Ulf Brunnbauer

Center for the Study of Balkan Societies and Cultures

Graz

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Primljeno: 15. 10. 2001

Surviving Post-Socialism. The First Decade of Transformation in Bulgaria

Preživeti postsocijalizam. Prva decenija transformacije u Bugarskoj

APSTRAKT Bugarski put u demokratiju nakon promena 1989/90. može se s pravom svrstati među uspešne. Manje uspešni su bili pokušaji ekonomske reforme. Nedosledne reformske strategije, česte promene u vladama sa različitim ideološkim orijentacijama, kao i nepovoljno regionalno okruženje (ratovi u bivšoj Jugoslaviji i embargo UN protiv SR Jugoslavije) doveli su do duboke ekonomske krize koja je praktično proizvela slom bugarske privrede početkom 1997. Od tada život mnogih običnih Bugara karakterišu niski ili nikakvi prihodi i stalna borba da se sastavi kraj sa krajem. Ovaj članak opisuje neke od najprisutnijih strategija opstanka. Bugarski slučaj može poslužiti i kao ilustracija za nedostatke neoliberalne teorije tranzicije. Tranzicija se ne može smatrati manje ili više usmerenim procesom od jednog sistema ka drugom. Ovakav pristup bi prevideo trajno socijalističko i predsocijalističko nasleđe, kao i samu neizvesnost društvene promene. Da bi se na odgovarajući način prikazala postsocijalistička društvena i ekonomska promena neophodno je razmotriti šire kulturne oblike i strategije pojedinačnih domaćinstava. Stoga se pojam transformacije, koji ukazuje na u osnovi otvoren, neusmeren, heterogen i postepen razvoj, čini primerenijim.

KLJUČNE REČI jugoistočna Evropa, Bugarska, postsocijalizam, tranzicija, trans-formacija, privreda, siromaštvo, kriza, promena, strategije opstanka


ABSTRACT
Bulgaria’s way to democracy after the changes of 1989/1990 might rightly be regarded a successful one. Less successful were its attempts at economic reforms. Inconsistent reform strategies, frequent changes in governments with diverging ideological orientations and an unfavorable regional environment (wars in the former Yugoslavia and the UN-embargo against FR Yugoslavia) resulted in a deep economic crisis that climaxed in a virtual breakdown of the Bulgarian economy in early 1997. Since then the lives of most ordinary Bulgarians are characterized by low or no incomes and by a permanent struggle to make ends meet. The article illustrates some of the more salient survival strategies. The Bulgarian case can also serve as an illustration for the shortcomings of neoliberal transition theory. Transition cannot be regarded as a more or less targeted process from one system to another. This would neglect the lasting Socialist as well as pre-Socialist legacies and the very contingency of social change. In order to achieve an appropriate representation of post-socialist social and economic change it is necessary to consider also broader cultural patterns and individual household strategies. Therefore the term transformation, which indicates a basically open, undirected, heterogeneous and processual development, may be more accurate.

KEY WORDS
Southeastern Europe, Bulgaria, Post-Socialism, transition, transformation, economy, poverty, crisis, change, survival strategies


1. Introduction

The results of the Bulgarian parliamentary elections on 17 June 2001 were met by a degree of international awareness that is not usual for this relatively calm Balkan country: “National Movement ‘Simeon II’”, a strange coalition, put together some weeks before election day and comprising a heterogeneous crowd of conservative monarchists, young technocrats, neo-liberal ideologues and TV celebrities, gained almost 43 per cent of the votes cast and fell just one deputy short of an absolute majority in the 39th Bulgarian national assembly.[1] The program of the coalition consisted of just words: “Simeon II”, the ex-king of Bulgaria ousted in 1946 by the Communists, who returned in triumph to his country which he had to leave as a small child more than half a century ago. Not that “King Simeon”, as he is usually referred to, offered much more political program than “let’s wait and see” and “trust me” (one of his favourite slogans), but he enjoys almost religious devotion from large parts of the Bulgarian electorate. The international public was stunned: is Bulgaria about to return to monarchy? What are the aims of Simeon who is very reluctant to provide the public with some more detailed information about his intentions? Does he dream of reclaiming the throne? While it seems still too early to answer these questions, the reasons for Simeon’s spectacular victory are obvious: after more than ten years of “reforms” most Bulgarians are worse off than before, and they got tired of the promises of established parties who had got their chance to govern but did not succeed to improve the lots of ordinary Bulgarians. Now they have put all their hopes into Simeon the saviour who must not disappoint them as new prime minister, if he really intends to secure himself a place in Bulgarian history.

Aside from the fact that Simeon is the first who succeeded out of a plethora of former Southeastern European monarchs who toy with the idea of playing a more important role in their (former) home countries, his election success is not a complete break with Bulgaria’s post-socialist political development. Of course, his victory ended the bipartisan model of ex-Communists and anti-Communists dominating political life, but on the other hand it continued the democratic tradition of ousting the ruling party in parliamentary elections. The conservative Union of Democratic Forces (UDF) which had won an convincing absolute majority in the 1997 elections was reduced to crumbles and managed to secure only some 18 per cents of the votes this time. A similar fate had been experienced by the Bulgarian Socialist Party (BSP) in the elections of 1997, when its absolute majority from the 1994 elections came to a sudden and early end, gathering only 22 per cent of the vote. Also at the elections of 1991 the government, then led by BSP, was defeated, and UDF, with support from the Movement for Rights and Freedoms (the “Turkish” party), got its first chance to form a government which however soon failed. The political develop-ment of Bulgaria therefore shows that voters immediately punish those who do not fulfil their pledges. Since every government until now committed this sin, each one was ousted at the first opportunity. We will see whether the “King” will experience a similar fate.

