New substack site

I have moved my (very infrequent) posts to Substack.

Welcome to my new blog

I have decided to move my blog, giving it what I think is a better name, and with the hope that a fresh start will provide more opportunities (and motivation) for more frequent postings.

My original blog was started more as an experiment. I intend to keep this blog as a venue for experimentation, thought development, and the occasional op-ed on issues I care about and think I might have something at least half-way intelligent to say on.

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Postwar economic growth under central planning

I am posting here a little graph I plotted using data from Maddison’s standardized data on historical economic growth. The graph compares average regional per capita GDP in what can be considered two poor to middle-income developing regions after World War II, eastern Europe and Latin America. The comparison came up in the process of my analysis of patterns of industrialization in eastern Europe after the war. While comparing intra-regional levels of development (e.g., Czechoslovakia and Bulgaria), I thought of doing a global comparison to see how the region fared in comparison with other, similar developing regions.

Many economic historians and political economists now consider it historically more appropriate to compare the USSR and its east European offshoots with other developing regions than with the rich nations of the West, given more similar historical patterns of development and underdevelopment. When one compares the USSR and eastern Europe to the rich and developed countries of the West, one is always disappointed. But to consider the two regions comparable is to abstract from history a bit too excessively, given that western Europe had the upper political and economic hand over eastern Europe and the USSR/Russia since at least the sixteenth century. A comparison with other developing (what we would today call middle-income, semi-peripheral) regions is a whole lot more appropriate from a developmental standpoint.

Latin America is a perfect fit for a comparison, given the contrasting paths of development the two regions took after the war. In Latin America, states pursued various statist forms of (largely) capitalist development, whereas in eastern Europe, economies came to be run under the model of central planning developed in the Soviet Union in the 1930s. The data covers the early postwar period, 1946-1969.

As one can see from the graph, both the USSR and what became the socialist east European nations were poorer than what were at the time the most developed and relatively resource-rich countries of Latin America (Argentina, Brazil, Chile, Colombia, Mexico, Peru, Uruguay, and Venezuela – here shown as Latin America-8). As one can see, as a group, these countries were wealthier than the USSR and eastern Europe in 1946. They also had the added advantage of not being ravaged by war, as the USSR and much of eastern Europe was.

Although poorer, the USSR catches up with this part of the world by 1950 and by 1969 has placed significant distance between itself and Latin America. The latter period is also one when the USSR is making important advances in space exploration and rocket technology, displaying not only greater material wealth but also important technological advancement.

Important differences do exist, however. At a per capita GDP of $5,225 in 1969, the USSR is wealthier than most of the Latin America-8 group. However, wealthier than the USSR are Argentina ($7,037) and Venezuela ($10,262), while the socialist federation is roughly equal with Chile ($5,220). We are not in the habit of comparing the USSR to Chile but in abstract material terms in 1969 they are at similar levels of development. It is important to bear in mind, however, that Chile started 1946 with a per capita GDP of $3,699, while USSR was at $1,913, so in those terms one can see that Soviet growth was more impressive. Moreover, between 1946 and 1969, Argentina raised its per capita income by one and a half times and Venezuela did so by one and two-thirds. But in the same period, the Soviet Union almost tripled its wealth! Again, the Soviet rate of growth is much more impressive.

The case of eastern Europe (without the USSR) is just as impressive, if not more. Lagging far behind the Latin America-8 group, it not only catches up with the region but by the mid-1960s is able to surpass the Latin American industrializers in per capita terms. And these are countries which are mainly resource-poor and begin the postwar period with a very small capital base.

Eastern Europe and the USSR do just as impressively when compared with the larger group of Latin American countries, which includes the lot of what were poorer and politically more unstable countries such as Bolivia, Guatemala, Panama, Haiti and Honduras. While the levels of development of these countries were on average lower than the USSR and eastern Europe, one needs to bear in mind that in 1946, countries like Bulgaria and Romania were very much underdeveloped agrarian nations, as were many parts of the USSR and Yugoslavia.

It becomes clear that in the immediate postwar era, the states that ended up basing their economies on central planning performed much better than those that relied on the path of (various statist forms of) capitalist development. This should tell us something about the appeal of the Soviet model for many poor and developing nations in the 1950s and 1960s, but also sheds some light on the relative success of central planning in industrializing underdeveloped economies, a fact largely recognized at the time but somehow forgotten by contemporary discussions of histories of state socialism which tend to base their evaluations on the crisis-ridden 1980s to proclaim central planning a failure. Clearly, in purely material terms, early postwar central planning performed quite impressively.

One might retort by saying that the better comparison is with East Asia, rather than Latin America. In fact, East Asia (including Japan) is an extremely impoverished region after World War II. For the 16 nations that Maddison includes in his East Asian group, the average per capita income in 1950 is only $667. Asian growth emerges slowly, and is in fact impressive in only a select group of countries. Most East Asian nations (in Maddison’s broader definition) perform rather unimpressively. Japan, South Korea, Hong Kong and Taiwan are outliers in what is an overwhelmingly poor part of the world. And in 1946-69, with the exception of Japan, even the outliers do not grow at a very impressive rate, or at least not as impressively as the USSR and eastern Europe. With the exception of Japan’s rapid growth, the East Asian “economic growth miracle” only really becomes a story in the 1980s.

I do not have reliable data on hand, but it would also be interesting to compare how the two regions fare on other indicators of development, such as life expectancy, infant death, literacy rates, educational attainment and others. I would venture a guess that no later than the mid- to late-1950s, the USSR and eastern Europe performed better on those criteria as well. The comrades managed postwar development quite adeptly, it seems.

My goal here is of course not to simplify complex histories or score any cheap ideological points. I would certainly not recommend that any country adopt central planning today, and I am not sure that such a thing would even be possible given the unique historical circumstances of postwar Europe. As someone who does comparative historical analysis, I am merely drawing attention to contrasting historical paths of development. The legacies and consequences of such historical paths are certainly still with us today.

Mass protests in Bosnia – it’s the economy, stupid!

Bosnia and Herzegovina’s political establishment has been rocked by a popular uprising that has swept the country. The chain of events began on February 6th in the northeastern industrial city of Tuzla, when some 6,000 workers from five factories, Dita, Konjuh, Polihem, Resod Guming and Poliolechem, gathered in front of the cantonal government of Tuzla to protest against the closure of their factories. The workers blamed the closure of the factories on crony privatization by new owners tied to the ruling political elite and various asset-stripping schemes which aimed at bankrupting the once successful firms. Their protest in front of the cantonal government of Tuzla quickly turned violent as police responded brutally to the protests. The protesting workers were joined by youth, students and other citizens in a confrontation that ended with the burning of the government building in Tuzla. The cantonal government of Tuzla promptly resigned, while similar protests spread to the Federation’s other regions, including Bihac, Travnik, Mostar and the capital Sarajevo. The violence in Sarajevo led to the tragic burning of the Bosnian archives, including, in some accounts, the entire collection of nineteenth century documents from the period when Bosnia was a protectorate of Austria-Hungary – though these later turned out to be exaggerated claims. The burning of the archives (which was unintentional, and happened as fire spread from a nearby government building) was used as a pretext by the ruling political elites and some foreign diplomats to discredit the protests and their demands by calling them hooligans, vandals, and anarchists.

In spite of efforts by elites to discredit the protests, the movement that began in Tuzla exploded into widespread mass protests united by the grievances of the Bosnian citizenry against corruption, abuse of power, and the worsening economic conditions in a country that already faces one of the highest unemployment rates in Europe. The protestors charge the political class with nepotism, corruption and mismanagement and blame them for the mess Bosnia has been in over the last several years, and even longer. What has drawn the attention of many observers is the explicitly anti-nationalist message that the protests have sent. These are seen not only in the slogans that the protestors carry (“We are hungry in three languages” – a reference to Bosnian, Croatian, and Serbian, the languages of the three constitutive nations of Bosnia-Herzegovina), but also by the fact that the protests have crept from Tuzla, Sarajevo, and the mainly Bosniak regions of Bosnia to Mostar (a predominantly Croat town) and a small protest was also organized in Banja Luka, the regional capital of Republika Srpska, the Serbian entity of the country. I will have something to say about the allegedly surprising nature of anti-nationalism in Bosnia, but let me begin by examining what may have led the explosion of protests at this very moment.

