Is The European Union A Progressive Force? Or A Machine For Neo-Liberal Capitalism. A Study of Inequality in Hungary and Poland Before and After Joining


In this research, my motive is to study human development and living conditions based on certain institutional and political changes that occurred in many Eastern European Countries, especially in the recent Enlargement of the European Union which occurred around a decade ago. I will be focusing on Hungary and Poland. In the late 20th century these countries as well as other East European Countries underwent many changes including: a departure from the Stalinist model of communism (as well as Soviet Domination), adopting market economics and a democracy, and most importantly, their subsequent entry into the European Union (Swieboda). Considering there was an effort to transition to a market democracy, it is interesting that also joining the EU sped up that transition. In order to fulfill the requirements of joining the EU, There were many changes that were made within the economic system that included :the privatization of state assets, the elimination of subsidies (including food subsidies) going from a state run society to a market driven one with neoliberal restructuring turning public entitites private, It seems from a distance that these changes would definitely have to have altered the lives of the citizens of these countries, especially that of women workers and children. The short term effects are inevitable, but another important factor is, the long run t social benefits in joining the EU including a banning on discrimination of minorities and women especially in the workforce (Europa). In studying the economic impact of these transitions, I will use study variables that account for inequality and wages for citizens. There are many other variables that are hard to quantify on a graph and need to be mentioned, such as other everyday expenses citizens incur, (which especially increased with the elimination of subsidies). So beyond just looking at graphical statistics, it is important to get context on how the changes effected different segments of the population. Also, graphs that show economic growth in a nation do not actually account for the living conditions of the average citizens. Measuring income inequality and wages seems to be a much more accurate way to understand how these political changes effected the populations of Poland and Hungary.

Did most East European Countries benefit from these reforms or did it hurt them economically? These questions are of upmost importance to look back on and understand exactly what changes took place within the structures of these societies. This is relevant to Europe in general considering the recent trends of Euroscepticism from the left and right. In understanding why Britain decided to leave the European Union and why other countries such as Greece are planning to do the same. If we understand what exactly the European Union mandates for States to join and what their effects are on the population as a whole, we can understand why some might have resentment or some might believe it is a step forward to creating a healthy democracy and is beneficial to the citizenry.

It has been over 10 years since the European Union initiated its Eatern Enlargement, so at this point there is a lot of questions and answers that need to be explained to understand what value the transition from Stalinist Communism to the European consensus (Sedelmeir). The EU pushed trade and price liberalization (including wages) throughout the countries that wanted to join, and this has many effects on the population as a whole. Inequality itself within a nation is relevant to any society, and it is especially interesting to see its manifestation in Europe, a place where relative to the rest of the globe, pro-social intellectuals have had enough influence to give most citizens a higher standard of living than any other continent. Also, this study would be of interest of any political theorist trying to understand the implications from certain forms of political and economic systems. Considering inequality also has been proven in studies to be linked to public health, this is an important study to be considered. It is especially important when understanding that prior to the transition to capitalism, women in communist countries had unprecedented amount of employment and wages like the western world. Specifically, for women the wage gap between men and women has grown to a great degree (Brainerd 1) The stratification of wealth isn’t limited to just gender, it runs down class lines. Looking at data about wealth and inequality/poverty in these countries before and after joining the EU and leaving the Command economy will show us overtime the shorter and long term effect of neoliberal policy pushed by the European Union for all Countries that attempt to join (Europa). Women have been disproportionally effected by the market effects which makes the transition itself not a gender-neutral decision (Brainerd 21). It is important that this study shows inequality and severe poverty per capita. These are good variables to use in understanding the socioeconomic conditions of each East European countries in their respective years. Some of the causes of inequality and wage stratification is a result of price liberalization and the destruction of food subsidies that help the poor and middle class not have to spend most of their days working to afford food. In the short-term many, would believe that inequality and poverty would drastically increase. However, after 10 years’ countries such as Poland have shown that they have truly utilized many positives aspects of joining the EU, which gave them 56 Billion Euros in funds to build roads, hospitals and children hospitals, modern sewage systems, kindergartens and preschools (Adekoya). Poland’s GDP almost tripled as it could trade with other European Nations. However, just GDP increasing itself is not fully indicative of the living standards of the citizens. At the same time, GDP skyrocketed, unemployment is at 14% wages have stagnated. However, besides the economic implications, on a social level the European Union has been a good anti-racism force that has helped stop discrimination of women in the workplace. Poland, however is just one example of some positives coming out of joining the EU (Adekoya). The many changes imposed by the European Union on the socio-economic system of the various countries it took in had a variety of effects but we can speculate and use data to figure out what exactly what positively affected the citizens and what negatively affected the citizens. My hypothesis is that initially the reforms imposed would cause more poverty and inequality, but overtime it would balance out to an extent but overall the wages for workers in these countries would be slightly lower than that of “Old Europe (Adekoya)” Overall, it is evident that the post-communist transition did not affect all the soviet-bloc countries in one way, or all demographics within a country the same way.

