Slovakia's Gloomy Economic Ride

Posted in 2012 The Gnovis Blog

This blog investigates the economic conditions of developing EU nation, Slovakia. Although Slovakia’s integration in the EU bolstered significantly its service industry, nevertheless, up until today, Slovakia remains the second poorest country in Europe. In my investigation, I relate the socio-economic notions of author and economist Jane Jacobs to the Slovakian case. I examine Slovakia’s peculiar economic conditions from multiple Jacobsion lenses – stagflation, transaction of decline, city capital and trade among equals. I argue about the perils of Slovakia’s late adoption of the Euro currency. In my conclusion, I elucidate a Slovakian economic resolution that parallels one of Jane Jacob’s economic notions.
Joined the EU in 2004, Slovakia is one of the tiniest nation-state in the Union, with a population of 5.3 million, spanning across 48, 854 KM square. It was not until 2009, however, that Slovakia adopted the Euro currency. Ever since, some believe the adoption of the Euro was detrimental to the Slovakian economy. In my study, I examine the Slovakian economic condition on two levels: the tourist and car assembly industry.
On the tourist level, my trip across Eastern Europe this summer comprised a short stop in Slovakia. Apparently, Slovakia is a tourist hub for both Eastern and Western Europeans. Slovakia is known to be one of the largest natural and hot springs reserves in Europe, where a significant number of tourists flock in to the nation’s hot-springs resorts across the country. But, ever since Slovakia adopted the already inflating Euro currency, prices and costs skyrocketed. As a result, tourism dropped significantly. A tourist guide whom I met while there expressed concerns that ever since Slovakia adopted the Euro two years ago, Slovakia has become nearly as expensive as developed Western European countries. For that reason, prices inflated while salaries did not increase enough to balance out price inflation.
Additionally the car industry in Slovakia is considered by many to be the Detroit of Europe. A handful of high end German and French car manufacturers such as VW, Porshe, Audi, and the French [PSA Peugeot Citroen Group], own assembly production lines in and out of the capital. According to the the New York Times: “the country now leads the world in cars produced per capita and earns about a quarter of its economic performance from the automobile industry. Controversially, however, Slovakia remains the second poorest country in Europe. The economy, which grew by more than 10% in 2007, shrank by almost 5% in 2009.” The shrinking economic profits coincided with the adoption of Euro as currency.
Slovakia presents a captivating paradox; it is the second poorest EU nation and yet, simultaneously is leader of the world in car produced per capita. This paradox may not be captivating to Jacobs. She argues that irrespective of the level of supplies, “developing countries must generate their own capital, instead of depending on providing industrial services for developing nations such as, assembling cars for an already developed French and German (car) industry.
One way to curb such economic setbacks is a Jacobsion “trade among equals” approach rather than, assembling cars and providing an assembly-line backbone for developed nations. According to Jacobs: “underdeveloped nations should concentrate their commerce on other underdeveloped nations.” Thus, avoiding direct economic competition with the industrialized world unless and until their levels of development are more nearly equal.”
The Euro transpired from an agglomerates of European economic powers, then passed down to developing nations at a later stage. For that reason, the use of the Euro by both developed and developing nations is economically incongruent. One way to curb this economic incongruence amongst polarized economic nations in Europe is through the creation of another currency –– a Euro tailored for developing nations –- that is less inflated and less expensive than the actual Euro.