There are attempts by various Western “Balkan analysts” to lay blame for the protests on the dysfunctions of the Bosnian political elite and the indecisiveness of the international community, and in particular the European Union (EU), in taking the lead on reform in Bosnia. The EU and the US play an important role in Bosnia because of the presence of EU troops in the country and the continued role of the Office of the High Representative (OHR), an institution set up with the Dayton Accords of 1995 to provide a means for a Western-appointed supervisor with supra-sovereign powers to enact and veto laws and bar from power officials seen to be threatening the tenets of the peace agreement. While the OHR has often been criticized as an instrument of Western imperialism, its interventions have in some instances been instrumental in promoting the unity of the country, such as the introduction of uniform license plates and other measures that reinforce a united Bosnian state. In 2008, the Western powers, and France and Germany in particular, aimed at the closure of the OHR, believing that it had outlived its usefulness. However, that decision was suddenly reversed, and instead, a set of conditions were drawn up which the Bosnian political elites were expected to fulfill in order for the Western powers to decide to shut down the OHR and end the international supervision of Bosnia. Western analysts have been critical of the West’s intention of withdrawing from Bosnia, citing risks posed to the unity of the country by nationalist parties. They are especially worried about the intentions of Milorad Dodik, the prime minister of Republika Srpska, who has on more than one occasion over the last several years threatened with Srpska’s secession from Bosnia-Herzegovina (and recently made a statement to that effect again). On the other hand, in the Bosniak-Croat Federation, relations between the ruling Bosniak nationalist Party of Democratic Action (SDA) and its Croat counterparts have been less than cordial. Last year, the three members of Bosnia’s three-member Presidency (where each member represents one of the national groups) failed to agree on a law permitting the issuance of national identity cards, leading to the tragic death of an infant who could not get proper medical attention abroad due to the lack of identity papers allowing its parents to obtain a passport.

The temptation to interpret the protest wave in terms of Bosnia’s existing political deadlocks and failed political reforms, while raising the specter of nationalist conflict, obscures the economic failures that have characterized Bosnia’s postwar development, and in particular the ways in which the postwar state has been integrated into the circuits of European and global capitalism. As is clear by the data, Bosnia’s economy was hit badly by the 2008 global financial crisis, and has languished as Europe succumbed to a secular economic crisis with no end in sight. The external shocks of the crisis exacerbated domestic structural limits on growth, while the ensuing domestic economic crisis laid bare the politics of rentier capitalism and “accumulation by dispossession” that has taken root in Bosnia as it did in virtually all postsocialist economies that made the political decision to construct “the free market” by transferring control of collectively-owned assets into private hands.

Political deadlocks and tensions between ruling nationalist parties, corrupt privatization, clientelistic politics and nepotism, and other features of Bosnian political life which have become the object of popular anger, are not new. Indeed, these problems have plagued Bosnia since 1995, when the peace accords ended the bloody civil war in the country and helped entrench nationalist parties as the wheelers and dealers of Bosnia’s future. The question therefore is not why are people protesting, but why now?

The most obvious answer is found in Bill Clinton’s 1992 campaign slogan during his presidential campaign against George H. W. Bush – “it’s the economy, stupid.” Bosnia-Herzegovina was ravaged by the civil war of 1992-95, which led to the death of over 100,000, the displacement of millions and the destruction of homes, factories, infrastructure, and public facilities. The postwar settlement brought about not only the end of fighting, but important foreign aid which helped rebuild the country. The price to pay, of course, was that for aid to flow, not only were Bosnian elites required to adhere to the various political tenets of the Dayton Accords, but also implement the neoliberal program for “transition” to capitalism under the supervision of the IMF and Western aid agencies and “consultants.”

For a while, it seemed like Bosnia was on a path of economic recovery. In addition to the aid money which helped rebuild infrastructure, economic activity was also on the rise. Between 2002-08, GDP growth averaged at around 5% annually – a relatively impressive figure for a small, developing, and not particularly resource-rich country recovering from war. A great deal of economic growth depended on Bosnia’s growing exports. Between 2001 and 2008, Bosnia’s exports grew from 2 billion BAM (1.4 billion USD) to 6.7 billion BAM (4.7 billion USD). This enabled the revival of a great deal of Bosnia’s traditional industries, such as the wood, chemical, and food industries, and mining. The opening up of EU and regional (ex-Yugoslav) markets helped in this revival.

The economic growth was reflecting in the improving relative welfare of the population – or at least the fortunate among it. Between 1998 and 2008, GDP per capita (in PPP terms) nearly doubled to 7750 BAM (Bosnian Convertible Marka – 5425 USD). More importantly for the working public, wages increased dramatically. Average monthly wages increased by 42%, from 560 BAM in 2005 to nearly 800 BAM in 2008, and even caught up in Republika Srpska where wages had been traditionally lower. Unemployment was on the decline, from its high of almost 50% to 40% in 2008. More importantly, youth unemployment (ages 15-24) fell sharply between 2006-08 from 62% to 47%. A sign of Bosnia’s economic growth was the fact that the country was weaning off of its dependence on remittances from the Bosnian diaspora abroad, as these became an increasingly marginal portion of GDP. For the fortunate among the working population, it seemed like the road to reclaiming the comforts and status of a middle class lifestyle that a good deal of the population had enjoyed before the violent dissolution of Yugoslavia, was within reach.

More significantly for the country’s socio-political dynamics, this period of relative economic prosperity benefited primarily the middle classes, including industrial workers, urban professionals, and public sector employees. World Bank data shows that the income of the top 10% and 20% of earners rose from 22% and 37% of total income in 2001 to 27% and 43% in 2007, respectively. Savings in the country grew tremendously as well. The relative prosperity of a portion of Bosnia’s population is shown by the growth in domestic savings. Between 1998 and 2008, bank deposits in domestic currency grew from a tiny 147 million BAM to 3.5 billion BAM. This suggests that by 2007, nearly half of the income earned in Bosnia was being taken in by the country’s relatively small middle class, contributing to the process of accumulation. By contrast, the income share of the lowest 20% fell from 9% to 6.6% during the same period, although absolute wage growth obscured the growing inequality between wage-earners. While we have no concrete data, there is plentiful anecdotal evidence pointing out that the period has led to the enrichment of politicians, politically well-connected elites and other insiders of all nationalities who benefited from Bosnia’s economic growth and especially the privatization process. Beyond the enrichment of Bosnia’s new capitalists, among the urban classes, a two-tiered system developed in which the fortunate ones with jobs were reaping the fruits of Bosnia’s recovery through increased savings and consumption, while those shut out were experiencing increasing hardships and growing impoverishment. The story of Aldin Siranovic, who issued the call to protest in Tuzla on Facebook and who became unofficial leader of the movement, is illustrative of this. The 26-year old Siranovic has a university degree, as does his wife. While struggling to support their child, neither of them have been able to find work.

The seemingly successful drive towards economic prosperity in the early 2000s came to a crashing halt after the global financial crisis of 2008. Like most countries in the EU’s capital and trade dependent periphery, the crisis hit the economy of Bosnia hard. GDP contracted by -3.9% in 2009. The worsening conditions across Europe and the eurozone in particular did not help Bosnia’s economy. In real terms, since 2009, the Bosnian economy has experienced what is effectively a depression. In 2014, real GDP growth is expected to be a mere 2%.