The underlying causes of these shifts in voters’ opinion is the deep dissatisfaction with the economic performance of the country. Even more than three years of stability and growth since 1998 did not change the mood. The ruling UDF-coalition was obviously not aware that measurable improvements like positive economic growth, growing foreign direct investment and sound public finances did not directly translate into sustained improvement of living standards. Rampant corruption and the arrogance of prime-minister Ivan Kostov further contributed to the downfall of UDF. In this paper I want to highlight some of the social processes which characterised the first decade of Bulgaria’s transformation and which allow a better understanding of political trends in this country. My analysis has also comparative purposes putting the Bulgarian example in the regional context. In the first part I discuss some recent theories of transition/transformation. My special concern are coping strategies of “ordinary people” and the forms of material, social and cultural capital they are drawing on. This was often neglected by scholars as well as by policy makers who seemed to put all their trust in the market. Wrong conceptualisations led to wrong political decisions, hence theories of transition/transformation are closely related to practices of transition/transformation. What I try to show is that the changes since 1989 have already brought some enduring results which however fell far short of the expectations of reform oriented politicians, and which show striking similarities with the social and political structure of the inter-war period as concerns “backwardness” and “dependence”.

Aside from the vast secondary literature my remarks draw on several completed or still ongoing research projects at Graz University’s Center for the Studies of Balkan Societies and Cultures. One of these projects studied the prospects of civil society in Southeastern Europe, and others focused on kinship and family history in Bulgaria and the Balkans.

2. Theories of Transition

During the last few years the study of the radical changes in Eastern and Southeastern Europe became a major industry in the social and political sciences. These accounts have been written by authors from a wide range of disciplines, so the perspectives differ considerably as do the conclusions. Roughly speaking, there are two extremes: on the one hand, some observers describe transition as a success-story, where political suppression and economic stagnation have been replaced by democracy, liberty and economic growth. On the other hand, the post-1989 developments are held responsible for a huge increase in poverty in the formerly Socialist countries as well as for the decline of societies into ethnic hatred, wars, criminality and insecurity. Southeast Europe especially is presented as lagging behind in its transition.

A good point of departure for discussing different assessments of transition is the term “transition” itself. In the context of the past decade in Eastern Europe, “transition” points to a process connecting the past with a future that features certain characteristics, commonly associated with liberal democracy and capitalist market economy. “Transition” is thus, to a certain extent, loaded with ideological meaning. From this point of view, the current social and economic changes in Eastern Europe can be judged on whether they have delivered the expected results or not. Such a teleological approach calls up Francis Fukuyama’s famous “end of history” (1992) because “transition” is regarded as the process from an imperfect past to an ideal future – a rhetoric quite reminiscent of the Communist one which also claimed that present grievances were acceptable in the name of a radiant future. Scholars who are sceptical about the final outcome of the process therefore reject the term “transition”. They usually speak of “transformation” that emphasises less the result and direction of the process, but the process and its uncertainties itself. In German-speaking literature a third term which is often used is “Reform”, which puts the focus on conscious political acts for transforming the political, social and economic systems. But whether we prefer to use “transition” or “transformation” we must be aware that the processes labelled with one of these terms are not uniform, clearly directed ones. The outcome does not necessarily—or even probably—correspond to the wishes of the actors involved. Policies from the centre are being resisted and manipulated by the people, making transition processes combined and uneven ones with multiple trajectories (Burawoy and Verdery, 1999: 14). Political action causes unintended results, and those in turn have to be addressed by new political efforts. Policy-makers as well as scholars have often neglected this essential fact about social processes and have therefore put forward simplistic interpretations of transition.

Different theories of transition are usually connected to different views of Socialism. Those who understand Socialism as a totalitarian system emphasise discontinuity, while those who saw room for autonomous action within Socialism stress the legacies and traditions of the socialist system resurfacing during transition. Some observers view for example black market, second economy, corruption, informal networks, extended kinship ties, barter and subsistence orientation as remnants of the Socialist past which are again practised in post-Socialism. But as Michael Burawoy and Katherine Verdery remind us, we should avoid to discuss current phenomena only in terms of legacies, because the emerging coping strategies and social relations are “…direct responses to the new market initiatives, produced by them, rather than remnants of an older mentality. In other words, we find that what looks familiar has causes that are fairly novel” (Burawoy and Verdery, 1999: 2).

Not only as a historian would I not subscribe to a complete rejection of the idea of legacy, but I do object radical notions of determination of the present by the past as have been brought forward by some historians who discuss the emerging differences between the European transition countries in terms of Western/Latin versus Eastern/Orthodox or Oriental/Islamic traditions (e.g. Goehrke and Gilly, 2000). It is hard to see how references to the late Middle Ages and to old religious cleavages do help much to explain the present vicissitudes of transition. I would instead argue for an approach which connects a clear focus on current forces and practices with the traditions of these societies. History does not predetermine the present but it narrows options, and people shape their responds on the basis of past experiences and local knowledge. Nevertheless it is important to see that several features of contemporary Southeast European societies remind of the inter-war period. Lack of domestic capital, a peripheral place in the world economy, low productivity, underemployment and out-migration are no new phenomena for the region. The Hungarian economic historian Ivan Berend therefore speaks of a “detour from the periphery to the periphery”, however without advocating a determinist view of historical processes (Berend, 1996).

