By Piroska Horvath
East Berlin in 1989. A passionately ideologist mother of two falls in a coma for two years, sleeping through the fall of the Berlin wall, reunification of Germany and the dissolution of the socialist era. Instead of facing the reality due to her ill health, her kids try to recreate the good ol’ days, in a time to that is all about change. This award-winning German tragicomedy Goodbye Lennin! gives an insight into the dramatic change people faced in the post-socialist age. This era where countries were challenged with immense cultural shock, crisis of national identity and division in political views.
Fast forward 30 years and Central and Eastern European countries- that were once ruled by socialist powers- have become influential, and equal members in the economic and political climate of Europe. What’s more is that these countries have been playing catch-up on international playing fields, many disadvantaged by foreign imperial dominations since the 19th and early 20th century. Despite this, attempts at integration into the competitive environment and introducing reforms aimed at moving away from centralized planning, can be described as successful.
Yet even in this day and age, if one takes a train ride from Istanbul to London they are faced with not only cultural but significant socio-economic differences between the Eastern and Western parts of Europe. This begs the question whether the effect of the socialist era still creeps into our lives today as millennials and gen Z, and in the socio-economic decisions that the leaders of these countries make? Or after 30 years has its influence been completely erased? And whether the answer to this question can be the explanation in the difference in outlook and governance of these countries?
After World War II, many countries celebrated liberation and freedom, however the Central and Eastern European (CEE) countries fell from one dictatorship to another. The main focus of the socialist economic system was efficiency and strong political control through public ownership of all factors of production. This entailed centralised decision making by individual governments and planned or command economy which was assisted by the creation of the Comecon- Council for Mutual Economic Association in 1949.
Initially, Comecon was responsible for registration of bilateral trade and credit agreements between participating members, but later focus shifted to specialized industrial production. Famous examples of this include Poland’s state owned steel company which was bigger than Great Britain’s at the time; Hungary’s Ikarus factory which was the largest manufacturer of the cross-country buses in all of Europe; Czechoslovakia’s chemical industry; Bulgaria’s industrialized agriculture; and many others. Ultimately, the focus on industrialization and military expansion at the expense of individual consumption meant a rapid modernization and infrastructural developments to CEE countries. Comparing to pre-war levels, people genuinely enjoyed what this system has brought about. For instance, many of the famous soviet brutalist architecture which can be observed till this day, was the manifestation of the utopistic Soviet era in the common person’s eye. Or so they thought.
Despite the much-debated wellbeing and living standards of people in the socialist era, it is even more clear that the West has had a more successful run with their free market economy. The machine that was the socialist economic system, carried built-in obsolescence and faulty parts which slowly but surely meant its collapse. For instance, pricing was arbitrarily determined by the governing body of the member state, thereby market value and the laws of supply and demand were ignored and often trade resorted to bartering. This also induced shortages in food and essential products, all around USSR and its satellite states.
Furthermore, a common argument is that technological innovation and progression was left behind due to the lack of competition and free market. Looking to the West, by the 70s, the automobile market boomed with the increasing popularly in cars such as Mercedes, BMW while Eastern cars have just started to appear as rear attraction on roads and people showed off their newest Lada which arrived 3-4 years after payment. This rapidly changing environment in the West induced by the free market was what the USSR high command tried to catch up on to but ultimately meant their demise. Their stagnating economy in the 70s began to show its flaws and the leader, Mikhail Gorbachev resorted to radical reforms towards decentralization and foreign trade. This encouraged private investment ad greater openness towards the West. While the high command tried to pick up the pieces of the crumbling economy, attitudes of the people towards the west started to change and societal unrest towards liberation started to occur. The Pan European picknick of 1989 held at the Austrian- Hungarian border, set in motion the chain reaction of the disintegration of the Eastern Bloc.