The crisis has depressed private sector activity and placed strains on already burdened public budgets. Wage growth, which benefited the working middle classes during the first half of the 2000s, has remained relatively flat. Unemployment shot up to 46%, including the portion of long-term unemployed which grew from 20% to 25%. Youth unemployment grew from its 2008 low of 47% to 63% in 2012. Moreover, the burden of inflation, which has plagued most of the Balkans after 2008, has added to the difficulties of vulnerable groups.

The origins of the crisis are twofold. First, the crisis in Bosnia differs in nature from that in, say, Greece or even Slovenia, two EU members in the country’s neighborhood. As a non-eurozone country, Bosnia was not wedded to the capital flows which produced the financial bubbles in the EU periphery. In addition to the collapse of export markets in the eurozone in 2009, there seems to have been, at the same time, a period of “overinvestment” in Bosnia itself in which the crowding out of capital, concentrated among a small portion of the population, produced a local crisis of profitability. In the 2000s, investments were being fueled by falling lending rates and increased risk-taking by banks. The growing hunger of banks (mainly foreign-owned) for risk-taking is seen in their willingness to lay out increasingly larger amounts of their capital as credit. Bank capital-to-asset ratios, which measure bank financial exposure, fell from a conservative 20% in 2001 to a relatively risky 8.8% in 2007. The amount of credit increased tremendously, and by 2007 bank credit as a percentage of GDP grew to 67%, from 23% in 2001. In 2008, the real interest rate was negative, suggesting that the economy was already on an overexpansionary drive. Household consumption was growing at a faster rate than investments, which shows the highly lopsided distribution of the benefits of growth in a country of extremely high unemployment. Growth was limited by the fact that, on the one hand, economic dependency typically places limits on the growth of export markets available to fuel increasing returns of domestic industry, and domestic capital, judging from income distribution, became concentrated among a privileged minority of the population, regardless of national background. Growth, in other words, was not dispersed and expansive in ways that creates more employment (and thus more wage-earners), but concentrated and intensive, fueling wage growth and increasing household consumption among the employed, while channeling investments into “unproductive” areas like housing and consumables and economically vulnerable small businesses.

The crisis brought to Bosnia its own version of “structural adjustment.” During the early 2000s, economic growth enabled the Bosnian government to increase its expenditures every year and pay down the country’s foreign debt all the while running cash surpluses. In 1999, government debt stood at 50% of GDP. By 2007, it had been reduced to a mere 4%, a record low for European standards. After 2008, not only has the growth of public spending been curtailed (growing by a little over 1% per annum), but the government has had to turn to borrowing to finance its expenditures. The financing has been secured primarily through the IMF, which, as it typically does, imposes strict expenditure controls as “conditionality” for continued loans. This has led to critical declines in social expenditures – especially important in a postwar country like Bosnia where many depend on old-age and veteran pensions and other forms of social assistance to get by. Public expenditures for social benefit payments in 2012 have been vulnerable to cuts and were a mere 4.5% higher than in 2008, barely keeping up with inflation.

The traditional Keynesian formula of responding to shortfalls in the private sector during a crisis by increasing public spending has not been an option in Bosnia. First, the collapse of revenue has meant that the government has had to struggle to keep up with spending, let alone increase it. Second, the traditional route of devaluing has not been possible because of the official peg between the BAM and the euro (at a 2 to 1 rate). This has, just as in euro-member countries facing the current crisis, tied the hands of policymakers who are unable to let the value of the domestic currency fall, and thereby improve the country’s relative trade position by stimulating exports. Like Greece, the politically imposed policy trap (in this case due to Dayton-era arrangements) means that “structural adjustment” takes place at the backs of labor, public budgets, and the overall growth of the economy. This situation is partly responsible for the conundrum in which Bosnia currently finds itself in – a high unemployment, low growth economy with a government that, even with the best of intentions – when it is not politically paralyzed by the ethnopolitics of nationalist parties – can do very little to turn things around.

Given worsening economic conditions in the crisis years, the fact that Bosnians of all ethnicities have taken to the streets or express sympathy with the protestors is unsurprising. While dissatisfaction with the political class was high over many years in Bosnia and high unemployment stood as permanent proof of the ultimate economic failure of the postwar neoliberal policy model, the Bosnian elites were, so it seems, able to placate sectors of the population in the short run by enabling urban middle classes to gain a share of the postwar economic growth. The deteriorating economic conditions and prospects among these classes, including public sector employees, pensioners, war veterans, workers, and students and youth have produced the current situation in which the most active parts of the population are also the most affected by the crisis. It is, most likely, the reversing fortunes of the middle classes (and especially its more vulnerable and marginal segments, such as educated urban youth) after 2008 that has generated the potential for mobilization on the basis of socio-economic grievances, finding its basic fault in the economic corruption of the existing political parties.

The urban-centered and widely class-based nature of the protests probably also has something to do with their non-nationalist and even explicitly anti-nationalist nature. It is pure prejudice (and one very common among Western observers) to equate ethnicity with nationalism – as a result, one expects every Bosniak to be a Bosniak nationalist, every Serb to be a Serbian nationalist, and so on. For those rooted in such a worldview of Balkan “ancient hatreds,” non-nationalist behavior and even the explicit rejection of national identity as the basis for political mobilization and action comes as a deep surprise. In fact, the history of Bosnia, and especially of urban Bosnia, is not one of interethnic strife but of relatively peaceful coexistence. To take the example of the city of Tuzla, which has been the epicenter of the recent protests, in the last census carried out before the war, some 20% of the city’s population declared itself as Yugoslav. Moreover, the recently deposed government of Tuzla was under the control of the Social Democratic Party, a non-nationalist party (which nonetheless has its base of support mainly among the Bosniak population). It is difficult to recall that non-nationalist and anti-nationalist movements existed during the civil war as well, but these had little power to undermine nationalist politicians whose claims for the need for ethnic separation became self-fulfilling prophesies during the violence of the civil war. At the same time – and ironically for that – it is the deep decentralization of the Bosnian state by the Dayton Accords that has created the conditions for the institutional experimentation we are presently witnessing in Tuzla, in which a citizen Plenum has become an organ of direct democracy, essentially co-governing the canton with the local Assembly. Across all of southern Europe, the North African countries swept by the “Arab Spring,” and most recently in Ukraine, we have seen that the chief target of mass protests are typically national authorities and national centers of power. In the Bosnian case, the regional government of Tuzla would never have been such an important target for protestors (and consequently a site for institutional innovation and experimentation) had it not had a relatively powerful regional authority and – most critically – also been the entity in charge of privatizing local industries. As is usually the case, institutions not only entrench power in particular ways but, by doing so, also sew the seeds for their potential transformation.

In any event, the fact that the most vocal segments of the present protest movement are those who are too young to remember the war and are pointing to a possible future beyond nationalist divisions are a hopeful sign for the future of the country. But the shift to an entirely non- or anti-nationalist politics in the country as a whole seems like a long shot given the still living memory of the civil war, the post-Dayton ethnopolitical institutions, which not only privilege, but premise the entire political process as one of rule by ethnonationalist consensus, as well as the existing nationalist parties which have already seized upon the protests to stir up conspiracy theories about how the alleged real goal behind the protestors is to undermine the power and standing of one own’s or the other national group. The potential for a non-nationalist political solidarity across all of Bosnia which would entirely and categorically reject this approach seems possible, but it will take more than a few symbolic gestures to overcome the divisions that have been sewn by the civil war and entrenched institutionally and politically in post-Dayton Bosnia. Indeed, what has united the grieving populations of all three groups is the belief that political power in Bosnia has been used by parties of all stripes chiefly for personal enrichment at the expense of the rest. The mass protests, which have already produced radical institutional innovation at the local and regional level, are clearly also a call for a much empowered Bosnian central state that not only does away with the logic of ethnopolitics, but also possesses the means to steer the country towards more meaningful and more inclusive economic development.

