Standard but Poor: Understanding Northwestern Bulgaria
by Kristina Georgieva
Since
August 2012, people in the Bulgarian capital, Sofia, have been riding on one of
the sexiest metro lines on the Old Continent. It is fast, it is arty, it is
fancy, and it is the pride and joy of the ruling party Citizens for European
Development of Bulgaria. Ironically, less than 100km north, you can find a rather
underdeveloped region; in fact, the poorest in the European Union -
Northwestern Bulgaria.
So what does the poorest region in the European Union look like?
The
Northwestern region of Bulgaria encompasses five municipalities between the
Danube river and the Balkan mountain: Vidin, Montana, Vratsa, Pleven, and
Lovetch with total population of approximately 800 000 people (as of
2011). Ten years ago, it used to be around 20% more; however, due to high
migration and low natural population growth, Northwestern Bulgaria has been
shrinking rapidly. Its scores are in the worst possible ranges in almost all
indicators presented in the Eurostat regionalyearbook 2012.
The GDP and the primary income of households in the region are below 50% of the
EU 27 average; it has the lowest population change and life expectancy, and to
top it all off, Northwestern Bulgarians are also the least educated. In short,
the situation is pretty dreary, and the forecasts for the future do not look much
brighter. And these are merely the statistics behind the personal tragedies of
the many people struggling and failing to make a living there.
But why so surprised?
Bulgaria
joined the EU a mere five years ago, it hasn’t yet adopted the Euro, nor is it
even near entering the Schengen area, and since somebody has to be the poorest
in the EU, why not Northwestern Bulgaria? In fact, economic theory gives us
quite a few answers to this question. To begin with, one of the borders of the Northwestern
Bulgarian region is the Danube River, which should create better conditions for
economic activity, as it allows cheap trade with other cities on or in
proximity to the river. Considering that some of those cities are major
European Capitals (Vienna, Bratislava, Budapest, and Belgrade), the economy of
Northwestern Bulgaria should be benefiting largely from this major geographical
asset. But it is not. It should also be benefiting from Bulgaria’s accession to
the EU, which should trigger convergence, and thus rapid growth in the natural
process of catching up. In fact, this growth should be even more explicit in the
Northwestern region than in others, as it is on the western Bulgarian border,
which should be the entry point of all new investment. But it’s not; the
situation in the region has even deteriorated since the accession in 2007. Thus,
it is surprising that contrary to economic logic, a region close to a major
European river, in a new EU Member State, and in relative proximity to the
“center” of the Single Market is not growing, but actually shrinking to the
point of being the poorest in the EU.
How did this happen?
One
possible explanation of why Northwestern Bulgaria’s economy is performing so
poorly is its inability to adapt from making goods to making ideas – the most
demanded product of our time. Similarly to the case of Detroit, Michigan, manufacturing
in Northwestern Bulgaria was specialised in mass production of tangible goods:
in Detroit it was cars, and in Northwestern Bulgaria: ceramics, accumulators,
and automobile tires. With the sole goal of increasing production and decreasing
costs on the assembly lines, firms both in Detroit and in Northwestern Bulgaria
ended up creating a disincentive for innovation and an oblivious labour force. This
archaic practice of cheap mass production cannot meet the consumers’ increasing
demand for variety and constant quality improvement. Since it is incompatible
with the changing market dynamics, Northwestern Bulgaria, like Detroit, is
bound to struggle to stay above water.
But there’s
more. Unlike Detroit’s economy, that of Northwestern Bulgaria did not always
accommodate perfect competition or the right to private property, nor was it
influenced by the forces of supply and demand. So when in 1989 the Berlin wall
collapsed, so did the Bulgarian economy. It could not survive in the highly
competitive capitalist market: production was no longer subsidised and became
unsustainable, factories closed, unemployment shoot up, and people accustomed
to working on the assembly line were incapable of running a business. While
that story is the same across all of Bulgaria (and the other transition
countries), the case of Northwestern Bulgaria is worse as the region was more
industrialised than the others.
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Still, there
is light in the end of the tunnel with the recent opening of three IKEA
factories, and another two – one for batteries and one for bikes. A new road
bridge across the Danube is planned to open soon providing a connection between
Vidin, Bulgaria and Calafat, Romania. So there is an opportunity for growth even
in the poorest region, but bringing back the assembly lines and simply combating
the physical distance from the market will not save Northwestern Bulgaria. If
the Bulgarian politicians and policy-makers would like to achieve something
more than reelection, they should shift the focus from convenient
infrastructure projects to long-term investment in human capital and
innovation, so that the region can adapt to the dynamic economic environment. If
not, Northwestern Bulgaria will continue to reign as the “EU’s poorest” region.
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The metro line in Sofia:
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