Lucky to have them

Economic slumps are vicious things, and not just because they cause financial pain. They make the more comfortable parts of the world mean and selfish. For proof, just look at the debate in western Europe about enlargement of the EU, and the sour turn it has taken even in countries like Britain, which was the only big EU country to open its labor markets to workers from ex-communist nations when they joined the union in 2004.

The most recent enlargement of the EU (which in all took in 12 countries, 10 of them from the former communist world) is increasingly presented as a source of problems and costs, not opportunities. There is much talk about re-closing borders (or, if you are in Italy, expelling Roma migrants after burning their homes down), and general grumbling about how the newcomers were allowed in too soon. Look to the future, and the idea of enlargement to take in big, strategically important countries like Turkey or Ukraine seems further away than ever.

The latest issue of the Economist carries a series of articles on the most recent enlargement, focusing on the wave of enlargement that began in 2004 and ended last year with the admission of Romania and Bulgaria. The special report concludes that this expansion of the block from 15 to 27, reuniting a Europe divided by the iron curtain, was not only one of the EU’s greatest achievements: it came in the nick of time.

If the EU were still trying to negotiate the entry of Poland, Romania or Slovakia now, just imagine the shrill headlines about floods of migrants, and about the economic costs of admitting these poor, often very rural countries. The big bang of enlargement, taking in 10 new members, is four years behind us, and still the front pages of British tabloids are filled with stories about such “outrages”, as Polish workers claiming British child benefit allowance (and why should they not claim it, given that they pay British taxes?).

Across the union, a nasty coalition of rightwing nationalists and leftwing protectionists can be heard questioning the very principle of allowing EU citizens to move freely about the union - one of the best things about the European project. Not long ago, a British red-top tabloid included freedom of movement on a list of dangerous, bad things contained in the Lisbon treaty that is currently going through ratification by the 27 member nations. In the interests of consistency, if that same tabloid really thought the freedom to settle elsewhere in the EU was a bad thing, it should stop printing a special edition in Spain, each day, for all its readers who have moved there.

How will a downturn affect new Europe, where most people have - until now - been much more keen on free movement and foreign investment than workers in places like France or Germany?

Travel round the new member states, and you certainly hear that the flow of Poles and Czechs to the west has slowed in recent months. Economic nervousness in places like Britain has coincided with fast-rising salaries back home (salaries in some new member nations rose by 30% last year). It also matters that the Polish currency has strengthened a lot against the pound, so that money saved or sent home by a Polish worker in Britain buys much less in Warsaw or Bialystok than it once did. West and east are converging, in other words.

That will have political, as well as economic, consequences. Globalization has been a relatively simple, broadly positive story for eastern and central Europe. For a decade or more, jobs have flowed into the low-cost, less regulated labor markets of the ex-communist bloc, as investors sought production at a fraction of the cost of western Europe, but without the transport costs of China or elsewhere in Asia. But now business models based on production in Slovakia or Hungary are coming under strain. It is not only a question of rising labor costs - salaries in Slovakia, say, are still much lower, than in Germany or France. But globalization everywhere is changing, as globe-spanning production lines fragment into lots of separate tasks, some of which resist offshoring more than others. In eastern and central Europe, new jobs continue to arrive, as others head still further east, and some back to the rich world.

Jobs are flying in all directions. In one striking example, a German lighting company recently shed 400 jobs in Slovenia. The high-end design and engineering jobs headed back to Germany, the low-end manufacturing jobs to China.

Will eastern and central Europe turn against global free trade, and open borders, aping the defensive reactions of workers in places like France?

Globalization remains a big overall benefit to Europeans, through cheaper goods for consumers, and by helping countries like Germany become export powerhouses. But any sensible defense of globalization has to admit that for some individuals, the process is painful - in the ex-communist bloc, the new economy can offer little to workers aged over 50, for example.

For everyone in the new member nations, convergence with the west will be tough. In a decade, labor costs will no longer be a trump card for many ex-communist countries. If that means people being paid more, that is good (indeed, it was always meant to happen): as long as they can find new forms of competitive advantage to compensate. That means climbing up the value-added ladder, moving from being a workshop for the west to being a rival to the west, when it comes to research and innovation.

There are reasons to hope the newcomers will remain keen on open borders. Much of the angst felt by workers in western Europe is related to the passing of good times that will probably never return: golden years in the 1960s and 1970s, when western Europe did not face serious competition in manufacturing or industry from the communist bloc. Thanks to the iron curtain and state socialism, 30 years ago workers in eastern and central Europe (or come to that, China) simply were not rivals to French, German or Belgian workers.

Slovak, Lithuanian or Polish workers never knew those golden years of secure, unionized, well-paid jobs. They were plunged from the state-planned mediocrity of life under communism straight into years of instability. They are tough, and remember what it feels like not to be free to move. They are not about to give up on open borders just because times are getting rough. All of Europe is lucky to have them. (Guardian, UK)