How to write like a true Marxist-Leninist

Now here’s something completely different. I discovered a cool online textual analysis tool at voyeurtools.org. Just for fun, I ran through it a collection of online texts by Enver Hoxha, the late Marxist-Leninist dictator of Albania. Hoxha was a prolific writer. Not only was he the political leader of Albania during his rule (1944-1985), but also its top Marxist-Leninist theorist. As a great thinker, he rarely bothered with technical policy details (unless, of course, it involved denouncing, purging and condemning his political rivals into Albania’s gulags). Rather, he took part in the great ideological critique of capitalism (as any good Marxist would), but most importantly, he was a harch critic of  the “revisionist” communist countries like Yugoslavia (after 1948), the Soviet Union (after Khrushchev’s denunciation of Stalin) and, later, China (after it too deviated from the road of true Marxism-Leninism). He denounced them all – Titoites, Khurshchevites, followers of “Mao Tse Tung thought,” “Eurocommunism” – you name it.  In his mind, by the late 1970s, Albania was the only remaining revolutionary Marxist-Leninist country in the world. He even inspired a tiny following in the West.

Enver Hoxha was a prolific writer, but certainly not a masterful one. Having surrounded himself with yes-men – especially after having killed off or imprisoned most of the original founders of the Albanian Communist Party [later Party of Labor] – it is likely that Hoxha was not much in the business of accepting critical feedback for his writings. Citing Enver Hoxha was obligatory in Albania during his rule, regardless of topic – not only did party followers find inspiration and truth in his writings, but so did historians, artists, poets, and engineers. In any event, his writings set the tone for Albania’s political orientation for much of the Cold War, as well as domestic policy. Let us see then, how a true Marxist-Leninist writes, as revealed by Voyant.

I ran an analysis of the online collection of English language texts by Enver Hoxha held at marxists.org. This is clearly a fraction of Hoxha’s writings, but includes a useful sample of texts from 1944-1981. These include letters, political statements, as well as Hoxha’s Imperialism and Revolution (1978), Eurocommunism is Anti-Communism, and With Stalin which are the only full text books in HTML format (Voyant does not parse text from PDF files).

As one can observe from the word bubbles, the vocabulary of a true Marxist-Leninist isn’t that rich. The most frequent word is… you guessed it – party. Other most frequent words: world, countries, Soviet, imperialism, revolution, people, struggle. Combine any of these words with revisionist, capitalist, bourgeois and situation and you get a true Marxist-Leninist text. Because, of course, you need to denounce the capitalist, revisionist, imperialist, and bourgeois in order to affirm the party, revolution and the struggle. A reference to the genius of Lenin and Mao will undoubtedly add to the argument.

See the full list of most frequent words here.

What is interesting of course – though the limited sample of texts makes this not truly representative – is to observe the changing frequency of words across time. Voyant does make this possible, by providing an analysis of trends.

Let us examine, for instance, the word “struggle.” It is interesting to observe that its use increases dramatically in the texts from the 1970s and declines in the 1980s. As Albania becomes more isolated politically after its break with China, struggle becomes more important. Though this could also be a function of the fact that the book length texts analyzed are from that period (and the word “struggle” is frequently used in them). It is also interesting that most of Hoxha’s writings dealt with developments within the communist camp. “Soviet,” “China” and “Chinese” make more frequent appearances than “American” and “revisionists” appear just as frequently as “bourgeoisie.” Though, of course, for Hoxha the revisionists tended to act and think like the bourgeoisie, so the word could still be a reference to groups within the communist camp.

How about an analysis of individual texts? For example, in his 1969 denunciation of Khurshchev in “The Demagogy of the Soviet Revisionists Cannot Conceal Their Traitorous Countenance,” the analysis reveals the importance of the word “clique.” There is a clique that is somehow involved in the critique, and not only Khrushchev’s revisionism. An important and unusual term that appears in that document: “social-imperialism.” That term is repeated 41 times. Social-imperialism is akin to a kind of fascism. As Hoxha writes in his typically acerbic tone:

Social-fascism in the home policy has social-imperialism as its direct continuation in foreign policy; and while they seek to camouflage fascism with “socialist” phraseology, the Soviet leaders strive to conceal their imperialism with the slogan of “proletarian internationalism.”

You can’t fool Hoxha with your so-called “proletarian internationalism,” you Soviet imperialist revisionist scum! You’ve been unmasked and your true intentions revealed!

Just as our little tool here has revealed how limited Hoxha’s vocabulary was in his 50-odd years of writing. But of course, in Hoxha-style Marxism-Leninism, you really didn’t need to rely on a very large corpus of keywords to make your point. The analysis of words is sufficient to show the combative nature of Hoxhaist discourse, as well as the Manichean structure of Hoxhaist thought.

Let me illustrate this once again. In Hoxha’s 1965 text on art and literature (“Literature and Art Should Serve to Temper People with Class Consciousness for the Construction of Socialism”), one would imagine a different set of concepts used in such a deeply thought-through exploration of human creativity. But a real Marxist-Leninist wouldn’t be caught with his pants down without exhibiting his political edge. Thus, the most common words in this text are people (119), party (39), work (38) (though this may also mean “work of art” and not labor), struggle (31), great (28) and things (24). The word music is used only 19 times, arts 15 times, and writer a mere 12. The people, the party and the struggle are more important than writers; you’ve been forewarned, Ismail Kadare!

This exploration into the Manichean thought of Albanian Marxism-Leninism reveals other interesting cultural trends in post-Communist Albania. First, it is clear that Hoxhaist thought was, paradoxically for its ultimately isolationist policy implications, worldly and cosmopolitan – “world” (929) is a lot more central to Hoxha’s discourse than “Albania” (239). One explanation for this, of course, may be because these are English language translations and are obviously selected to appeal to foreign readers. But that is likely not the only explanation. The revolution in Albania was framed in world-historical terms; its struggle echoing in the far reaches of the world struggle against capitalism, revisionism and imperialism. A frame pitched towards Albania’s unique role within a universal history of struggle and revolution seems rather appropriate. As Hoxha states in his Imperialism and the Revolution,

Right from the start, the Party of Labour of Albania raised high the banner of implacable and principled struggle against Soviet revisionism and its followers, courageously defended Marxism-Leninism, the cause of socialism and the liberation of the peoples, just as it had fought and was fighting resolutely against Yugoslav revisionism.

As the sentence shows, socialism and the liberation of the peoples are great, one could say “universal” causes in which little Albania was only doing the most righteous thing by renouncing the wicked revisionists. This intense preoccupation with global history and global events as turning points – as a proper criticism of imperialism would demand – is scantly found in present-day Albania, where a more narrow, self-centered worldview tends to dominate public discourse. Second, the corpus of words most frequently used by Hoxha are today, very likely, the least popular words you will find in Albanian public discourse. That includes not only “party,” given the demise of the single-party state, but also words such as revolution, imperialism, struggle, people, class, capitalism (we now only speak of free markets), and the bourgeoisie. I would bet that, if we were to do a textual analysis of post-Communist discourse, the most frequent words would be “democracy,” “Europe,” “reform,” and “corruption.” (On the last word, see the study by my friend and colleague Blendi Kajsiu.)

I invite you to explore the full data by clicking here.

Is China already part of the industrial core?

My occasional forays into economic theory have led me to the intriguing work of Adolph Löwe, in particular his 1976 book The Path of Economic Growth (Cambridge University Press). Being a sociologist, I have very little knowledge of how Löwe’s work is currently received in the economics field, though I believe many theoretically and historically sensible economists consider it a classic work on the issue of economic growth. (Ironically, in 1935 Löwe published Economics and Sociology: A plea for cooperation in the social sciences, which called for greater incorporation of insights from sociology by economists, and vice versa.) In The Path of Economic Growth, Löwe is interested in developing a model of economic growth, which for Löwe, a “classic” neoclassical economist (along the lines of Walras, Marshal, Keynes, Schumpeter, Kalecki, Kuznets, Minsky, and others economists today considered “unorthodox” by the dominant neoliberal orthodoxy) is defined as the process of ever-growing industrialization, or the ever growing mass of fixed capital.

