Resurgence of post-crisis neoliberalism: labor law reform and the return to “business as usual” in Lithuania

ABSTRACT

The economic crisis of 2008–2010 revealed the extreme vulnerability of Lithuania to global financial shocks. However, instead of reforming Lithuanian capitalism, the domestic political and business elites chose to write off the enormous social and economic costs incurred during the 2008–2010 crisis as an expense of continuing doing business in a way that was typical to the pre-crisis, booming years of ‘the Baltic tigers’ (2000–2007), i.e., relying on the unstable and inequitable growth model based on foreign capital inflows and remittances, suppressing and keeping wages and taxes on capital low and exporting cheap-skilled labour to the core EU countries. We illustrate this return to business as usual in Lithuania by analyzing the political process of contestation and eventual consolidation of neo-liberal consensus among domestic political actors that resulted in the passage of the new Labour Code enabling creation of ‘flexible’ labor markets. Social and political implications of the resurgent neoliberal hegemony in post-crisis Lithuania are discussed.

KEYWORDS:

• Neoliberalism
• labour code reform
• post-crisis
• Lithuania

Acknowledgements

We are especially grateful to Dr. Charles Woolfson and anonymous reviewers for their comments and suggestions on drafts of this article.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. We understand labor market liberalization in the way it was defined by recommendations of the European Commission, i.e. as attempts to ‘amend the labor legislation with regard to flexible contract agreements, dismissal provisions and flexible working time arrangements’ (European Commission 2012). Neoliberalism can be conceptualized in a number of ways(see, for example, Gilbert 2013; Tombs 2017, 10–15). For the purposes of this paper, we define neoliberalism as an ideology legitimizing subjection or subordination of labor relations to the logic of the market and/or capital economics (see also Clarke 2010, 385).

2. For example, in a representative public opinion survey conducted in July 2016 by the polling firm Vilmorus, 50.7% of Lithuanian respondents had a negative opinion concerning the new Labor Code, 14.2% had a more negative than positive view, 2.7% were more positive than negative, and 1.4% were of a positive opinion about the new legislation (Samoškaitė 2017).

3. Cf. Karl Polanyi (2001), who claimed that, at the extreme, the replacement of social relations with market relations would lead to the virtual collapse of society as such.

4. Such a stance is neither unique nor entirely eccentric. The dangers of moral conviction in political choice-making echo the more grandiose example of support for the invasion of Iraq by Tony Blair – who insisted in 2016 that he believed it had been the right thing to do. We are grateful to Dr Charles Woolfson for pointing to parallels in the stances of the two prime ministers.

5. See, for example, statements by the president of the Lithuanian Business Confederation V. Sutkus (2015), the President of Investors’ Forum R. Skyrienė (2015), and Ž. Šilėnas, the President of the Lithuanian Free Market Institute (2016).

6. Similar changes in labor laws leading to internal devaluation of labor costs and the flexibilization of labor markets were expected from countries in the EU’s southern periphery, such as Greece (see European Council 2010; Kennedy 2016).

7. The LSDP was established in 2001 by the merger of the Social Democratic Party of Lithuania and the Democratic Labor Party of Lithuania (the former Lithuanian Communist Party [LCP] until 1990). In this merger, the LSDP was a junior partner, dominated by the leadership of the former LCP nomenklatura, as was symbolized by the election of Algirdas Brazauskas, the former LCP First Secretary, as its first leader. The LSDP tends to take a more pragmatic view of Soviet Lithuanian period when the LCP was pursuing the Lithuanian version of ‘national communism,’ or adapting to Moscow’s rule, but also seeking where possible to preserve and modernize the country and the nation. The conservatives (Homeland Union), in comparison, are the successor to Sąjūdis, or the Reform Movement of Lithuania, the nationalist-inspired political organization, which led the struggle for Lithuanian independence in the late 1980s and early 1990s. Sąjūdis rejected the Soviet period as an illegitimate occupation and sought lustration to purge the state administration, the system of education, and cultural organizations from officials that were affiliated with the Soviet system in Lithuania.

8. Documentation on the preparation of, and proposals for, the Labor Code reform produced by the Commission is available at www.socmodelis.lt.

9. Since the reestablishment of independence in 1991, tension and conflicts between the two executive branches of the Lithuanian state – the prime minister and the president – were endemic to Lithuanian politics. It is a systemic feature of the country’s politics because of the semi-presidential constitution of the country (Protsyk 2006; Krupavičius 2008). The scope and dynamics of intra-executive conflict and cooperation, however, were highly dependent on the personal characteristics and style of the interaction of the individuals occupying two highest offices of the country. President Dalia Grybauskaitė, serving her second five-year term, was and is the most popular politician in the country. In Soviet times she was a lecturer in the Communist Party Academy in Vilnius, but in the post-independence era, she transformed herself into a high-ranking and competent bureaucrat serving as the Vice-Minister of Foreign Affairs and Minister of Finance as well as European Commissioner for financial programing and the EU budget. Her style of communication and governing is characterized (especially by her critics) as somewhat high-handed paternalistic authoritarianism, reflective of her Soviet past and high-ranking administrative experience (Bielinis 2013). Grybauskaitė’s status and legitimacy derive from her twice running for president and winning as a political independent, allowing her to stay above the fray of contentious and scandal-ridden national politics. Thus, in her ascendance to national prominence, Grybauskaitė acted as a populist leader who established a personal, even ‘intimate’ relationship with her followers, unmediated by political organizations. We would also point to the importance of an ideology of ‘familialism’ in shaping her presidency, as there is a tendency by the president to treat society as a surrogate family, and herself as performing parental responsibilities as the head of the household. ‘Familialism’ in the Lithuanian presidency is a historical and cultural legacy of interwar years, when then politically independent Lithuania was ruled by the authoritarian President Antanas Smetona (1926–40). Since Grybauskaitė was elected in 2004, she carried out her presidential responsibilities increasingly in the mode of a leader performing familial responsibilities (a strict, but fair disciplinarian), rather than as the country’s political leader as defined by the constitution. Thus, she has tended to focus on the management of the financial and economic affairs of the state, normally the purview of the prime minister, generating continuous tensions and friction with the prime minister’s office. Commentators even dubbed this tug of war between the president and the prime minister as ‘a rule of two Prime Ministers.’ Due to the president’s populist appeal and genuine popularity, however, she was mostly able to get her way in shaping major (and less important) economic and financial decisions, with the prime minister usually accommodating the president and rarely (directly) challenging her. The contention and conflict over the labor law between the president and the prime minister, described in this section, is typical in this respect.

10. In a wide-ranging interview just before she vetoed the new labor law, Grybauskaitė explained that if it were 15–20 years ago when she was, in her own words, a ‘maximalist’ (ardent supporter of liberalization), she would probably have as forcefully pushed the reform through the Seimas (in her words ‘as a bulldozer’), just as the Prime Minister was doing at the moment. Yet, she changed her position.

Additional information

Notes on contributors

Arunas Juska

Arunas Juska is Professor of Sociology at East Carolina University, USA. He writes extensively on the Baltic region with especial focus on policing and rural development. His most recent research focuses on labour migration, neoliberalism and Baltic labour standards.

Romas Lazutka

Romas Lazutka is Professor at Vilnius University where he teaches courses on social policy and economics. Dr. Lazutka is an expert of the European Social Policy Network and has worked as a consultant for the Lithuanian Government in the areas of social security and poverty reduction. His main research areas are public sector economics, pensions, social assistance and poverty.