The question how historic legacies, the Socialist system and transformation are understood is not a mere academic one because it also determines strategies for “reform”. Looking back, differences were sharpest in economic reform because in most countries a consensus was soon reached on the goals and means of political transition. Two conflicting positions on how market economies with prevailing private property—which was the goal of most reformers—should be built emerged: shock-therapy and “big bang” approaches, on the one hand, gradualist and evolutionary positions, on the other. The first advocated the immediate and instantaneous liberalisation of prices and foreign trade as well as swift privatisation in order to dissolve the past as soon as possible. It was based on the view that the Socialist economy was rotten to an extent where it had to be demolished in order to build new economic relations. Market forces would then, after a short transition recession, soon lead to economic equilibrium and growth. Should reforms not deliver these results, then either deviations from the blue-print plan, and not the plan itself, or remains of the Socialist past were to blame. Gaspar M. Tamás, once one of Hungary’s leading dissidents, wrote in 1999: ‘The East European economy still has not completely recovered [he means from the economic crisis of the 1970s and 80s]. Unfortunately, many people see the present predicament as a result of, rather than the reason for, ‘the turn’’ (Tamás, 1999: 66; my bold).

Evolutionary economists, on the other hand, argued for a gradualist approach focussing on nurturing new economic institutions within the old framework until they would become strong enough to resist global competition. These economists condemned the destructiveness of the neoliberal approach and believed that markets can produce satisfying results only when they work under the regulating influence of strong public institutions. In particular liberalisation of foreign trade was criticised as having been introduced too early. Tariffs on a significant level and direct budgetary subsidies should have made domestic producers first competitive before exposing them to the world market (Islam and Mandelbaum, 1993: 209). But transformation countries were generally in too weak position to resist pressure from western countries to open up their economies, although neither EU nor USA granted them equally unlimited market access in return, or stopped large-scale subsidising practices especially in agriculture, where many Eastern and Southeastern European countries would have been rather competitive.

Shock-therapy and gradualist strategies also differed in their assessment of the social cost of economic restructuring: “Big bang” advocates regarded social cost and recession as temporary though inevitable consequences of the destruction of the old, rotten system. They expected trickle-down effects of economic growth and capitalist accumulation in the immediate future. The advocates of evolutionary approaches on the other hand viewed poverty mainly as the direct consequence of shock therapy. According to them economic policy should have been based on maintained economic growth and step-by-step reforms. The lack of state intervention was particularly seen as a major cause of impoverishment. An United Nations Development Project report maintains that “a major problem with the economic policies advocated for the transition period is that they have been based on minimizing the role of the state. But because of the protracted and complex nature of the transition, the responsibilities of the state should increase rather than decrease” (UNDP, 1999: 10).

One of the basic shortcomings of shock therapy was certainly its blueprint character. It was developed at the headquarters of international financial institutions and did not pay much attention to the peculiarities of the countries where it was to be employed. Its popularity derived less from its coherence, but from the neo-liberal consensus prevailing at that time in the West, especially in the USA who also dominate international financial institutions such as the International Monetary Fund (IMF) and World Bank. Shock therapy advocated price and trade liberalisation when many producers were not competitive on the world market and domestic monopolies still existed, and believed in the virtues of laissez faire. A dramatic decline in output and rocketing inflation were the logical results. This, however, could hardly be seen as “creative destruction” in Schumpeter’s terms because while much old was destroyed, not much new emerged. The transition economies also lacked a capital market and efficient commercial and trade laws such as those regulating the market in the West. The rationale of privatisation was furthermore often less economic than political (either to provide cronies with wealth or to make a return to the past impossible). Similarly, the dissolution of the COMECON was more a politically than an economically wise decision. Shock therapy wanted to achieve too much in too short a period, and left the governments struggling with problems for which they had not been prepared. The failure of the West to honour its financial commitments of 1989 and 1990 further aggravated the problems of the transition economies.[2] Gradualist strategies, focussing on maintaining employment and growth as well as institution building would most probably have led to different results, as the Chinese example shows. Ivan Berend concluded: “The application of the self-regulating free market model in the transforming Central and Eastern European countries was certainly a historical mistake.” (Berend, 1996: 357).

Concluding this point, it is obvious that while the political élites were definitely confronted with dramatic difficulties, and that many of the changes were out of their control, choices were still to be made. The direction of the transition process was not predetermined by the past or by outside forces. That these and not other decisions were made must be explained also by referring to the interests of the new élites and the emerging class of (half)private entrepreneurs, and not only by pointing to the inevitability of what happened. To give one example: Land-restitution in Bulgaria was carried out in an economically devastative way because the primary goal of the conservative governments, who were responsible for that, was ideological. They wanted to recreate a pre-Socialist pattern of landholding and to destroy co-operative farming, which was regarded as the main source of rural support for the Socialist party. Land was given back to the former owners or their heirs which resulted in the resurrection of Bulgaria’s pre-war pattern of small, extremely fragmented landholdings. Since the new smallholders in many cases lacked agricultural experience and almost all had not enough capital for investments in farming, agricultural production went down (for Bulgarian land reform see: Kaneff, 1996; Creed, 1998: 219 passim). As a result, Bulgaria has turned from an agricultural exporter to an importer.

3. Social cost of Transition in Southeast Europe

The Bulgarian transformation process is regarded as one of the least successful ones (see tables and graphs in the Appendix). Due to regular changes in governments, also reform strategies changed and no consistent reform policy was applied. However, this does not make Bulgaria an unique case in Southeastern Europe. On the contrary, the region is said to have generally been unsuccessful in transforming its formerly socialist economies into capitalist market economies. A recent World Bank report for example concludes: “the transition has been generally disappointing for the countries of South Eastern Europe.[…] None of the countries have yet established a firm foundation for substantial growth and progress on improving living standards has also been disappointing” (The World Bank, 2000: 1).