I will be focusing on Hungary and Poland’s entrance into the European Union and what the results of joining were. There were a variety of reasons I chose this topic of interest to study. Not only do I see the global trend of economic restructuring as not limited to the European Union but most international organizations, which has implications that can be brought up on both sides of the pro and anti-EU debate. I chose these cases specifically not only because they were both countries that were formerly part of the Soviet Bloc that, after the fall of the Soviet Union decided to in the early 2000’s join the European Union for better or worse; but because these countries show mixed results from joining the European Union. In the case of Poland, it is a good relatively positive example considering it has shown to have the most growth compared to the other nations that also joined. I’ve decided to use variables including measurements of extreme poverty as well as average wages and income for citizens in these countries. This falls into place with the type of restructuring that the European Union requires, because this directly affects the wages, income and expenses endured by every citizen of the countries that join the European Union and must undergo change based on neoliberalism, which puts state subsidies and assets into private hands. In regards to both these countries, the immediate affect was drastic but over time it eventually leveled out which, especially in the case of Poland, led to greater workers’ rights in the social dimension. After the 2005 period where Poland joined, disability benefits were sharply cut by a fraction. Employers were given a break not only in this regard, but many have noted that the recent tax laws in Poland now heavily favor the rich over the poor. Some scholars relate level of democracy to standard of living, and some note that new EU countries have a far higher level of democracy than the countries that joined within the recent Enlargement.

It is important in measuring the quality of life for the citizens in seeing where wages have gone. Gross Domestic Product has gone up for all countries that joined the European Union, but this alone is not a good indicator of prosperity of all citizens. It is important we know the years Hungary and Poland joined the European Union. Hungary and Poland both joined on May 1st 2004, it is important we see the years after this and what the changes were on wages, poverty and inequality.

It is important to get data on year by year on poverty, inequality, and wages, which will give us the ability to assess what led to certain changes. To assess this, I will be using data from The Gini Country Report which contains an index, specifically for net equalized income of labour. Measuring Income relative to the population, these studies have been able to use relative household income to track the rates of inequality. It is important to get the specific chart that measures most the populations income, so it encompasses those fulltime workers with low-earnings. It is important in specific for these studies, to organize a graph based on a few years before these countries joined the European Union, and several years after, which will give us a full understanding of the changes that occurred. I created this graph based on the information given in the Gini Country Report.



The dependent variable in the study is the year, after, and before joining the EU. For Hungary, as the years go by it levels out but initially the first year (when the reforms were enacted) had the most drastic and noticeable effect. For Poland, joining the EU made inequality overall better. The results are similar yet slightly different than what I expected, considering the European Union requires a drastic change in economic policy I did not think inequality could get back to “normal” in just a few years after taking in the reforms. Although wages didn’t dramatically change, expenditures for the average citizen increased. Per Gini’s report, inequality has gone up since the 1980s, the author directly relates it to joining the EU. Also, it is noted that many studies have shown that high levels of inequality and wealth stratification lead to less political engagement and can undermine political legitimacy and lead to a withdrawal from ones cultural and social life (Gini). We should also note that inequality alone from wages is one study, but there are many factors that also affect the standard of living. These include necessities like food, housing, education costs. However, it is hard to break this down year by year because that data does not exist. The author of the Gini Report notes that prior to joining the EU, and especially during the communist era, a lot of public housing was built which provided opportunities for the poor. However, after the EU, more people have been able to own their own homes, which is a positive. Although statistically, it seems Hungary’s inequality hasn’t drastically changed, segments of the population, mostly the poor were drastically effected by the 08’ financial crisis disproportionate to other social classes. Most striking is that the ethnic demographic of the population that is Roma has 54% unemployment! And 71% of Roma lives in relative poverty (Feffer)



Overall, the reports have noted that even after joining the EU, Hungary remains one of the countries with relatively low levels of inequality and poverty, however for Poland the author notes that inequality and poverty exists to a certain level and has not been directly tackled by any politicians, especially the European political elites that have strictly imposed market corrections on the populace. It is noted that in Hungary, in the late 2000’s (right after joining the EU), the risk of poverty for citizens did increase. As the graph showed, inequality and wages did drop immediately the year of or after joining the EU, but it eventually went back to relatively normal rates. The EU did provide many social benefits including the prohibition of discrimination over religion or sex. This might not have directly improved the wages of citizens but did give women more of a chance to feel free to the workforce. This study can help us make an analysis of the effect of joining the EU and taking in their consensus. It has its benefits in some regards, but it is important for the EU to not eliminate all subsidies or liberalize all prices especially wages. The amount of low wage earners did grow in both these cases, but as an overall it levels out when considering the overall range of laborers and their various incomes.

Studies show that inequality and wages did not vary a great deal, but there are many factors that are hard to quantify on a graph that need to be taken into consideration when making a full analysis of what the effects of EU enlargement was on the citizens of the countries that joined.