For Löwe, as modern industry expands, so does consumption, and with it so does the scale of the economy. He develops a model of industrial development which draws from Marx (whom Löwe credits for developing the two-sectoral model of the economy) by proposing an economic industrial model consisting of Marx’s classic sectors, production and consumption, but further subdividing the productive sector into that producing consumables and that producing industrial goods, or what Marx once called “the means of production of the means of production.” Industrial production is therefore divided into consumer-good (CG) and equipment-good (EG) industries (the acronyms are mine, not Löwe’s).

For Löwe, an industrial subsector producing and reproducing the stock of fixed capital (tools, machinery, equipment required for the industrial process) – what is sometimes also referred to as capital goods – is central in any process of growth, because it conditions the expansion of the other sectors. A closed economy which contains EG and CG industries, secures the constant flows of inputs and labor, is a system capable of its own reproduction, because it can fulfill both its needs of consumption and of the replenishment of its industrial goods. Such a hypothetical system is, in Löwe’s terms, a system in stationary equilibrium. One can, in formal terms, define the necessary cycles of inputs and outputs to develop a formal model of self-perpetuating industrial economy in stationary equilibrium, and, by building on this basic model, deduct the terms of (national) industrial growth. For Löwe, the economy in this model need not necessarily be a competitive/market-based one. A centrally planned system would behave in the very same way, given that the basic sectoral subdivisions apply equally in a planned industrial economy as they do in a competitive/marked-based one.

I will not go any further into Löwe’s interesting model – one of the reasons being that I am still working through his book. Of course, there is an underlying problem in Löwe’s assumption of a closed (national) economic model. We know, both from current processes as well as history that industrial capitalism never developed as a closed (national) system. There might be question about the extent to which Löwe considers the disruptive effects of technological (production process) innovation, not to mention that the formal model, while a useful theoretical exercise, leaves us with few tools to understand the growth of empirical economic systems, especially of industrial capitalism, which is perpetually crisis-prone.

In any event, the conceptual division between CG and EG industries is an interesting and perhaps useful one. In particular, a long-standing theoretical problem in world-systems theory is the division of world regions into core, periphery and semi-periphery. For Wallerstein (1979), the division involved the distribution of whole units, which were nation-states. For Arrighi (1990), the division involved distinguishing between “core-like” and “periphery-like” economic activities. While Arrighi’s approach is better suited for an increasingly globalized economy where “deterritorialized” systems of production have emerged worldwide, Arrighi never quite specifies what are the “core-like” and “periphery-like” activities.

Enter Löwe. His simple division of industrial sectors into CG and EG industries provides a simple but effective way of measuring the industrial hierarchy of the world economy. Hence the title of this posting, and hence China.

In trying to figure out a way to measure world industrial output in terms of EG industries, I went into the UN COMTRADE database and pulled out time-series data on exports, and in particular examined exports of industrial machinery, based on HS category 82 (“Nuclear reactors, boilers, machinery, etc.”). I believe this category covers most exports of industrial machinery used in production processes, though there may be some items included which do not quite fit the criteria. In any event, this is a useful rough measure. These numbers, of course, do not reflect total world output since they are a measure of exports only, but they indicate the economies which serve as industrial suppliers to the world. Since the majority of the countries of the world are reliant on imports of industrial equipment to industrialize their economies (as well as replenish the stock of industrial machinery which depreciates or becomes outdated as new technologies are introduced), those who supply the machinery necessary for industrial growth clearly enjoy a dominance in the process of global industrialization.

According to the data, China has already overtaken the US, Japan and Germany as the largest exporter of industrial machinery (see graph). And this from quite a low position as late as 2001.

China’s rise as an exporter of industrial machinery is dramatic. In 1992, China’s exports of industrial machinery were around $3 billion, a meager 3% of the $84 billion each exported by leading exporters, the US and Germany (with Japan not far behind). By 2004, China had already overtaken Japan, by 2006 surpassed the US, and in 2008 overtook Germany as the world’s leading exporter of industrial machinery. After the market collapses of 2008 caused by the global financial crisis, China’s exports recovered rapidly and in 2011 amounted to $353 billion, that is, nearly $100 billion more than Germany and $150 billion more than the US.

This entails several things. First, to ask whether China is “core” or “semiperipheral” seems like the wrong question. Clearly, a number of core industrial activities have emerged in China (in case the reader is curious, China also dominates the list of electronics exporters), making China the world’s largest supplier of industrial equipment. In the industrial sense, during the course of the 2000s China clearly has moved to the core of the world economy, not only by its current dominance in low-cost CG, but also by the volume of EG it exports throughout the world.

One might retort that China lacks its Siemenses, Mitsubishis, and Caterpillars, and thus lacks both firms with the global brand recognition and the high value-added activities which characterize US, German and Japanese firms. That may be true, but that may also indicate the limitations of the data used here, which provides information about total volume of trade but not of the structure of the industrial sectors which produce the goods. In these terms, an analysis of the market power of firms may be more pertinent to what we want to know than simple aggregates of exports (suggesting that “core-like” and “periphery-like” activities have firm- and market-level implications, and are not only state-based designations). To understand this, one might invoke Harrison White’s (1981) production schedule, which lays out firms in a production market in terms of price and revenue. In global supply markets, it may be that Chinese firms occupy a position that is low on the price axis, but also, on a firm by firm basis, low on the revenue axis of the schedule, while individual US, German and Japanese firms still command market power in terms of revenue even while charging higher prices for roughly equal goods. In these terms, one could expect Chinese producers to export more volume and, in the aggregate, earn more total revenue, but that does not translate into market dominance of specific industrial sectors. It is clear, however – and one gets the impression simply by reading the business pages of any newspaper – that the low cost/low price formula that Chinese firms have introduced have disrupted global markets in fundamental ways. The data shows that over the last decade this transformation has crept into the heart of industrial production, that of the tools and machinery required for industry.

A second implication is that, during the 2000s, the world economy entered a phase of what can be termed “industrialization with Chinese characteristics.” That is, Chinese manufacturing is no longer industrializing China alone, but provides the means for industrializing other parts of the world. For most of the twentieth century, if a developing state wished to industrialize, it had to rely almost solely on US, west European or (after the 1960s) Japanese equipment and technology (not to mention financing, training, logistics, etc.). Even industrialization in the Soviet Union in the 1930s would not have been possible without German machinery. In the postwar era until about the 1980s, the Soviet Union and the industrialized states of eastern Europe provided an alternative to Third World countries seeking to industrialize while avoiding dependence on the West – though Soviet technology in many sectors could not compete with that of the West. The rise of Chinese “industries of the means of production” now offer an alternative – and evidently one chosen by many countries – for states seeking to industrialize or business owners seeking to equip or upgrade production facilities. This also ties in many ways to the politics of foreign aid. Typically, foreign aid, while helping to “develop” a poor or developing society, is also an instrument of expanding potential markets for the domestic firms of the aid provider. For example, the US development agency, USAID, may provide assistance for agricultural development to a poor country, but the “catch” is that, in, say, supplying fertilizers, USAID will contract a US producer. Thus, while seemingly aiding a poor country with developing its agriculture, USAID also helps create a potential new market for US fertilizer producers which persists long after USAID has completed its aid program. EU aid rules similarly privilege EU-based firms and organizations in supplying goods or providing services for its aid projects around the world.

A similar process could take place with Chinese foreign aid – and is probably already happening in places like Africa, where Chinese firms are aggressively expanding their presence. Possessing the financial means, the market for goods, and the equipment goods industries that will supply the machinery for industries of many types, China may provide a new boost to industrialization in places far from its shores. That means that, put in Löwe’s terms, a new, China-driven cycle of world growth may be in the making – indeed, already taking place.

