Central Europe in the Twentieth Century. An Economic History Perspective

EH.NET BOOK REVIEW

Published by EH.NET (Au gust 1998)

Alice Teichova, editor, Central Europe in the Twentieth Century. An

Economic History Perspective. Aldershot: Ashgate Publishing, 1997. 192

pp. $68.95 (cloth), ISBN: 1-85928-105-2.

Reviewed for EH.NET by Michael Palairet, Department of Economic History,

University of Edinburgh.

The contributors to this collection of essays were set the task of

critically assessing the post-Communist transitions in Central Europe

within their historical

context. Most of the authors are practicing

economists and economic historians in senior positions in east European

institutions. It is the transitions themselves which mainly preoccupy

them; their sense of economic history is in the majority of cases weakly

developed.

If there is a consistent theme running through the collection, it is

about resistance to change, both by observation and by the inclination

of the authors themselves. One of the (unintended) uses of the book is,

therefore, what it tells us of the attitudes to economic transition, and

policy inclinations of east European academic elites. None of the

contributors want to turn the clock back, but the tone of the book is

set by Teichova’s introductory essay,

an outline of the economic history

of Central Europe, which hankers for an elusive middle way, eschews the

Thatcherist “victory of enterprise culture,” and seeks to discredit

“shock therapy,” while all see the re-building of the social safety net

as prerequisite to successful transition.

The most extreme of these views emanates from Jorg Roesler who provides

no historical retrospect, and extends his sympathies for the “anger”

felt by the east Germans (despite the most generous regional aid

programme in history) and warns of the deepening gulf in attitudes

between the west and east of the country. His ideal for the east would

seem to be west German standards of prosperity linked with perpetuation

of the right to rent-gua ranteed inefficiency.

The other central European contributors are aware of the absence of a

comparably bountiful feeding hand to bite, but form a consensus around

the proposition that reform can only progress at a speed compatible with

the inclinations and comprehension of the political elites.

Pruca describes economic development in pre-war and Communist

Czechoslovakia in terms which differ little from the analyses put out by

the country’s “liberal” establishment in the 1970s and

’80s. He admits

that “discontinuity was needed in many areas,” but proceeds to condemn

the abrupt changes (under Vaclav Klaus) which would “undermine the

consensus of society.” (For “society” read entrenched opinion formers.)

Returning to ”

shock therapy:” All excoriate it, yet none bother to

explain what the term was intended to mean, by its originator (or

populariser) Jeffrey Sachs. They seem to understand “shock therapy” as

implying a regime of ruthless cut-backs, but Sachs was more concerned to

engineer reversals of inflation expectations, and to use mainly

macro-economic tools to impose business discipline on enterprise

decision making, and in the widest sense, to foster the norms of civil

society.

This task was undoubtedly ambitious, but nevertheless urgent, if the

modest wealth of these countries was no longer to be dissipated in

supporting failure, and reallocated to meeting human needs. In Henryk

Szlajfer’s short institutional survey of Poland’s de velopment, he notes

that in 1988, 24 percent of Polish manufacturing industry subtracted

value (if its outputs were measured in world prices). Value subtraction

was probably an even greater problem for the still more ossified

Romanian economy

according to Daniel Daianu, who advocates the outright

closure of the value-subtractors, and the restructuring of unprofitable

enterprises which nevertheless add value. Fine – but this surely is the

crux of the matter – organized, entrenched opinion is in eastern Europe

closely linked with the value subtractor interest, and Daianu comes

close to explaining why. The system promoted the over-expansion of

“soft” sectors, (steel, chemicals, machine building) whose outputs were

near-unsale able, because it was easier to expand them than the “hard”

sectors (agriculture, consumers goods, energy). So these “soft”

leviathans became the leading sectors, politically, as well as

economically. Therefore they and their political allies became the

bastions of resistance to change, and continued to impose an

insupportable rent charge on the rest of the economy.

The economic history of Yugoslavia is described from a Slovenian

viewpoint by Franjo Stiblar, but in rather wooden terms. Retaining a

nostalgic affection for workers self management, despite its admitted

inefficiency, he tells us how many theatres, doctors, and convicted

criminals operated in 1938 and 1989 (why?) but little about the causes

of Yugoslavia’s precipitate economic decline in the 1980s. His essay

contains the usual criticism of Markovic’s “shock-therapy” reform of

December 1989.

The only contribution to address the problem thematically rather than in

a national context is Michael Kaser’s study of property rights and

international indebtedness. He points out that most of these countries

have been structural debtors throughout the century. If borrowing had

been channelled into useful capital formation, this would not have been

unjustified. Czechoslovakia, for example, could have benefited from more

borrowing, not less, but unhappily investment under Communism was apt to

create net negative property, because of the environmental damage

associated with it.

Probably the most interesting study in this book is Fritz Weber’s essay

on the Austrian economy after World War II. Its experience of

reconstruction differed from Germany’s, with state control,

egalitarianism and employment maximization given priority above price

stability (which is why today’s schilling is worth only about a seventh

of a deutschmark). Planning was used as a tool (says Weber) for the

restoration of the market economy.

The analogy held out for transitional central Europe seems clear. All

had elaborate total planning systems. As enterprises consequently had no

experience of marketing, and were accustomed to orienting production and

the allocation of supplies and deliveries around plan directives, these

systems could have provided a transitional tool for re-pricing and

reallocating resources, to simulate to some degree the behaviour of a

market, yet they do not seem to have been accorded this role.

(Alice Teichova (editor) is Emeritus Professor of Econo mic History at

the University of East Anglia, and Honorary Fellow of Girton College,

Cambridge University.)

Michael Palairet is author of The Balkan Economies c.1800-1914

(Cambridge University Press, 1997), and specialist in the micro-e conomic

history of former Yugoslavia.