Southeastern European countries are said not only to have been reluctant to restructure their economies but also to display certain deficiencies in the political realm. As regards the latter there are of course considerable differences, for example between Bulgaria with its working democracy since 1989/90 and FR Yugoslavia/Serbia, where authoritarian rule came to an end just one year ago. The different political and economic outcomes of transition did not come unexpectedly given the differences in points of departure. In the mid-1980s Slovenia, Bulgaria and Albania had not much more in common than today, although all claimed to be socialist. The situation in the region was further aggravated by the wars in the former Yugoslavia which were a massive backdrop not only for the republics directly involved, but also for the surrounding countries. Foreign investment was not very much attracted by wars nearby, foreign trade patterns as well as transport and communication lines were disrupted, and regional co-operation and integration was made improbable by the rise of nationalist conflicts and mutual suspicions between Southeastern European countries. But despite all their differences and the fact, that not all countries engaged in wars, transition processes in Southeastern Europe—with the notable exception of Slovenia which is better regarded as a part of Central Eastern Europe—display some basic similarities: output has dramatically decreased, inflation was very high in the first years of transition and continues to be at worrying levels in some countries, investments are considerably lower than before 1989, productivity remains lower than a decade ago, and economic growth has been disappointing and still looks very fragile. The Southeastern European economies of Albania, Bulgaria, Croatia, Macedonia and Romania have only reached 75 per cent of their pre-transition levels of economic activity. War-affected Bosnia and Yugoslavia of course score much worse. The Gross Domestic Product (GDP) per capita on a Purchasing Power Parity-basis has drifted from 33 per cent of the EU average in 1990 to 24 per cent in 1998 (The World Bank, 2000: 2). Thus the economic disadvantage of the region vis-à-vis Western Europe has again increased, after “real” Socialism succeeded to narrow it a bit (Berrend, 1996: 361). This meant in particular a dramatic backslash for Yugoslavia which was on the brink of beginning negotiations for EC-membership in the late 80s.

The economic contraction has not only reduced employment throughout the region but also the capacity of the state to maintain its formerly relatively generous and extensive social welfare systems. Pressure on state enterprises to become competitive has also let them rib off their social services (kindergarten, schools, recreation homes, etc.) which were once a constituent part of the welfare system. Formerly taken for granted social rights, such as lifetime employment, stable and secure (though low) cash incomes, subsidised basic consumption goods and services, free access to healthcare and education, assured pensions and other forms of social assistance ceased to exist. As a result, transition did not necessarily widen people’s opportunities and choices, but in contrast narrowed them for many people, undermining their capabilities and thus causing huge social cost. The UNDP definition of human development points out what that actually means: “Human development is commonly described as the process of widening the range of people’s choices among options that they value. This expansion of choices is based on building up people’s basic capabilities, such as being literate and knowledgeable, being healthy and well-nourished, being warm, clothed and sheltered and being mobile.” (UNDP, 1999: 3).

All observers agree that the extraordinary rise in poverty in Southeastern Europe is a result of the persistent economic crisis, the crumbling welfare systems and rising income inequalities. Although there is no consensus how poverty should be measured and statistical data itself is somewhat problematic (see: Atal, 1999), some features of poverty in Southeastern Europe are well established (see: Szamuely, 1996; UNDP, 1999: 5f.; The World Bank, 2000: 7) such as:

Several groups were particularly hard hit by impoverishment, such as pensioners, unemployed, disabled, migrants, refugees and children.

Women are worse off than men (Brunnbauer, 2000).

Ethnic minorities are more likely to be poor than ethnic majorities. The Roma are especially afflicted with poverty, as they display several characteristics associated with a high risk of poverty, such as high birth rates, low levels of education and high unemployment.

Rural poverty is worse than urban poverty – although this distinction is somewhat problematic because non-cash incomes in rural areas are often not included in official income distribution statistics – and there are strong regional variations in income levels.

The gap between the rich and the poor has widened.

Larger households are poorer than smaller ones, as are households headed by people with low educational attainment.

The number of working poor is on the rise due to a significant fall of real wages and considerable higher living costs.

The diet has worsened as regards calorie intake as well as the quality of nutrition.

Public spending for education and healthcare have declined to a critical level, so that universal and free access cannot be taken for granted any longer.

So, the emerging picture looks quite bleak. However, Southeastern and other European transition countries are still more developed relatively to their per-capita incomes than many other countries in the world with similar or even higher incomes. In the Human Development Indicators Ranking all countries of SEE do better than in the real GDP per capita ranking (UNDP, 1999: 3). This can be ascribed, on the one hand, to the legacy of intensive Socialist welfare and, on the other hand, to a still relatively egalitarian income distribution - compared to other countries with similar income levels. But as public resources for welfare continue to decrease and income inequality is on the rise, this might soon change too.