References

Arrighi, Giovanni. 1990. “The Developmentalist Illusion: A Reconceptualization of the Semiperiphery.” in Semiperipheral States in the World Economy, edited by William G. Martin. New York: Greenwood Press.

Wallerstein, Immanuel. 1979. “Dependence in an Interdependent World: The Limited Possibilities of Transformation within the Capitalist World-Economy.” in The Capitalist World Economy, edited by Immanuel Wallerstein. Cambridge: Cambridge University Press.

White, Harrison. 1981. “Where Do Markets Come From?” American Journal of Sociology 87(3):517-47.

Components of economic growth and rentier capitalism in Kosovo

[NOTE: Below is a Google translate version, edited and corrected by myself, of my original Albanian posting on the components of economic growth and rentier capitalism in Kosovo. It is not the best translation, and it is probably not the way I would have written this in English, but I still think it may be useful especially given the gaping lack of political economy analyses of Kosovo.]

We often hear statements in Prishtina that, in recent years, Kosovo has had the largest amount of economic growth in the Balkans. This is correct, as long as regional economies are affected (in different degrees), originally from the financial crisis of 2008, and then from the eurozone crisis that has hit especially some of the main trading partners and investors in the region, like Greece and Italy. While Croatia and Serbia have experienced recessions, Macedonia and Albania minuscule growth, for 2012 Kosovo is expected to register growth of 3.9% of Gross Domestic Product (GDP).

However, it should not be forgotten that the level of economic growth in Kosovo is close to the range of 2-4%, which has been registered for all transitional economies in 2012, according to estimates by the European Bank for Reconstruction and Development (EBRD). Seen from his perspective, the case of Kosovo is hardly one of a deviation from the norm. Moreover, judging by the EBRD estimates (and some of my own analyses for the Balkan region), economic contractions since 2008 in the periphery of Europe (or what Will Bartlett calls Europe’s ‘super-periphery’) have a direct relationship with the degree of exposure of these states to eurozone economies. Economic downturns, almost as a rule, have been more severe in states with strong ties to the eurozone, both in terms of trade and in financial flows. Since 2008, Kosovo has been spared the worst of the crisis due to the low level of interdependence of its economy with that of the euro area and the EU in general. For example, Croatia, which exports heavily to the EU, has been hit harder by the European crisis, in relative terms, than Kosovo, which exports very little, because Croatia has markets in the EU, while Kosovo does not.

However, this analysis has less to do with where Kosovo fits in regional comparisons, and more with the components of economic growth in Kosovo over the past years (until 2011, since data for 2012 are not yet fully available). In a way, this analysis reveals the sources of economic growth by analyzing its constituent components. At the same time, it highlights the volatility of the current path of economic development in Kosovo, despite nominal or real growth in GDP.

Let us start with absolute terms. Kosovo GDP has increased from 1.9 billion euro in 2001 to about 4.9 billion euros at the end of 2011. Economic growth in terms of GDP has been steady over the years after the 1999 war. The trend of growth has continued after the declaration of independence in 2008 and survived the 2008 financial crisis and deep economic problems in Europe and the following years.

What we are interested in is breaking down GDP into its constituent components. A visual representation of this is given below, including all components of GDP before subtracting imports (which is part of the formula for the calculation of GDP).

Graph 1. GDP components in Kosovo, 2004-2011, before subtracting imports.

As is evident, in absolute terms,  household consumption (Household Consumption Expenditure) makes up the largest share of GDP. Capital formation (gross capital formation, which includes private and public investments, such as infrastructure) are the second component, the third are exports, while government spending (government, Final Consumption Expenditure) fourth. The last element is donor expenditure (in this case, the salaries of employees of international organizations) make up an increasingly smaller share of GDP.

Graph 2. Participation of GDP components by percentage.

Another picture is presented to us if we look at each component based on their actual share in GDP. From this we see the largest relative increase in the role of capital investments and exports against household consumption as the bearers of economic growth (Graph 2).

From these two views we seem to have good progress in economic growth, given increased investments and exports. However, as is well known, one of the main problems of Kosovo’s economy is a large trade deficit. Continued rise in imports eats away at any nominal economic growth, because part of the surplus created in the economy is sent abroad. This is simplistic from an economic perspective, but in purely arithmetical terms, this is why Kosovo, rather having a GDP of around 7.3 billion euro in 2011, had only 4.9 billion. This part is “lost” by the country’s economy through the purchase of foreign goods. The graph below illustrates how, despite modest growth in exports, imports are growing faster, and therefore the trade deficit from 2004 to 2011 almost doubled to nearly -1.8 billion euro.

Graph 3. The trade deficit (exports – imports) of Kosovo, 2004-2011.

The role of government expenditure on economic growth is often highlighted by observers Kosovar economy. However, beyond superficial impressions, for a proper analysis those which are most important are trends. These are reflected in the graph below.

Graph 4. Annual growth (in percent) of household consumption (blue), investments (green) and government spending (red). Thin lines show the underlying trends for each.

It is thus clear that the growth of specific components of GDP since 2004 are not equal. Household consumption, for example, during the 2008-09 global financial crisis, has fallen from 16% to -2% (and Kosovo was not affected by the crisis!), while investment growth fell from 26% to 9%. But the trend lines enable us to distinguish long-term trends from annual fluctuations. It is clear that while the trend of growth in household expenditures is rather flat on average, government spending has been at an increasingly growing rate. Investments are also growing, but even here, one can easily assume that these include government capital investments, and especially after 2010 construction of the Morin-Merdare highway. This makes us conclude that investment and government expenditures are more or less the main driver of economic growth, since growth is not translated into greater increase consumer level, which means that on average, households Kosovo are not getting any richer, since annual consumption rates, on average, are not growing dramatically, and even falling.

The figures clearly show the difference between the rate of growth of household consumption and government expenditure as a share of GDP. As can be seen a clear line before and after 2008.Prior to 2008, the growth of household consumption expenditure was in the range of 6-16%, and after 2008, this range drops to -2-10%. The opposite is true for government spending since 2007 (when the first Thaçi government  came to power), increased by 10-17% per year. If one is looking for an explanation for economic growth in Kosovo after 2008, this is it.

There are clear indications in the data that economic growth is not being translated into an improved household economic situation in Kosovo. We currently do not have solid data on incomes in Kosovo. However, we can draw some indications from the data which we do possess. As it is known, the period after 2007 marks a period of enormous growth in inflation (see graph below). Kosovar households (on average) are not only not becoming richer, but have struggled to survive the overall rise in the cost of living. The logic is this: if we household income in Kosovo was increasing as a result of economic growth, consumption will grow in spite of inflation. Prices rise, but since rises in income are greater, families can consume what they consumed last year, as well as add to their consumption even more. However, what we see is that after 2008, the increases and decreases of household expenditures are dictated almost entirely by inflation. This is illustrated in the almost perfect synchronization that exists between the rate of growth of household consumption expenditures and inflation in graph 5 below. As is clear, after 2007, household spending increases are more or less equal to the inflation rate, which means that the difference between necessary expenses and added consumption (consumption beyond basic needs), for many families is only being reduced. Before 2007, while inflation growth was small, or there was even deflation (falling prices), the household consumption rose about 5% per year, indicating the rising wealth of Kosovar households that are able to spend more than the year before. However, after 2008, the growth in consumption levels are very close to the inflation rate, which indicates that Kosovar families are forced to spend more just to maintain their current standard of living. Put bluntly: the average family in Kosovo has not benefited from economic growth at all in Kosovo since 2008.

Graph 5. (Above) Inflation in Kosovo since 2002 and (below) consumer spending growth rate of households (blue) and increased inflation rate (red). Since 2007, Kosovar households are not spending more because they are getting richer, but in order to cope with inflation.

