Slovenia Goes Slow on Privatisation, and Succeeds

By Zoltán Dujisin Reprint | | Print |

Analysis by Zoltán Dujisin

BUDAPEST, Jan 13 2011 (IPS) - Twenty years ago when the Berlin wall fell, radical privatisation was promoted as a solution to the ills of Eastern European economies. The one country that ignored the West’s recipe– Slovenia – seems to be faring far better.

Ever since state socialism collapsed in Eastern Europe, post-communist countries have faced pressure to build market economies while needing to preserve a social safety net.

The transition was assisted by Western countries, the International Monetary Fund (IMF), the World Bank (WB) and various Western, mainly U.S.-based foundations, who among other things promoted the privatisation of state assets through large inflows of foreign direct investment.

Most external actors firmly believed democracy could only emerge once a market economy was in place, and thus their first efforts went into market reform.

Estonia, Latvia, Lithuania, Poland, Czech Republic, Slovakia, Hungary, Slovenia, Romania and Bulgaria are now fully integrated in the European Union since they joined it in 2004.

The region’s economies have become largely dependent on attracting substantial foreign investment, leading to the integration of their economies into the West but also to foreign ownership of most major industries, services and utilities.

Privatisation has been among the hottest topics in the region, as many perceive it as having proceeded too quickly and to the benefit of a small elite that became politically and economically powerful.

The new position of these countries in the global economy does not allow them much room for manoeuvre, but Slovenia has proven to be a surprising exception by privileging domestic privatisation and integrating various interest groups in the legislative process.

Its polar opposite are the Baltic countries, Estonia, Latvia and Lithuania, which were Soviet republics run by centrally planned economies until 1991. After independence they have consistently elected right-wing governments who have pursued a radical version of economic liberalism.

The East-Central European countries of Poland, the Czech Republic, Slovakia and Hungary have sought a middle way allowing considerable market reforms but maintaining some form of social protection and pursuing industrial policies.

Only Slovenia has considerably diverged from this path and, more than any other country in the region, has created a socially inclusive society without sacrificing macroeconomic performance.

The frequent left-wing governments in the country have imitated many of the social democratic and corporatist arrangements typical of northern European countries such as Germany or Sweden.

Nevertheless, Slovenia has also followed some neo-liberal trends, in regards to labour legislation.

Corporatism is a political-economic system whereby business, labour, and other social groups are accepted as partners in shaping the country’s macroeconomic policies, for instance by agreeing on the minimum wage or on unemployment benefits.

“In Slovenia social dialogue was a tradition, and we continued with it also after independence,” says Rastko Plohl, president of the Independent Trade Unions of Slovenia (NSS), a labour organisation often dedicated to awareness-raising and civic activism.

“An Economic Social Council was established, where tripartite dialogues happen in the area of labour rights and other legislation,” he explains.

Slovenian corporatism has been even more inclusive of labour than most Western countries, which helped legitimise market reforms such as privatisation that elsewhere in the region are often considered to have been unfair and hasty.

Its past as the most liberal and economically western oriented republic in former socialist Yugoslavia, and the communal form of ownership prevailing then was crucial to the posterior inclusion of trade unions in the post- communist legislative battles that defined the new property rights.

In February 1989 “the NSS participated in the Constitutional Council, and managed to bring in articles into the Constituion on workers’ rights,” says Plohl.

The NSS “also demanded a six months long public participation in the public debate, and opened the way for other organizations and to the public, so that everyone could join with their proposals,” the syndicalist notes.

One result was that foreign capital was not allowed to penetrate its economy as easily as in the Baltics or the East-Central European region; instead selective foreign involvement in the country’s traditional light industries was promoted.

Slovenia and the East-Central European states have managed to create export industries that similarly to Western countries rely on complex technology and skilled labour and which, in many cases, already existed in late socialism.

The result was better real wages and working conditions for Slovenes, partly thanks to the greater bargaining power of its high-skilled labour.

The Baltic countries have been celebrated in some of the Western press for their macroeconomic stability and balanced public finance but this has come at the expense of worrying levels of inequality and social exclusion.

Countries such as Estonia and Latvis have combined neo-liberal economic policy to nationalist politics by making sure the costs of transformation would be borne by their large Russian minorities.

Fearful of losing their independence, the Baltic countries have severed as many economic ties with Russia as possible to reduce economic dependency, and Soviet industries that massively employed ethnic Russians were hit especially hard.

Whereas during the mid-1990s Slovenia and the East-Central European countries recovered some of their industrial capacity, Baltic industrial output has been consistently declining.

Baltic exports concentrate around resource-intensive or unskilled labour- intensive industries, similarly to many less-developed countries.