In such an environment Bulgaria makes no exception as concerns its social and economic problems, although its course of transformation had some conspicuous features. First of all, its political transition made Bulgaria a showcase for the successful establishment of democratic institutions despite its unstable and insecure regional environment (see e.g: Fish and Brooks, 2000). Governments are regularly sent into the cold by voters, which indicates that the democratic processes are working properly. But from the point of view of economic restructuring, the record is much worse. After an initial recession accompanied by a small “big bang” and price liberalisation under the conservative government between 1991 and 1992, the “expert” cabinet after 1992 slowed down the pace of reform. Salient structural problems, such as enterprise bad debts and a largely insolvent banking sector, were not tackled. The negative consequences of delayed reforms did not occur immediately, but the economy inevitably fell victim later to its inherent imbalances and contradictions (Wyzan, 1998: 94). Economic growth through 1994 and 1995, to which Bulgaria returned under the Socialist government elected in 1994, thus proved deceptive because at the same time the economy grew ever more unbalanced and a serious crisis in the banking sector loomed on the horizon. The budget was also drained by substantial deficits which further reduced the ability of the government to stimulate the economy. The Bulgarian National Bank (BNB) bailed state-controlled and commercials banks out, which persistently gave “bad”, i.e. uncollectible, loans to state and private enterprises. This policy of “soft budgetary constraints” further aggravated macro-economic imbalances because non-competitive and inefficient players on the market could survive on, in the last consequence, taxpayer’s money. This and increased price-controls introduced by the Socialist government made international financial institutions loath to back the economy with new loans. The government therefore run into increasing difficulties to serve Bulgaria’s enormous foreign debt, which stood at 81% of GDP in 1995 ($10.5 billion). BNB’s foreign reserves were quickly drained as the IMF did note release fresh loans from the July 1996-standby-agreement with Bulgaria because it was not convinced of the seriousness of the government’s reform intentions. The economic meltdown of 1996 and 1997 was the logical consequence. People experienced hyperinflation, a further dramatic drop in output, and the evaporation of purchasing power. At the end of 1996 inflation reached 310 per cent p.a., the GDP had fallen by around 11 per cent over the last year, and the average wage stood at just $54 (Wyazan, 1998: 112 passim). After street-protests against its dismissal economic record the Socialist government of Žan Videnov had to resign in December, 1996, and the Socialist party was not able to form a new one despite its parliamentary majority. In February, 1997 president Stojanov named Sofija’s mayor, Stefan Sofijanski, head of a caretaker government. The new government took office in a situation of complete chaos, as in February the economy sunk to unimagined depths: monthly inflation was more than 240 per cent, the Bulgarian Lev lost almost 200 per cent of its value against the US-Dollar over one month, shops closed or were empty as shopkeepers and producers were reluctant to sell anything in a situation of hyperinflation, and average wages dropped to some $25.

The economic collapse of Bulgaria in late 1996 and early 1997 proved that it had chosen the possible worst reform strategy: neither to pursue consistently gradualist policies, nor to take the risk of shock therapy. Continuous governments have delayed painful but inevitable decisions, and have thus accumulated reform needs and imbalances until the economy has eventually crushed. Thus, gradualism should not be confused with the very lack of reform or a policy of muddling trough whose only rationale is not to loose political support.

What has happened since then? The response of international financial institutions to the crash of 1996/97 was predictable. Any new government which hoped to receive fresh loans was urged to pursue radical economic reform in order to facilitate market relations as well as private capital formation. Fresh money did indeed come in order to bring the country out of the nadir of economic collapse. The new conservative government, elected in April 1997 and headed by Ivan Kostov, began a rapid reform programme. Privatisation was accelerated, the banking sector reformed, loss making enterprises closed. One of the government’s first and most important acts was to agree on the introduction of a Currency Board which was supposed to create financial stability. A currency board establishes “a fixed exchange rate and relies on automatic mechanisms to restore macroeconomic equilibrium. […] A currency board restores confidence by relying on these automatic mechanisms and severely limiting the discretion of policy makers” (Miller, 1999: 5).

While the Bulgarian case deviates in some points from the orthodox model of currency boards, such as in allowing the Bulgarian National Bank to exercise some control over money supply and to function as a lender to troubled banks, the Bulgarian currency board nevertheless made impossible to continue business as usual (Wyazan, 1998: 117). From the point of view of social costs of transformation the paramount feature of the board is that it reduces the government’s spending capacity and focuses on maintaining a fixed exchange rate as well as keeping inflation down. On the one hand, this creates an environment which is meant to be attractive for foreign direct investment, and, on the other hand, it guarantees the repayment of foreign debt. In Bulgaria’s case, government expenditure was reduced to 35 per cent of GDP in 1998, of which roughly half was paid for serving its $10 billion foreign debt (Prhaska et al, 1999: 6). Hence the Bulgarian government cannot do much to offset contractionary economic pressures (Miller, 1999: 18). It is basically left to the mercy of foreign direct investment which is the only source for substituting for the lack of domestic capital. In such a situation, the state lacks sufficient funds for social welfare. The consequence has been growing poverty despite achieved macro-economic stability and despite increasing growth rates since 1998. Some figures may illustrate this trend:

Most people in Bulgaria spend most of their income on food. Much of the rest is allocated to heating, water and electricity.

According to a January 2000 survey by the “Agency for Social Research”, almost half of the population regard itself as poor and 33 % say they live on the verge of poverty. 30 % of the population live on less than $1 per day, which is the absolute poverty line set by the World Bank and the U. N. (Ivanov, 2000: 99).

Unemployment and social benefits as well as pensions are below any meaningful level and do not allow for a decent life. They also have only a small impact on alleviating poverty. Real pensions amounted in 1999 to 24.7 % of their 1989 level and have not yet even recovered to their 1995 level. Minimum pensions are DM 37, and minimum wages DM 70 per month, while the official poverty line for 1999 was set at DM 78.7. However, trade-unions have calculated minimum subsistence costs at DM 229 monthly. The heating of an average apartment alone costs about DM 130. A proposed increase of minimum wages to DM 100 was rejected by the IMF in early 2000. Finally, minimum wages were increased by only DM 5 to DM 75 (Ivanov, 2000: 99).

Scarce resources—only 3.4 % of GDP, well below the European average—are channelled into healthcare. People are usually required to pay bribes, if they want to receive adequate treatment in public hospitals.

According to some estimates real wages are continuing to decline, although officially they have grown modestly over the last two years. But real consumer prices (such as for food, electricity, fuel, heating) are rising considerably faster than the official inflation rate and also faster than nominal wages.

Unemployment is rising due to the restructuring and shutdown of loss-making enterprises. Official figures which count only the registered unemployed speak of 13-14 % of the active population, while trade-unions put the unemployment rate at well above 20 % (Boyadiev, 1998: 52).

Some 50,000 school-children, mostly from the Roma community, do not attend school regularly (Ivanov, 2000: 100). According to UNICEF, half of the children in Bulgaria are malnourished.

This is the background against which the election defeat of the Kostov government must be seen.