After 1991, there were many steps taken in the road to recovery. CEE countries became the fastest growing economies. As an example, Romania had a 10 % growth rate closely followed by Slovakia and Bulgaria. The main driving factor behind this phenomenon was the increased trade openness and the boom in productivity gains. This generated foreign direct investments which although made it dependent but overall helped these countries catch up to international levels dependent on foreign direct investment. This growth is also demonstrated in a survey by Pew Research which compares life satisfaction in West Germany went from 52% in 1991 to 61% in 2014, to the affected countries: In Russia, life satisfaction was 6% in 1991 and grew to 43% in 2014; in East Germany 15% to 59%. This clearly show the amount of progression CEE countries have made.
Nonetheless, the steps in recovery induced by the collapse of socialism have formed socio-economic norms that still differ in Eastern and Western Europe. Quoting a German newspaper Die Zeit which illustrates differences that left by the old West and East Germany in interesting and interactive maps:
“In the early euphoria following the fall of the Berlin Wall in 1989, Germany moved quickly to erase the scars of its Cold War division. But East Germany’s legacy remains visible in statistics.”
One observed difference by Asparuh Koev, CEO of Transmetrix, and a Bulgarian entrepreneur, even though Westerns have typical more venture capital to invest, Eastern Europeans tend to be more entrepreneurial. The focus on efficiency and production in the Soviet era was rooted in propaganda and early education meaning that there was not much incentive or chance for lower class to go into higher education. This tended to produce many manual labourers rather than leading, intellectual individuals (as leadership tended to be based on nepotism or party loyalty). Consequently, many people opted to pave their own way and create their own business. This was further assisted by the later faced economic struggles, most importantly liberation from state ownership.
Another notable difference is on difficulty of establishing a national identity. As mentioned above, many of the Eastern countries have a long history of foreign dominance which was further complicated by the many visible changes the countries faced in the period of integration such as the dissolution of Yugoslavia or Czechoslovakia in the early 90s. This cultural and economic shock resulted in a stronger sense of belonging, as well as adhering to Christianity and its values. An opinion poll by Pew research shows that people view their countries as much more religious today than it was in the 70s and further found greater association between religion and national identity. Which can be an explaining factor why these countries are likely to have more conservative policies that tend to target family values and national identity and less progressive outlooks on mainstream issues such as LGBTQ+ or immigration.
Further notable difference to natives is the level of life satisfaction. Figures show that life satisfaction in 2019 in ex-Soviet countries are little bit below the standards in Western European countries. West Germany leads with 64% satisfaction rate while the UK and other western countries behind with 57%, Slovakia with 49% and Ukraine and Russian with 25% and 28%, just to mention a few. Even today, Germans feel positively about the unification. However, only 3 in 10 agree that life standards are equal.
There are two main problems with this. Firstly, this prompts many people to emigrate into the West, which means a loss of population, labour force and intellectual minds. Secondly, this gap in life satisfactions inherently means differences in level and style of education, income per capita, health and overall living stands. For example, the above-mentioned German news article created interactive maps of Germany in 2012, which shows a clear divide- as if the wall would still exist- regarding different aspects, such as income per capita, gun ownership, agriculture and many more. This could serve as evidence that, socio-economic divide is another phenomenon consequent of the socialist regime, and still plays an important part in the daily life of people.
The question of this article could be answered by finding the answers to subsequent questions such as “where would eastern and central Europe stand without socialist dominance? Would they be equal of their neighbours or are there other factors which causes these countries to have such divergence from the West?” Obviously, these questions are for a mid-summer night discussion next to a bottle of wine and bear not much relevance this day. But what does, is the fact that Central and Eastern Europe has seen the two extremes of the political spectrum in less than a century. Consequently, as much as these countries try to move on, the shadows of the past still creep up, subtly but just enough to remind us that no political ideology serves people well, if taken to the extreme. And furthermore, how important is to not only respect each other’s opinion but respecting the right to be challenged and opposed on ideas- and thus to do our best so that the tragedies of the past never repeat itself.
The views expressed in this article are the author’s own and may not reflect the opinions of The St Andrews Economist.
Calvo et al, 1992. “Stabilizing a Previously Centrally Planned Economy: Poland 1990”, Economic Policy, Vol. 7, No. 14, Eastern Europe, pp. 175-226, Oxford University Press