Introduction: The Transition in Central and Eastern Europe

Gareth Dale

It is over two decades since the economies of Soviet Central and Eastern Europe (CEE) experienced their 'transition' to the market. The ongoing restructuring of the region has been the subject of successive waves of analysis as new events occur: the accession of erstwhile Warsaw Pact members to the European Union (EU) and NATO, the 'colour revolutions' in Georgia, Ukraine and Kyrgyzstan, and the oil and gas price boom which fuelled the Russian economy's return to growth. The global recession of 2008–9 has ushered in a new phase, and it is this, the impact of the world economic crisis on CEE, that provides the central focus of this volume.

The chapters in this volume cover a representative range of CEE countries, from the former Soviet Union to the Visegrád Four (the Czech Republic, Hungary, Poland and Slovakia), including states both big (Russia) and small (Latvia), and which are within and outwith the EU and NATO. The tenor of contributions is critical. While acknowledging that the freedoms achieved in much of CEE – of speech, assembly, organisation and the vote – represent resounding victories for the mass movements of 1989, contributors take issue with the mainstream account of the transition, according to which archaic economies and closed societies gave way, aided by aid and expertise from the West, to efficient markets and democratic polities. Instead, they paint a picture of persistently low productivity and repeated crises, of self-serving Western involvement, of retrenched forms of servitude and 'managed democracy' and of an undergrowth of rent-seeking and corruption that flourishes within the market environment.

In this introductory chapter we set the scene with a summary analysis of the demise of the Soviet economic model and the broad social and political trends that bore upon the events of 1989, before surveying the arguments made in the substantive chapters concerning the 'transition' of the 1990s.

THE DEMISE OF THE SOVIET MODEL

Although state ownership of the means of production was nominally socialist, G. M. Tamás and Stuart Shields (Chapters 2 and 8) argue, the Soviet-type economies were constructed from a recognisably capitalist set of constituent parts: the separation of the means of production from the producers, wage labour and the coercion to work, money and the drive to accumulate capital – an imperative that was decreed by both geopolitical and geo-economic competition. The Soviet Union found itself positioned outside, and in competition with, what some authors call the 'liberal-capitalist heartland'. For some of the nineteenth and much of the twentieth centuries, the 'catch-up' attempts by challengers to the liberal heartland powers, relying as they did on the direct mobilisation of people and allocation of resources, constructed forms of state that were relatively differentiated from society, proactive in economic development and heavily reliant on centralised administration. It was a 'variety of capitalism' that flourished especially at times when intense geopolitical competition coincided with economic deglobalisation, and where backward economies led by modernising elites engaged in catch-up industrialisation. De-globalisation – the breakdown of international trade and capital flows – encourages the 'nationalisation' of domestic economies. Militarism draws states into an economic coordination role, notably of the arms industry and other strategic sectors. And where a low propensity to save meets a high demand for investment, coercion offers a solution – where the land is barren and productivity low, as Nigel Harris put it, 'only a very powerful army and police force can snatch the surplus for national investment between the peasant's hand and mouth'.

Geopolitical competition on the basis of economic backwardness locked the Soviet Union and its allies into a peculiar economic structure, characterised by relative autarky, an emphasis on heavy industry, a high savings ratio, allocation by administrative decision and an extensive use of political incentives and ideological appeals geared to increasing output. These features, Oskar Lange and others have noted, are typical of war economies. In the words of the vice president of the GDR's State Planning Commission, they represented an attempt 'to transpose the economic rationality of capitalist enterprises onto the national economy as a whole'.

Although 'backward' compared to the liberal heartland, the Soviet-type regimes were in many respects brazenly modern. They mobilised their populations in the service of rapid economic growth and a future-oriented ideology; they applied science and technology systematically to the production process and Taylorist techniques to the labour process; and they imposed performance targets on employees within all social institutions. At least during the early decades, moreover, social mobility was rapid. As Tamás describes:

The change from village to town, from back-breaking physical work in the fields to technological work in the factory, from hunger, filth and misery to modest cafeteria meals, hot water and indoor plumbing was breathtaking – and the cultural change dramatic. Also the route from illiteracy and the inability to read a clock face to Brecht and Bartók was astonishingly short.

The Soviet model proved well adapted as a framework for capital accumulation within backward economies during a world-economic epoch of relative autarky. In the 1950s and 1960s large parts of CEE industrialised and some oversaw successful shifts of investment into high-tech sectors, such as aerospace and electronics. However, structures that had evolved in the 1930s and 1940s became obstacles to competitiveness as the ability to gain external markets and organise production on a transnational basis became a divider between winners and losers in the world economy. The Soviet system was structurally resistant to the trend. Trade was mediated through export...