3. Coping strategies

Confronted with such figures, the question is how people are managing to survive after all. This problem leads us away from the already well studied effects of transition on the macro-level to the micro-level of lifeworlds and the practices of ‘ordinary people’, a much less investigated field. As Burwoy and Verdery state: “aggregate statistics and compendia of decrees and laws tell us little without complementary close descriptions of how people—ranging from farmers to factory workers, from traders to bureaucrats, from managers to welfare clients—are responding to the uncertainties they face” (Burawoy and Verdery, 1999: 2).

However, in the last years these “small transformations” have also increasingly become subjects of ethnographic and sociological research. The World Bank has begun to fund qualitative surveys on how people cope with poverty in order to shape its programs (see for Bulgaria: Balikci, 1998; Iliev, 1999; Kabakchieva et al, 1999). Also research at the Department of Southeast European History at the University of Graz highlighted some of the ways people employ to survive post-Socialism (Brunnbauer and Kaser, 2001). Most of these studies deal with rural settings and focus on the role of subsistence agriculture for survival, but some also investigate urban contexts. The main survival strategies described by these studies can be summarised as follows:

Many people have found employment in the informal economy, which according to some estimates contributes between 20 and 30 per cent of GDP (Todorova, 1999: 90). However, employment in the informal economy has several negative consequences: informally employed people are usually not eligible for social benefits—for that reason many people try to arrange bogus official employment by employer-friends or kin in order to have a claim for social assistance. Furthermore wages are low, working conditions are poor, and the bargaining power of workers is minimal in the informal sector. These pressures are often softened by the fact that in many cases informal employment is based on kinship and similar close relations. But in any case, the state loses much needed tax revenue.

Kinship and informal networks (in Bulgarian called vrăzki) are again a determining pattern of social interaction. The presence or absence of family support plays a very important role in the living conditions. Practical kinship had never lost its significance despite enforced Communist modernisation. On the contrary, kinship was one of the basic resources drawn on to “domesticate” Socialism, as Gerald Creed has called the strategies to soften pressures and constraints of Communist rule (Creed, 1998). The ruling atmosphere of uncertainty during transition generally re-enforces the role of kinship because only the family can be trusted. Kinship plays a role in employment as well as exchange of goods and labour, but—more importantly—it also regulates access to land and thus to food, an asset of enormous importance, as highlighted next.

Subsistence agriculture, made possible by land restitution, is certainly one of the main stays of survival, not least due to the closure of many village workshops of industrial enterprises that has led to dramatic unemployment in rural areas. Access to land is often the decisive factor whether people are living in poverty or making ends meet, given that cash incomes are usually insufficient. What Canadian-Bulgarian anthropologist Asen Balikci wrote about pensioners holds true for other generations too: “Access to intensive gardening and limited stockbreeding seems to be the main differentiating element. In real misery live mainly the urban pensioners who rely exclusively on their pensions” (Balikci, 1998). Subsistence agriculture and kinship are closely related to each other and bring town and village together. Yuljan Konstantinov has called this relationship the “urban-rural extended household”, that means a family structure in which one part of the family—usually the parents—live in the village and provide their adult offspring with food (Konstantinov, 2001). The urban family members in turn help with cash and also guarantee access to vital urban resources through their connections in town, to medical or administrative services for example. This relationship existed already during Socialism, but now it has come under strong pressure because the urban part of the extended household has increasingly been left without anything to offer in exchange for food from the village. Instead, it has intensified its direct participation in farming because the elderly parents cannot work all the restituted land alone. Many people see this as a degrading experience, especially if they once held typical urban professions (Iliev, 1999).

Subsistence agriculture is often connected with informal trading arrangements, such as barter. In her paper on barter in a Bulgarian mountain village Barbara Cellarius makes clear that “you can buy almost anything with potatoes” indicating the significance of barter, in particular during times of hyperinflation (Cellarius, 2000). Social relations play an important role in many barter transactions although they can also be quite formal with potatoes as ‘currency’. Barter is an adaptation to an imperfect market system and to the lack of cash, that can draw also on people’s experiences of informal exchange during socialism.

Another coping strategy which is more market-oriented, but will hardly induce economic development, can be described as gathering and small-scale trading. Gathering is especially widespread in mountain areas and includes plucking mushrooms and wild herbs as well as snake and other wildlife hunting (Iliev, 1999). In the Rhodopi mountains, where I did most of my fieldwork, a good part of the male population of some villages spends most of the day in summer gathering mushrooms in the extensive forests nearby. Mushrooms are sold to intermediary traders, usually from outside the village, who then sell to wholesalers, often from Italy, who bring the mushrooms abroad for further processing. Gathering is organised on a family basis, and households can earn significantly more than an average daily wage with the harvest of one day. In other parts of the country, landless Roma travel through mountain areas, gathering lime blossoms and other fruits.

Small-scale trading was particularly important during the first years of transition when distribution was rather chaotic (see Konstantinov, 1996). It was often involving not much more than a trader and his suitcase. Traders took for example the coach to Istanbul and came back with goods they could sell with large enough a margin in Bulgaria, like sport shoes, clothes, and leather products. Similar marginal forms of trade exist within the country, for example buying up sheep wool and skins from non-commercial stock-breeders and selling it to wholesalers. Since these forms of trading are mainly employed by Roma, ethnic Bulgarians are usually loath to get involved in it because they do not want to become regarded as “Gypsy-like”.