There is another interesting element that indicates how the financing needs of households are being met in times of rapidly rising prices. It seems that there is a direct correlation between the growth of household consumption and increases in the level of private sector debt (see graph 6 below). In other words, to maintain the level of expenditures (i.e., to cope with cost of living increases), Kosovar households are assuming ever greater debt. Given that the interest rates charged by Kosovo bank are preposterous, increasing the debt burden of Kosovar households will have long-term consequences, especially if the investments made ​​by households (e.g., in real estate) are not sustainable.

Graph 6. The growth of household consumption in GDP (above), the increase in imports (middle) and the growth of private sector debt (below).

Graph 7. The annual growth of household consumption (blue) and private sector debt (green).

The above chart (7) illustrates the close connection between the growth of household expenditures and private sector debt in the Kosovo economy. This graph, which shows the annual growth of these two indicators, we observe a strong synchronization between the two, but where the rate of growth of private debt is higher than the growth in the rate of consumption. Of course, if we had the data of 2012, we would have a more complete picture. While I hope to complete the analysis when this data is made available, the trends remind us that there will be no dramatic changes.

What does this mean? Obviously, this is a very limited analysis to produce solid conclusions. However, the data presented here suggest two preliminary conclusions. The first is that the growth of GDP in Kosovo is mainly a result of increased government spending and investment (especially in infrastructure), rather than consumption growth (which would imply an increase in income). This trend was even threatened by the 2008 crisis. Since then, Kosovo households on average spend more not because they are getting richer, but because they have to cope with enormously rising costs of living.

The second is that consumption growth is increasingly dependent on credit, which means that a part of the economic growth is being financed by the private sector’s growing debt. At the same time, the exponential growth of the trade deficit shows that industrial development of the kind that would result larger exports and import substitution is not occurring in the sufficient degree to prevent the rise in imports.

What does this mean in terms of an analysis of political economy, which demands a concomitant analysis of social and class relations that constitute the economic structure? One may risk a hypothesis, which I believe is sufficiently reasonable: that the biggest beneficiaries of economic growth in Kosovo (as always, in relative terms) is not the average family in Kosovo, but importers (as a result of a growing market for imported goods), government contractors (as a result of increased government investment expenditure), and banks (due to increased debt). We thus have three class factions that dominate the Kosovar economy: compradors, political capitalists (businessmen mainly associated with the ruling party, who benefit from government contracts), and organized financial capital (Kosovo’s foreign-owned banks). A shared feature of these three socio-economic factions is rentierism. In economic terms, rent, in contrast with profit, is realized through “unproductive” activities in the economic sense of the word. The point is that, in economic terms, although importers, government contractors and banks, as commercial organizations, make a “profit”, their “profit” results not from the risks undertaken by investments in productive capital, but through the control and monopoly of certain resources – flow of foreign goods (compradors), control of money (banks) and privileged political ties (political capitalists). Although rentierism is present in all capitalist economies, in Kosovo rentier capitalism is the dominant form of capital accumulation, since the rentier sectors are the largest growing and most “profitable” sectors in the Kosovo economy.

The question is, how sustainable is this course, in purely economic terms? (We are ignoring, of course, the political implications of this economic structure.) The first factor is that, without a real expansion of Kosovo’s industrial base, government investment, especially the kind privileged by the Thaçi government (investment in road infrastructure) will represent an increasingly large burden and is fiscally unsustainable in the long run. Kosovo’s financial capacities are very low (on this see this and this article) and its existing financial system cannot support the kinds of deficits required to maintain the current rate of growth in spending. Meanwhile, an extremely poor export base shows that the positioning of Kosovo in the regional, European and world economy shows no signs of improvement. The second is that, relying on remittances, the standard source of support for the consumption of many households, cannot continue indefinitely. If Kosovo follows the trends of other countries in the region, after a certain period, remittances will fall, regardless of economic developments, as a result of demographic trends. The third is that investment in Kosovo is directed mainly in construction and trade, which indicates that over the last decade there has been little change in the structure of private sector investments in Kosovo. This also means that credit growth, which has already fallen since 2008, could be reduced even further, especially if there is a rise in bad loans, which may result in further increases in interest rates. All these indicate the need for a radical change of the economic course, but which necessarily must be preceded by a rupturing of the political alliances (explicit or implicit) of the class fractions that dominate and benefit from the structure of rentier capitalism in Kosovo. Let this be my immodest wish for 2013.

Export profile of Balkan states and Turkey (visual)

Following up on my post on the Balkans and the international trade network, the image below is a graphical representation of the export profile of the Balkan states and Turkey (as a bonus!) in 2011, based on Eurostat data. If we know the main trade bloc the Balkans trade with, it is useful to know what the Balkan states export, and how the export profile of the states differ from one another.

The graph shows interesting specializations in exports, suggesting that, with the exception of a few shared commodities, mainly mineral extracts like iron, copper, lead, zinc and related metals, the Balkan states differ significantly in terms of their specializations in manufactured goods.

This, of course, partly reflects the inherited division of industrial labor which developed in the region at a time when six of these states were part of a single economic union (the Yugoslav federation).

Croatia is the region’s top exporter of manufactured goods, which include machinery (owing to Croatia’s shipbuilding industry), followed by Serbia, which also exports a number of industrial products (including weapons and auto parts). Serbia is also a large exporter of agricultural goods and processed food, and is the largest in the region in that category. Croatia’s export base is highly diversified, meaning that it exports a wide variety of goods.

By contrast, the export profiles of the other states are relatively weaker. Albania, Macedonia and Bosnia mainly export non-agricultural commodities (metals, including scrap), with the exception of a small number of labor-intensive goods such as clothing and apparel (Macedonia), footwear (Albania) and furniture (Bosnia). The export-oriented consumer goods industries in Albania and Macedonia are mainly of the offshoring type, producing for Italian and Greek brands. (As of now I know little of Bosnia’s furniture industry.) Albania also exports oil, a resource which the other states possess less of. The worst export profile is that of Kosovo, which exports few manufactured goods, and mainly commodities, including scrap metal which is one of its top exports.

Turkey’s exports are much more varied. Turkey’s inclusion here is mainly because it happened to be covered by the data I was using (Eurostat). Turkey is also a large exporter by volume, which the graph obscures and makes its inclusion among this group of states more than a little inappropriate. Turkey’s exports are nearly four times larger than the Balkan states listed here combined.

 

Top three exports by type, 2011.

The Balkans and the global trade network (visual)

Below is a neat little network map I produced with UCINET using trade data from Eurostat on global trade ties of the states of the so-called “Western Balkans.” (I am not a big fan of this term, as it is mainly a technical geographical designation conjured up in Brussels, but let me stick to it for convenience’s sake.) The Western Balkans are the Balkan states that are near membership or in the process (very, very long for some) of joining the European Union (EU): Croatia, Serbia, Montenegro, Macedonia, Albania and Kosovo. In a map of Europe, the Western Balkans are that little black hole to the southeast in a sea of blue EU member states.

The map represents what is well known in terms of the global interconnectivity of Balkans trade – that the EU dominates as a trade partner. The Newly Independent States (NIS), including Russia and the CIS states, are also important trade partners. China’s growing importance as a trade partner is also visible in the graph. The US’s role in trade in the region is minuscule, while the least trade takes place with Japan. The density of trade is represented by the thickness of the ties, while the main trading partners are closer to the center of the diagram. Ties are measured in terms of percentage of a state’s total trade per partner (exports + imports).

UPDATE: Added below is another visual representation using SocNet. (SocNet diagrams seem to provide better graphical representations of networks than the NetDraw package that comes with UCINET.) What stands out in the graph is the differing degrees of ties between individual Balkan states and non-EU trade blocs. For instance, Croatia, Serbia and Macedonia trade more heavily with the NIS than the other states. By contrast, China is a more important partner for Kosovo and Montenegro.

