1. Impact on Women in Different Social Groups
Financial and economic crises and a rapid loss of existential security are nothing new for women and men in the former socialist bloc countries of Central and Eastern Europe (CEE). These crises have been a permanent condition of everyday life for the majority of populations in the region. In the countries addressed in this paper — including the new EU countries, countries that emerged from the split of Yugoslavia, Ukraine, and Russia — instability and the struggle for survival have been part and parcel of managing everyday life for the last 20 years, as well as earlier, as the first signs of crisis of state socialism appeared in the 1980s. In the former Yugoslavia, war exacerbated existential insecurity. The paradox is that the new crisis comes exactly at the time when the transition has been at last declared completed and women’s and men’s lives have gained stability for good and bad.
For the majority of women, transition has been characterized by a period of hardship and insecurity related to restructuring. Inequalities in access to new wealth generated by privatization, paid work, and other sources of income have been skewed against women. In turn, the social costs of transition, particularly those related to the transfer of responsibilities for social reproduction from the state to households, have been borne disproportionately by women. Policy responses to financial crises are, therefore, ineffective if they fail to take into account the specific and gendered effects of structural change in Eastern Europe.
While neo-liberal restructuring and the resulting widening inequalities in income distribution is a global phenomenon (Scholte, 2000 and Milanovič, 1999), in post-socialist Eastern Europe the introduction of a market economy coincided with the reorganization of the state, institutional frameworks, and working and living conditions. “Processes of radical structural change reconstituted group identities and interests” and “created new gendered as well as class based divisions of labor, resources and power” (True, 2000).
Steep inequalities rapidly emerged, in particular in Poland (OECD, 2009) and Russia, where the poorest 10 percent of the population account for less than 2 percent of the total income, and the richest 10 percent account for approximately 40 percent of the total income (Kislitsyna, 2008). Whilst new identities, roles, and opportunities for women emerged, gender relations have remained relatively unchanged during the transition. Whereas some women attained high-status employment (for example, president, central banker),a new category of domestic servants emerged, applying to many more women. “Ukrainka” (a woman from Ukraine) became a generic term for temporary household help in Poland and “Polka” (a woman from Poland) became a generic name for domestic servants in Italy. New freedoms and opportunities became available and were enjoyed, but social vulnerability — resulting from the dismantling of social citizenship — has emerged, albeit to varying degrees across the region.
Economic, social, and political restructuring introduced neo-liberal forms of citizenship dependent on capacities to generate income. For instance, in Poland, women in the retirement age group can access their entitlements enshrined by legislation from the pre-transition period. However, women approaching retirement age — who are covered by new legislation linking the pension level to earned income and to the overall performance of private pension funds — receive pensions below the minimum wage level — an extremely small amount. Additionally, there are now women and men without health care or pension entitlements. The effects of rapid mass privatization (as opposed to more gradual restructuring), such as that performed in Russia, point to an increase of 12.8% in mortality rates among men in Russia (Stuckler, King, 2009) with the burden of providing for and provisioning children falling on women.
The access to new wealth has been gendered as masculine, with a niche for women in small enterprises (Yurchak, 2003). As a recent, four-volume study from Poland shows, the benefits of privatization have been captured by a new managerial micro-class, while the costs of privatization — including job loss, declining wages, cash injections and property endowments to companies or banks from state budgets before they were sold — have been socialized (Tittenbrun, 2009). Within the new managerial micro-class, women are a significant minority. A 2007 study of the board membership in public corporations listed on stock exchanges in Poland reveals that only 11 % of board members are women (Puls Biznesu, 2007). Beyond formal gender equity, the manner in which wealth is created and the distribution pattern of gains and costs — including social and ecological costs of wealth generation — are also problematic.
Work related murders of five women employed as debt collectors at Provident (a UK-based savings bank with branches in Poland) highlight the stark gender dimension of wealth creation. Provident loans money to the poorest households at extremely high interest rates. The corporation profits by extracting money from the poor and placing pressure on its poorly paid representatives by locking them into a quota and fee based system that forces all within the corporate hierarchy to seek profit from the “sub-prime sector” (Michalewicz, 2009). While they cater to more affluent sections of the population, respectable financial institutions are organized along the same principles.
