the poor. Between
1991 and 1996, food prices in Armenia rose by 24,000 per cent, whereas the
prices of non-food items rose by 7,800 per cent.
A fifth drawback identified by the report is the growing inequality
between the sexes. The advent of more democratic regimes has led,
paradoxically, to lower percentages of women in decision-making positions.
Women have been pushed out of public life, while the cuts in social
services have affected them more. Violence against women has also risen,
with physical abuse from spouses becoming more noticeable and more women
falling victims to crime. Women desperate to find employment have found
themselves forced into prostitution within the region and in Western
Europe by organised crime networks.
A sixth cost has been the deterioration of education. The sharpest falls
in spending on schools and universities have been in Azerbaijan, Bulgaria
and Georgia, but almost everywhere enrolment and attendance rates,
especially at pre-primary schools, have fallen. In the former Soviet
Union, more than 30,000 pre-school facilities were closed betweed 1991 and
1995. Overcrowding, dilapidation, lack of heating, underpaid teachers and
a lack of health checks have also taken their toll.
The final price paid, says the report, is higher unemployment and
underemployment. This has been a main source of social hardship in the
1990s, as much in the richer east European countries as in the poorer
states in the south and east of the former Soviet Union.
Related to this is the rise in "black" economies, which, in countries such
as Hungary, account for 30 per cent of total national income. The result
is that large parts of these new market economies are by-passing taxation.
Taken together, the UNDP says, these seven costs underline a "dramatic
deterioration" in human security for the former communist states.
Privatisation, which occurred in fits and starts, was never uniform. The
"big bang" theory was "seriously flawed".
Alternative strategies to economic and social reform must be fair and
uniform, the UNDP insists, and benefit not just the few but the mass of
the population. There must be a shift from private consumption to
investment and human capital formation. Otherwise, it predicts, the
outlook is grim for all those who looked at sunny horizons as communism
fell. Mr Kruiderink speaks of a "meltdown of expectation". Rarely has an
economic report been as bleak.
