The success of economic transformation in the new EU member states in the global context

• Published in: Strategic management (Online) Vol. 20; no. 2; pp. 17 - 25
• Main Authors: Pogátsa Zoltán, Fábián Attila
• Format: Journal Article
• Language: English
• Published: University of Novi Sad - Faculty of Economics, Subotica 01-01-2015
• Subjects: fdi-based competition model; globalization
• ISSN: 1821-3448; 2334-6191

The age of globalization poses imminent challenges to all economies, including the ones on the periphery of the global economy. The varieties of capitalism research programs investigate the different models of capitalism developed by the various macro-regions of the world in order to respond to these challenges. They include the Anglo-Saxon model, the Nordic model, the Far-East development model and various other models. Central and Eastern Europe have developed their own model, now generally referred to as the FDI-based competition model. This variety of capitalism relies on foreign direct investments so as to respond to all the challenges, be them employment, research and development, value added, regional development or any other. Rather than any policy efforts, the state competes with the wage moderation, low taxes and weak trade unions. In this way, they have integrated themselves into the low value added, the low wage periphery of global production chains. In spite of optimism about the enlargement of the Eastern EU emanating from the European Commission, this model of transition and capitalism has not proved itself to be successful. This is proved by the divergence rather than convergence of wages vis-a-vis Western Europe, low employment, and divergence in productivity. The populations of the region are aware of this, as demonstrated by their negative natural birth rates and their increasing migration away from the region.