Another important point: the data used in the graph is from 2007, since I was interested in pre-crisis trade patterns. While the graphs do not show this, it turns out that after 2008, though still nowhere near the EU, China becomes an increasingly important trade partner for all of the Balkan states. But then again, we would expect global economic shifts to be felt in a (semi)peripheral region like this.

Why don’t they pay their bills? Cultures of non-cooperation and distrust

I believe historical sociology is at its best not only when it can explain events in the past, but when it can elucidate long-term structures that continue to determine the limits (and potentials!) of collective action and choice in the present. I gained a slight hope that my dissertation may have accomplished a bit of that when I ran into this image produced by Albania’s electric distribution company CEZ Shpërndarje (recently privatized by the Albanian government and acquired by the powerful Czech energy company CEZ).

Albania, like many other developing and postsocialist countries, is notorious for its culture of non-payment of utility (and particularly electricity) bills. Regardless of the cheap moralism of Albanian media, pundits and politicians which with great ease denounce individuals, families and (especially) rural communities that fail to pay their electricity bills, the institutional, cultural, and plainly economic reasons for non-payment are complex and I would not venture in trying to give an explanation here.

But if at one level aggregate rates of utility payment represents an indicator of a population’s trust in and willingness to cooperate with state institutions (and given that until recently both electricity production and distribution were under the command of the state), then this map showing degrees of payment of electricity bills in three parts of Albania indicates how different this variable is in Albania’s major geographical regions. Orange regions represent areas where payment rates are above 80%, grey regions where they are between 50-80%, and black regions where more than 50% of consumers are in arrears. (The rates seem to represent regional averages, because the map makes no distinction between urban areas like Shkodër and rural regions like Tropoja or Mirdita which are in the black zone, or differences in rates between urban and rural areas in the orange and grey zones.)

The division almost completely matches my own regional analysis of state building and political mobilization. In my dissertation, I compare the travails of constructing national institutions of law and government in post-independence Albania, as the young state made its first efforts to establish national state authority and transition from the forms of decentralized power found during Albania’s rule by the Ottoman empire. In particular, I compare the dynamics of state expansion and rural mobilization in Albania’s pastoral and communally organized highlands (found mainly in the north of the country) with those in the peasant communities and landowner dominated lowlands. My regional map in some ways is similar to the one presented by CEZ Shpërndarje.

While the outcome I examine is the degree of radicalization of peasants (i.e., their support for radical political movements in the 1930s and 1940s), an offshoot of this work (and which I develop in a separate paper) examines how the interaction between the nationalizing state and political and legal institutions in rural communities helps determine the degree to which the state develops capacities of governance in that particular region. Here, I challenge traditional explanations which define state capacity mainly in its ability to use coercion, which I find is a necessary but insufficient indicator of actual capabilities of governance. For conceptual clarity, I separate coercive power from regulatory power, giving a pseudo-Foucauldian/Eliasian definition which defines power as the ability to engender discipline in a population by instilling through some kind of moral authority certain norms of conduct. Weber, for example, though better known for his definition of the state as a monopoly over the means of coercion, also talks extensively about how the moral authority of religion may at times be more powerful in regulating behavior than pure coercion. For the most part, a state’s capacity for engaging in such regulation is institutionalized in law, which represents not only a mechanism of coercion but also the state’s claim to a kind of moral (i.e., symbolic) authority over the social body (in the West, there is a long and grueling history of secular states usurping the power of law from the church and other religious bodies, with the final breakthrough taking place during the Reformation). We see that in the U.S. justice system every day – judges do not act as simple cold-hearted bureaucrats who mete out punishments but also represent a certain moral authority in society, symbolically representing “the people,” dressed up in their solemn garb and speaking with moral outrage when a defendant is found guilty of some hideous crime.

In any event, law is a powerful social institution, and it is especially powerful when it is embodied by the state (to drive the point again, it should be clear that as an historical sociologist, I take the unity between state and law to be an historical accomplishment specific to the West, not as a universal fact to be taken for granted). And I argue that the political struggle to appropriate the power of law was especially contentious in post-Ottoman states like Albania (and one might add many other cases: Egypt, Tunisia, even modern Turkey itself), given the Ottoman empire’s long-held distinction between state (administrative) law and what Caglar Keyder calls the “law of communities.” In the Ottoman empire, while “state” law regulated domains like rights over land and taxation, what we would today classify as “civil” affairs were mainly regulated by local institutions such as religious judges, priests, and community elders. The Ottoman empire was unlike the emerging nation-states of the West because it had no unitary legal system in the institutional and in the territorial sense; it was certainly not a lawless society but its legal order followed a rationality that was more complex, more locally and socially embedded, and, to follow Weber, based on the principle of substantive, rather than procedural, justice, and thus in both logic and practice dissimilar from that of the West.

In my paper on state building in the Albanian highlands, I show how the young Albanian state’s efforts to establish legal authority in the region was not only politically determined but also a cultural (symbolic) struggle. The highlands, having enjoyed a high degree if political autonomy and self-regulation through a long period of history (and at times also escaping the demands of Ottoman state law), had in the twentieth century its institutions of local governance confront directly the rising national authorities of the capital. Initially, Tirana was accommodating and in some ways replicated the model of divided jurisdiction which existed under the Ottoman empire. But then the new state began to imitate the model of a centralized nation-state: introducing in particular a unitary Penal and Civil Code, which were to be the same throughout the entire territory of the country. At that point the political attitudes of state elites towards the highlands shifted dramatically – they broke old compacts and agreements with highland communities vowing to respect local laws and, moreover, began denigrating local practices as reflections of cultural primitivity requiring a heavy handed approach by the state.

Not surprisingly, the approach failed and increasingly drove the highlanders away from cooperation with the state – tax collection rates fell, crime increased, forced labor mobilization was introduced for public works and attempts to introduce schooling failed as well in the 1930s as the population became increasingly distrustful of national authorities. All of this fed into the discourse – which become increasingly prevalent among political and secular cultural elites in the 1930s – of the highlands being lawless, primitive, and backward. Increasing isolation also helped further impoverish an already poor region, adding to the difficulties of governance, which the Albanian state mainly accomplished through the use of spies, informants and locally recruited (i.e., paid) loyalists who enjoyed little respect among the local population. Ultimately, highlanders saw little benefit in cooperating with national authorities while the state’s pressures were increasingly helping to erode local institutions, including those of local law.

The situation was very different in the lowlands. Here, local Ottoman judges known as kadı had long served the function of distributing justice, based on a combination of Ottoman and Islamic legal tradition. When the state began to support the efforts of landowners to strip local peasants of their traditional subsistence rights (which guaranteed them rights to the land and its products regardless of formal ownership), in their efforts to shift towards a more capitalist-driven agriculture, the peasants did what they had always done – they turned to the judges for redress and protection. The struggle over land in the lowlands escalated throughout the 1930s and was in the 1940s probably one of the main causes which led the Albanian peasantry to support the Albanian communist movement, whose central political platform was agrarian reform and land redistribution (and which was key in a country with little modern industry and a minuscule urban proletariat).

Most importantly, the peasant struggle over land involved peasants engaging extensively with the newly established institutions of the national state: local prefects, judges, and tax collectors. This interaction did not mean that peasants simply subjected to the demands of the state, but the ongoing political struggle produced both deep ties with public authorities as allies against the encroachments of landowners as well as a political culture of engagement which was never successfully implanted in the highlands.

Does the map simply reflect this long history? Yes and no. My narrative only covers the period until the 1940s so what happens during the era of communist rule is certainly important in this case (also since it was the communist regime which built Albania’s electricity and distribution industries) as well as the impact of Albania’s economic collapse in the late 1980s and neoliberal reform of the 1990s and the 2000s. But looking at a graph like this, where simple economics or divisions between rural and urban regions cannot explain the patterns, there is something to be said about the role of the early historical interactions between local populations, the nascent state, political struggles, and trust, and how that may reflect presently on things like the payment of an electric bill.