2. Poverty and Loss of Employment: Previous Coping Strategies Are Unavailable
Barring Poland and Slovenia, the first decade of transition in CEE countries and the Newly Independent States (NIS) produced a total output lower than in 1989. Toward the end of the second decade, the GDP in the region reached pre-transition levels (UNICEF, 1999 and World Bank, 2009). Recovery was short lived, however: due to the current financial and economic crisis, all countries in the region are experiencing a rapid decline in economic growth. The degree of decline varies across countries, with Ukraine, the Baltic States, and Hungary experiencing the steepest declines. The snowball effect of financial market volatility and economic downturn makes a human crisis extremely likely.
According to the World Bank (2009), the new financial crisis will plunge 35 million people in CEE and NIS into poverty, with predictable gendered effects. The crisis has caused job losses at a rate not seen since the early 1990s: unemployment is rising at 1 percentage point a month in some countries (Latvia, Estonia, Russia, Ukraine). This is exacerbated by rapid increases in wage arrears (unpaid or partly paid wages) in Russia and Ukraine (Rohland, 2009). Wage arrears are not seen as a symptom of a human rights crisis.
The effects of the financial and economic crisis on women map along the axis of social stratifications created in the past 20 years, creating multifarious and dispersed effects among women in different social groups. For example, women (and men) from rural areas who have access to land and can produce their own food will have resources to survive. Conversely, the urban poor who face redundancy in one-company towns and have no family ties to the countryside will lack the necessary resources to effectively manage. A limited number of migrants may benefit from the fall in value of their local currencies in relation to the dollar and/or euro as converted income to local currency yields higher earnings. But for many others, economic downturn in host countries may lead to the decline of jobs available to migrants.
A young graduate in her first employment may have her contract extended because her work is relatively cheap, whilst the employment contract of a senior colleague may be terminated, and tasks shifted to the younger colleague. The gendered effects of the crisis on the new middle class particularly impact young professional women of the first generation born after 1989, who combine career — in, for example banking, tourism, or consumer services (areas that have been hard hit by the crisis) — with raising children. Given the loss of income, rising costs of living and servicing household debt, these women face new insecurities.
The financial crisis notwithstanding, it is likely that companies will use the crisis to justify downsizing employment, cutting costs, and increasing profit margins. As a result, the work of remaining personnel will intensify, externalizing human health costs once again to the care economy.
The biggest brunt of the financial crisis is borne by women from low-income households, who lack preexisting savings and face limits to previously pursued strategies to cope with poverty (e.g. migration may no longer be a viable option to cope with poverty as destination countries face economic downturns). As mentioned above, while changes in exchange rates make it more attractive to migrate for jobs, economic downturn and increased competition in, for example, the UK, Germany, and the Netherlands increase the difficulty of finding work, particularly in the formal sector.
Some countries (such as the Netherlands) have already reduced access to their labor markets for migrants from, for example, Romania and Bulgaria (Dutch News, 2008). In the Czech Republic, Vietnamese migrants have been forced to return home. Czech officials are offering free air tickets and 500 euros in cash to jobless migrants to allow them to return home. The largest reduction in demand for migrant work is seen in the construction sector employing migrant workers from Ukraine. About $8.4 billion, or eight percent of Ukraine’s GDP, comes from remittances (Drach and Najibullah, 2009). Women are affected either as migrant workers themselves or as recipients of remittances. In Ukraine, for instance, returning migrants have no alternative sources of livelihood. The economic crisis exacerbated by the energy crisis in Ukraine (due to conflict with Russia over the price of gas) will result in human emergencies.
When crisis spreads to households, women are not only affected by the loss of jobs and income, they are expected to put more time into care and provisioning work for families under increasingly precarious conditions. Not surprisingly, sex work becomes the main job opportunity that is open to young women.
3. Economic Trends and Government Actions
During the past 20 years, all CEE countries have been integrated to varying degrees into the global economy. As a result, the current crisis is spreading via global production and distribution networks. The condition of parent companies, be they American (General Motors) or Indian (Videocon Group), impacts local economies and communities: for example, when local factories of multinational corporations close or move, local economies and communities are significantly impacted. Additionally, majority shareholders (in banking or telecommunication, for example) strip assets and press local daughter companies for dividends that will not be reinvested locally.