Lack of cash has forced many people, especially pensioners, to employ a strategy of maximum constraint. People have reduced consumption and expenditures to a minimum. This has also had a strong impact on their social lives because they have reduced social contacts for fear they cannot live up to traditional standards of hospitality. An example from Asen Balikci’s survey on impoverished pensioners shows that maximum constraint easily becomes an obsession which is not even dropped when cash incomes increase. “A. P. and H. P. from Sofia have also become obsessed with saving. All their light-bulbs are 40-watt only. Both are constantly turning the lights off, and when they have visitors they follow them around to check if they haven't left any on. They wash their dishes with as little hot water as possible. H. P. panics about the washing machine's using too much water” (Balikci, 1998). In rural areas such a strategy has led to a real cutback of modern amenities. “Village pensioners, who are more inclined to restrict expenses and less tempted by modern appliances, have almost completely reversed to the traditional way of life: they use wood and coal for heating and cooking, do their washing by hand and with home-made soap, and produce most of their staple food supplies on their private farms” (ibidem). Many urban residents are also forced to seal off central heating for its unbearable costs (the costs of heating a medium-size apartment in cities like Sofia equals an average monthly pension).

Finally, a coping strategy which has resulted in people leaving the social fabric of Bulgarian society all together is emigration. In the period 1990-1996 around 550,000 people emigrated from Bulgaria, with a peak in 1990 (Mintchov, 1999: 127). Since then, annual emigration numbers amounted from 45,000 to 65,000. It has mainly affected two sectors of Bulgarian society: the ethnic Turks, on the one hand, and well educated young people, on the other. The latter form the bulk of ethnic Bulgarian emigrants since 1989 who are estimated at more than 150,000. Between 1989 and 1995, 11.5 per cent of those, employed in science, scientific services and higher education, left Bulgaria which indicates a huge brain-drain (Mintchev, 1999: 128). Ethnic Turks continue to leave the country for Turkey in great numbers because of the miserable economic conditions in their areas of settlement in Bulgaria (especially in the Eastern Rhodopi mountains where local industry collapsed and tobacco growers face severe problems in placing their products). They hope to improve their lots once in Turkey. There they can join the hundreds of thousands ethnic Turks of Bulgaria who left the country because of repression in 1989. Also for young ethnic Bulgarians who want to leave their country social networks, based on ethnicity and kinship, are important for gaining access to the host country and its labour market.

4. Conclusions

These coping strategies cannot be explained only in terms of “economic rationality”. The responses of “ordinary”—but also less ordinary—people to the pressures as well as opportunities of transition must be seen as embedded in social relations, cultural traditions, and local knowledge. One reason why reforms did not produce the hoped-for results was precisely the ignorance of local practices. People are not only passive victims to outside forces—like those of “reform”—but instead react and try to manipulate the structures in a way that seems to deliver the best results for them—and not for the blueprints of economic strategists. A better understanding of socialism would have shown to ideologists of radical shock therapy that social engineering from above would necessarily have ambiguous consequences. Such as under Socialism, when people “domesticated” the industrial and agricultural policies of the party-state and manipulated them for their own ends, the population has tried to manipulate the forces of transition in order not only to survive physically but also to retain important cultural values. Now, more then a decade after 1989 it has become “increasingly apparent that the rhetoric of transformation did not accurately reflect the experience of most ordinary people” (Pine/Bridger, 1998: 5).

On the macro-level, the divergence of what reform politicians wanted to create, and what actually has emerged, is manifested in the failure to create a market society with a clear capitalist class structure. Burawoy and Verdery have described this situation as, “in reaction to the iron law of market expansion, we discover the iron law of market resistance” (Burawoy/Verdery, 1999: 7). In Bulgaria and elsewhere, millions have reduced their involvement with the market to the absolute minimum. Instead they rely—besides meagre incomes and cash benefits—on non-market strategies, embedded in social relations and cultural systems which are centred around kinship and similar close affiliations as well as ideals of egalitarian distribution and collectivism. This behaviour does not seem to be only a temporary phenomenon because it is based on nested mentalities that make people reluctant to let market relations dominate their lives. The history of the assertion of a market economy in the West should have made clear enough that it was not created by laws only, but was rather the result of a long and protracted process wherein cultural values and social relations experienced a radical transformation.

So, subsistence agriculture and reciprocal exchanges are about to become again a salient feature of Bulgarian society, as they were before collectivisation. This makes the prospects of economic and social recovery bleak, because as large segments of the population live outside market relations, domestic demand is low and can hardly be the basis for a new industrialisation or modernisation effort. As a result, the state’s tax base is also extremely thin, making investments in social welfare or economic development marginal. After half a century of forced modernisation Bulgaria and other transition countries in Southeastern Europe have again arrived at a situation where the government’s role is reduced to creating proper conditions for attracting foreign capital, which is the only possible source for new economic progress. Transition in Bulgaria has indeed produced results, but not the desired ones. On the contrary, the country is again part of a backward Europe where poverty is rampant and progress hesitant—a “detour from the periphery to the periphery” to quote Ivan Berend again (Berend, 1996). Of course, the situation is not the same as before the Second World War, although there are structural similarities. Bulgaria and the other transition countries have now at least educated populations and more or less developed infrastructures save for Albania. But this alone won’t be enough to put these countries on the path to catching up with the rich parts of the world.

Finally, I would like to address the question whether the social cost of transition is acceptable. This would be the case if in the reasonably near future most people could say that their lots have improved compared to the pre-transition situation. This might indeed be true for the successful transition countries such as the Czech Republic, Slovakia, Slovenia, Hungary or Poland, where foreign investment is concentrated and growth seems to be sustained. But even there economic and social fragmentation is enormous, and large sectors of the population are worse off than a decade ago. In Bulgaria and most other Southeastern European countries transition has until now produced no significant gains in terms of social wealth. Therefore the social cost of transition cannot be compared to, say, the huge social cost of industrialisation in Western Europe or the socialist countries. Social cost has instead become a salient feature of transitional economies in Southeastern Europe, where only a few people have profited from the destruction of the socialist economies and welfare systems. The absence of significant foreign investment and the growing inability of governments to provide sufficient funds for education as well as adverse demographic trends, such as negative natural population growth, point to more problems lying ahead in the future. The only viable solution to those problems seems to be economic integration into, and in the best case full membership in the European Union, for which Bulgaria negotiates since 2000. But in face of the lame enthusiasm on the part of the EU this does not seem to be an imminent option, given that in economic terms it will still take decades before countries such as Bulgaria may hope to achieve similar output performances as poor EU-countries. Bold steps are necessary, but where are those who dare take them?


