Department of Political and Social Sciences
Varieties of Backyard Management
EU Integration and the Evolution of Economic
State Capacities in the Southern and Eastern
Peripheries of Europe
Laszlo Bruszt and Visnja Vukov
European University Institute, June 2013
1
Department of Political and Social Sciences
Backyard management
• Strategies of integrating the economies of
the countries of the periphery by core
countries
– extending rules/imposing policies
– dealing with developmental externalities of
integration
2
Department of Political and Social Sciences
Patterns of backyard management
• “Integrating Rule Takers” EU – NAFTA
comparison (with McDermott, G. in Review of
International Political Economy 2012)
– Broad policy goals combined with extensive
capacity building
– Massive multiplex assistance and monitoring
– Joint problem-solving instead of checklist
compliance
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Department of Political and Social Sciences
Patterns of backyard management
• European East-South comparison:
– Literature focuses on effects and much less on
strategies
– In common: perception of problems in
competitiveness
– Diverging: EU strategies of economic
integration
4
Department of Political and Social Sciences
Export share in world markets
Share in total world merchandise exports
1995
1997
1999
2001
2003
2005
2007
2008
Visegrad
0.32
0.34
0.39
0.45
0.55
0.62
0.74
0.77
Baltic and Balkan
0.07
0.08
0.07
0.09
0.11
0.12
0.14
0.15
South
0.85
0.81
0.82
0.82
0.88
0.79
0.78
0.75
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Department of Political and Social Sciences
Exports – sectoral breakdown
Exports in % of
GDP
1995
Total
Visegrad
Baltics and Balkan
South
Total
43.5
47.6
22.3
2007
Agriculture Industry Services
64.0
3.8
51.4
8.8
55.7
5.6
37.5
12.7
25.5
2.1
12.5
11.1
6
Department of Political and Social Sciences
Exports structure
Complex exports in total
goods exports (%)
Share of medium and high-tech
in total exports (%)
1995
2007
1995
2005
Visegrad
Baltics and
Balkan
34
59
42.8
63.8
27
32
38.2
43.9
South
32
39
34.0
49.0
7
Department of Political and Social Sciences
Inward FDI stock – sectoral
breakdown
Inward FDI stock in % of GDP
1995
Total
Total
2007
Manufacturing
Services
Visegrad
Baltic and
Balkan
12.4
57.8
20.6
28.8
7.7
55.9
11.5
36.5
South
14.4
35.9
7.4
24.3
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Department of Political and Social Sciences
Fostering competitiveness in the
peripheries
• State policies (1995-2007)
–
–
–
–
Tax policies
Labor market flexibility
Welfare cuts
State aid, education, R&D
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Department of Political and Social Sciences
State transformation – evolution
of policies 1
2007 Corporate tax
VAT in total
revenue
Horizontal
aid
Labour
rigidity
Education
Welfare
Visegrad
Baltic &
Balkan
18.68
21.45
0.83
1.74
10.62
18.79
14.08
27.44
0.21
2.44
12.61
13.15
South
26.6
19.30
0.24
3.06
10.61
21.32
EU Average
22.18
21.08
0.38
2.2
11.50
20.98
10
Department of Political and Social Sciences
State transformation - evolution of
policies 2
Change (in %)
between 1995 and
2007
Corporate
tax
Share of
VAT in
total
revenues
Horizontal
aid
Labour
rigidity
Education
Welfare
Visegrad
-34.75
+17.05
+103.68
+9.09
+14.66
-0.99
Baltic & Balkan
-41.24
+9.32
+2.94
-0.81
+2.45
-3.87
South
-20.36
+5.85
-33.94
-19.69
+14.05
+3.31
EU Average
-23.29
+10.27
+13.40
-14.35
+6.16
-7.27
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Department of Political and Social Sciences
Government spending on research
and development
Government
sector R&D
spending
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Visegrad
Baltic &
Balkan
0.25
0.26
0.22
0.23
0.22
0.22
0.21
0.25
0.24
0.23
0.22
0.23
0.23
0.26
0.24
0.22
0.22
0.21
0.18
0.17
0.17
0.17
0.17
0.17
0.18
0.17
South
0.13
0.15
0.13
0.16
0.16
0.16
0.15
0.15
0.13
0.13
0.14
0.14
0.15
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Department of Political and Social Sciences
Fostering competitiveness in the
peripheries
• High Road: Visegrad Countries
– Tax reforms
– Labor market flexibility
– State Aid, R&D
13
Department of Political and Social Sciences
Fostering competitiveness in the
peripheries
• Low Road: Baltic countries and the Balkans
– Tax reforms
– Labor market flexibility
14
Department of Political and Social Sciences
Fostering competitiveness in the
peripheries
• No Road: South
– Neither the low nor the high road
– Cuts in State Aid, increase in welfare spending
15
Department of Political and Social Sciences
The main elements of the EU
strategies
• South: Competitiveness is a domestic issue,
focus on incentives
– limited pre-accession conditionality
– focus on EMU and Maastricht criteria
– Post-accession assistance /Cohesion policies/
16
Department of Political and Social Sciences
The main elements of the EU
strategies
• East: Competitiveness is an EU issue, focus
on institutions
– Extensive and deep pre-accession
conditionality, ex-ante regulatory integration
– Functioning market economy with the capacity
to withstand competitive pressure
– Extensive and multiplex pre-accession
assistance
17
Department of Political and Social Sciences
Monetary integration
• Assumed to create pressures on states to
implement ‘structural reforms’ and reorient
their policies towards increasing
competitiveness
• Empirics show that monetary integration had
exactly the opposite effect (Duval, Vukov)
18
Department of Political and Social Sciences
Cohesion programs
• Goal: Strengthen developmental state
capacity by empowering sub-national actors
• In reality: weakness of sub-national actors
strengthened the control of central authorities
over funds distribution which served as free
rents, reducing incentives to institutional
change
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Department of Political and Social Sciences
Copenhagen criteria
• Complex institution building aimed at
decreasing potential negative externalities of
economic integration
– Ex-ante regulatory integration – reduction of
domestic rent-seeking alliances
– State building: administrative, regulatory and
developmental capacities
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Department of Political and Social Sciences
Summary
Effects of EU strategies
•
•
•
•
South: getting the incentives wrong
East: getting the institutions right
No homogenization
No learning
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Department of Political and Social Sciences
Summary – NSE&TE
Against methodological nationalism:
• Domestic institutional change is embedded
in regional (and global) political settings
• Most of the transition economies are rule
takers
• Need to better understand regional/global
effects
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