A few companies are relocating to Central and Eastern Europe, where they can cut down on operational costs by, for example, paying workers less than they would in their home country. Dell, which was providing five percent of Ireland’s GDP, is relocating computer manufacturing from Limerick, Ireland to Lodz, Poland. While local benefits in Lodz will ensue, 1,700 women and men in Ireland will lose their jobs. The local economy in Limerick, once a showpiece of the Irish economic miracle, has collapsed (France24, 2009).
For commodity-dependent countries such as Russia and export-oriented sectors in other countries, the economic downturn in older EU countries and in the USA impacts jobs and incomes globally, with huge consequences for livelihoods. Not surprisingly, a wave of protests, including violent attacks on parliaments, swept Bulgaria, Hungary, Russia, Lithuania, Latvia, and Estonia with the most recent occurring in Pikaliewo in Northern Russia. In Pikaliewo, desperate inhabitants, led by women, blocked highways to demand work and income after 3 out of the 4 local cement works closed down and the remaining enterprise stopped paying due wages (TVN24, 2009). This case underscores the spillover effects of a burst development bubble, from the construction sector and suppliers to local economies.
The financial crisis has already taken its toll in the form of employment loss and destruction of livelihoods. Laid-off workers, in particular women close to retirement age, are not likely to find new jobs. Unemployment and low wages are primary causes of poverty in the region. Reminiscent of the early years of transition, jobs in the feminized garment industry have been the first to disappear.
In Poland, the garment industry has faced hardship as the high-end markets it fed in Western Europe have shrunk. The job toll in Poland, including subcontractors, is estimated at 40,000 — the majority of which are women’s (Polska Times, 2009). In the Czech Republic the Association of Textile Industry says that, in the worst-case scenario, employment in the textile industry — currently at 52,000 individuals after tens of thousands jobs lost — could shrink by an additional 10,000 jobs by 2010 (CzechNews, Nov. 18, 2008). The banking sector is also shedding jobs: 12,000 job losses were reported in Poland alone (Gazeta Wyborcza, 2009).
A decline in job vacancies — particularly in Bulgaria, Latvia, Slovakia, Hungary, and Poland — occurred in the last quarter of 2008. In Hungary, vacancies are currently at 10% of registered unemployed (Hungarian Statistical Office, 2009). In Poland, only 14% of registered unemployed are entitled to benefits, which, incidentally, are quite poor: $240 in the first three months and $120 in the next three months (GUS, 2009).
In Poland, factory closures and downsizing were also caused by the collapse of new Polish flagship businesses, including a meat processing and distribution company and a glass works, which speculated on the currency options markets. The companies with the state as a majority shareholder lost $0.3bn on wrong bets in currency options contracts (Pawlak, 2009, PAP 2008). At seminars organized by the OECD, World Bank and IMF, local businesses were trained and encouraged to create markets for debt and derivatives trade (OECD, 2007).
State budgets are now experiencing a plethora of financial problems, including a shortfall of revenue, rising costs in servicing state debt, and declining foreign direct investment and remittances, the latter creating acute problems for households dependent on income from work abroad. Given the declining demand for exports, declining terms of trade, and commodity dependency (Russia), the high levels of public, corporate, and household debt, and statistically visible social effects — data on company closures, collective redundancies, the decline in job offers, and rising unemployment — it is clear that the crisis cannot be denied.
Yet, across the region, governments have barely acknowledged the social impacts of the crisis. Concerned with the performance of local stock markets and investment funds, and fearful of the reaction from powerful rating agencies, governments resort to public relations stunts or, simply, crude force. In Latvia, for example, a university lecturer in economics was arrested for warning about the financial crisis in his country (New Statesman, 2008).
With declining foreign investment, rising costs of servicing debt, and declining revenue, governments have little room to maneuver; falling into a new debt trap is therefore incredibly likely. Several countries (Hungary, Ukraine, and the Baltic states) were on the verge of bankruptcy and were bailed out by new loans from the IMF or the World Bank. In addition to the 7.5bn dollars borrowed by Poland from the World Bank to pay for transition to a market economy, in the context of the crisis a new loan was recently negotiated in the amount of 1bn dollars in Poland (World Bank, 2009).