Appendix: Tables and Graphs on Bulgaria’s economic performance in a comparative perspective

Real GDP growth, SEE & CEE 1990-1999 (Annual change in percent)




SEE countries


1990


1991


1992


1993


1994


1995


1996


1997


1998


1999

 

Albania

-10,0

-27,8

-7,2

9,6

9,4

8,9

9,0

-7,1

7,9

8,0

 


Bulgaria


-9,1


-11,7


-7,4


-1,5


1,7


2,0


-10,1


-7,1


3,5


0,0

 

Croatia

-7,2

-21,2

-11,8

-8,0

5,8

6,8

5,9

6,4

2,3

-0,6

 

FR Yugoslavia

-8,0

-11,7

-27,9

-30,9

2,7

5,9

5,8

7,4

n.a.

n.a.

 

FYR Macedonia

-10,0

-7,0

-8,0

-9,2

-1,8

-1,3

0,7

1,5

2,8

0,0

 

Romania

-5,6

-13,0

-8,8

1,4

3,9

7,0

4,1

-7,0

-7,3

-4,0

 


Average of SEE


-8,4


-16,1


-8,6


-1,5


3,8


4,7


1,9


-2,7


1,8


0,7

 

 



CEE countries











 

Czech Republic

-1,3

-11,5

-3,3

0,5

3,2

6,3

3,7

0,3

-2,4

0,0

 

Hungary

-3,5

-12,0

-3,1

-0,6

2,8

1,5

1,2

4,6

5,1

3,0

 

Poland

-11,6

-7,1

2,6

3,8

5,2

6,9

6,0

6,9

4,7

3,5

 

Slovakia

-2,5

-14,6

-6,6

-3,7

4,8

6,8

6,6

6,4

4,3

1,7

 

Slovenia

-4,8

-9,0

-5,5

2,8

5,2

4,0

3,5

4,5

3,9

3,5

 


Average of CEE


-4,7


-10,8


-3,2


0,6


4,2


5,1


4,2


4,5


3,1


2,3

Source: TransMONEE 2000 database, UNICEF IRC, Florence



Real domestic product (1989 = 100)


SEE Countries


Lowest level


(year)


1999

Albania

60,4

1992

93,3

Bulgaria

63,7

1997

65,9

Croatia

59,5

1993

77,4

FR Yugoslavia

40,6

1993

50,0

FYR Macedonia

68,0

1995

71,6

Romania

73,0

1999

73,0


Average SEE (without YUG)


64,9



71,9


CEE countries




Czech Republic

84,6

1992

95,0

Hungary

81,9

1993

98,1

Poland

82,2

1991

121,2

Slovakia

75,0

1993

101,4

Slovenia

82,0

1992

107,6


Average CEE


81,1



104,7

Source: TransMONEE 2000 database, UNICEF IRC, Florence


Real Wages in CEE and SEE compared 1998 (1989=100)

Albania

83,6

Bulgaria

48,1

Romania

61,1


Average SEE


64,3



Czech Republic

101,0

Hungary

79,6

Poland

85,2

Slovakia

88,8

Slovenia

86,7


Average CEE


88,3

Source: TransMONEE 2000 database, UNICEF IRC, Florence



Level of GDP in 1999 as compared to 1989


Bulgaria – development of employment and real wages (1989 = 100)

Source: TransMONEE 2000 database, UNICEF IRC, Florence


Bulgaria: Industrial and Agricultural Production 1999


Industrial production 1999 (1989 = 100)

Industrial production

50,0

Electricity

96,5

Coal

86,6

Machine tools

27,7

Cotton material

21,1

Internal combustion engines

7,7

Tractors

6,4

Electric trucks

3,6

TV sets

3,2

Wagons

1,8

Buses and trucks

0,5

Radios

0,1

Cast iron

108,6



Agricultural production 1998 (1989 = 100)

Grapes

60,5

Crops

56,1

Fruit

40,0

Sugar

28,9

Cheese

28,6

Milk

14,7

Meat

8,8

Fish

4,0

Head of cattle

42,5

Pigs

39,7

Sheep

34,1

Source: Boyadiev 1998, p. XXX



Bulgaria: Share of agriculture 1989-1999 (in percent of GDP)

Source: TransMONEE 2000 database, UNICEF IRC, Florence


Rate of natural population increase, Bulgaria 1980-1997 (per 1,000 inhabitants)

Source: Statističeski godišnik na Republika Bălgarija, 1998


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[1] The final results of the elections are: National Movement ‘Simeon II’ (NMSII): 42.74% of the votes and 120 seats in parliament (out of 240), Union of Democratic Forces (UDF): 18.18% of votes and 51 seats in parliament, Bulgarian Socialist Party (BSP) 17.15% of votes and 48 seats, Movement for Rights and Freedom – the party of the Turkish minority – 7.45% of votes and 21 seats. All other parties failed to take the 4 per cent threshold for being represented in parliament.

[2] Despite of talks of a new Marshall-plan for Eastern Europe not much of the promised assistance materialised. In 1993 the per capita assistance for Central Eastern Europe was around $30, compared with the Irish $262 and Portuguese $173 annual average subsidy from the European Union. West Germany even sent an annual inflow of $5,900 into its new Bundesländer (Berend 1996: 337).