Hungary was saved from bankruptcy with a loan from the IMF, the World Bank, and the EU in the amount of 15.7bn dollars (IMF, 2008). While the cost of servicing state debt is increasing, revenue — constrained by liberal fiscal policy and a global race to the bottom to offer favorable conditions (including tax cuts and tax holidays) for private sector growth — is falling. In Poland, beginning in the late 1990s, corporate and personal in- come taxes began to be reduced, with the last cut occurring in 2008. In Bulgaria, a flat tax rate of 10% for corporate and personal income is in place. To obtain access to EU funding, such as structural funds, governments must prepay and are later refunded. In order to do this, however, governments must resort to borrowing from banks or issuing bonds. These measures increase public debt, leading to a new debt trap. Macro- economic policies, including new loans, are not subject to public consultations.
A review of the stimulus packages currently being implemented in the region reveals that all governments in the region have planned to prioritize the private sector, injecting it with new funds and credit guarantees. The social costs associated with the crisis are, on the other hand, not being addressed. In Russia’s fiscal anti-crisis response planned for 2009, a mere 3.81% is allotted for protecting vulnerable groups (Rohland, 2009). In a recent speech at an academic conference, World Bank Office Moscow director, Klaus Rohland, stated that through moderate additional spending (1% of GDP) — “if well targeted” — it is possible to substantially alleviate the social impact of the crisis (Roh- land, 2009). This time around governments are not following the advice of the World Bank. “Well targeted” becomes a magic formula to pretend that the human consequences of the crisis are addressed.
All stimulus packages are based within a framework of supply-side economics: support to the private sector will contribute to global welfare. In order to avoid discouraging investors or rating agencies, social sector support is not mentioned in public announcements on governmental responses to the crisis. Out of mind, out of sight?
The Russian stimulus package includes 20 billon dollars and promised income tax cuts from 24% to 20%; in the Hungarian context, $1.4 million is allocated for Small to Medium Enterprises (SMEs) and to improve the competitiveness of the private sector through, amongst other things, promised tax cuts. The Lithuanian government announced that it aims at helping businesses to access credit, improve the country’s economic environment, ease market regulation, encourage exports and investment, and speed up the use of EU structural assistance, as well as increase the energy efficiency of buildings. The Polish stimulus plan mentions social issues once, in the form of a proposal to allow 1% of personal income tax to be designated for social enterprises, and not only for Non-Government Organizations (NGOs). The response of the Polish state to human emergencies is, therefore, a proposal for charitable action by affluent members of society. Out of the Polish $30bn stimulus plan, $30bn is designated to stimulate private-sector growth.
All governments in the region are shaping their policy responses with an eye on international investors and credit markets, instead of their own citizens (Economy Watch, 2009, MTI News, 2009, Lithuanian News Agency, 2009, PAP, 2008). People –particularly women and men from low-income households — are effectively being left out and discriminated against in the stimulus packages.
While national approaches to the crisis demonstrate a clear gender discrimination — manifested in the bias toward the productive and virtual financial economy at the expense of social reproduction — specific local cases of gender discrimination are more difficult to identify without further extensive research. There are, however, historical precedents, such as the rise in the gender wage gap during the early years of transition. The gender wage gap widened during the financial crisis in Russia in 1998. Low-income women were hit hardest, including facing unpaid wages (Gerry et al, 2001). Unfortunately, history is likely to repeat itself.
It is important to think outside of the neo-liberal box. Simply providing lip service to the protection of vulnerable groups or taking up policies driven by rating agencies, foreign investors, or credit markets will, more likely than not, result in exacerbating the human crisis. If the financial crisis is not tackled at its roots and the dependence of households, states, and enterprises on credit is not minimized, the crisis will repeat itself on a much larger scale.
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Ewa Charkiewicz is from the Feminist Think Tank (Poland) and a member of Women in Development Europe (WIDE). This article was first published by the Association for Women’s Rights in Development in October 2009 under a Creative Commons license.