Europe’s Third World: The European Periphery in the Interwar Years

Published by EH.NET (June 2007)

Derek H. Aldcroft, Europe’s Third World: The European Periphery in the Interwar Years. Aldershot: Ashgate, 2006. xi + 217 pp. $100 (cloth), ISBN: 0-7546-0599-X.

Reviewed for EH.NET by Nikolaus Wolf, Centre for the Study of Globalisation and Regionalisation, University of Warwick.

Aldrcoft’s book is a compact and very useful survey on what we know about the economic development of the European Periphery during the interwar years. In large parts it reads like an extension of Berend and Ranki (1982) into the 1930s and like Berend and Ranki, Aldcroft refuses to present an overarching scheme or some unified model for the European Periphery. The main virtue of the book is to synthesize in a highly readable way a vast literature on the puzzling persistence of economic backwardness outside the north-western European core. Moreover, the book underlines the urgent need for further comparative research into the economic history of the Europe’s periphery.

The book is organised in nine chapters, covering thirteen European countries, namely Poland and Hungary in Central Europe, the three Baltic States, the Balkan countries of Albania, Bulgaria, Romania and Yugoslavia, and the Mediterranean countries of Turkey, Greece, Spain, and Portugal. There are many informative comparative tables on these countries, a list of references that is quite impressive (though of course incomplete: I missed for example the excellent 1997 book of Feinstein, Toniolo and Temin) given the shortness of the text, and a very good index. But the reader will not find any maps, except the one on the front cover, which is rather misleading about the geographical scope of the book. This absence of maps is understandable from a publisher’s perspective, especially because the cartography of Europe after 1914 is rather challenging, but it is hard to justify from an academic point of view. Good maps on the ethno-linguistic patchwork, on the extreme differences in natural geography, or on the presence or absence of infrastructure across the European Periphery would have been very telling about the economics of this region.

The first chapter argues for an “economic rather than a geographic” (page 3) definition of the European Periphery, encompassing those countries as peripheral which at the turn of the last century still had at least 50 percent of their population dependent on agriculture and with per capita incomes of less than 50 percent of the advanced European nations. On these grounds the exclusion of Czechoslovakia from the book is straightforward, but less so the exclusion of Italy. Here and elsewhere in the book, Aldcroft should have touched upon the massive regional differences within countries that prevailed during the interwar years. Then of course the exclusion of southern Italy but also that of Slovakia from the European Periphery would have become even more debatable, as well as the inclusion of Upper Silesia or some parts of Spain into the periphery: geography matters and I will come back to this. The chapter continues with a description of several common characteristics of these peripheral countries, which implicitly also indicates Aldcroft’s conceptual framework for economic backwardness as such. All countries showed a low land and labor productivity in agriculture, coupled with a not much higher productivity in industry, which is reflected in the dominance of primary commodities in their foreign trade. Urbanization rates were much below Western Europe and the development of infrastructure and capital in a broad sense lagged behind. A growing population was fragmented into a diversity of ethno-linguistic groups, which contributed to political instability and helped to bring about authoritarian regimes. Chapter two elaborates on this to describe the situation of Europe’s periphery prior to 1914: agriculture hampered rather than helped economic progress, human capital formation was slow and institutions poor. It also touches upon the “core-periphery” concept of development limited by economic dependency, but Aldcroft is skeptical about its general applicability (pp. 19-23).

Chapter three on “Peripheral Europe in the Interwar Setting” is the key narrative of the book as it surveys in about thirty pages the interwar experience of the thirteen countries in question. Here Aldcroft shows his outstanding command of a vast literature to tell a tale of many small and often young states fighting against a series of disasters. After a brief description of the difficult post-war reconstruction he rightly points to the fragility of the economic upturn in the late 1920s. Manufacturing production in the periphery grew, but all too often nurtured by subsidies and tariff protection, while still too slow to induce any structural change. When the Great Depression hit, it made a bad situation worse, by limiting access to markets while (often) increasing the debt burden. Aldcroft argues that the policy turn towards strategies of economic nationalism in most parts of the European Periphery during the mid-1930s was essentially without alternative (page 59). He mentions the raising share of defense spending in public expenditure due to a climate of military threat and concludes that “the international background … was scarcely the most auspicious of environments for latecomers to modern development” (page 67). It might have been rewarding to explore that international background a bit closer ? I missed some reference to the work of Eichengreen on international cooperation or more specifically to Ritschl on the international reparations problem. Instead, the following chapters (four to eight) look into some details of the country-specific experiences, before chapter nine concludes with a question mark on “development stalled?”

The country chapters give a concise and suitable introduction into the economic development of the periphery during these years. While Aldcroft acknowledges that the available data on the overall performance of the peripheral economies “should be treated with some caution” (page 172), the data show an intriguing variety in experience. The Baltic countries fared better than most of the Periphery, especially Estonia and Latvia, as did Greece or Bulgaria compared to the rest of the Balkans. Albania did ? for the little we know about it ? develop least, while Poland struggled for most of the period to catch-up to her pre-war level. This cross-country variation within the European Periphery, but also the changes over time that Aldcroft’s survey depicts in a very compact manner, suggest to this reviewer a reconsideration of the “core-periphery” debate in a way that places geography where it belongs: at the very heart of economic development.

As stated earlier, Aldcroft used an “economic rather than a geographic” (page 3) definition of the European Periphery, but he is reluctant to provide the reader with a conceptual framework to make economic sense of it. Paradoxically, geography might deliver such an economic framework. Rosenstein-Rodan’s landmark work of 1943 on economic development dealt with Eastern and South-Eastern Europe, and was elaborated in the work of Krugman and others on the “new” Economic Geography. In Krugman (1991), and in the vast literature that has developed in the wake of Krugman, a core-periphery pattern emerges from the notion that different access to markets can be self-replicating, without any recurrence to economic dependency or exploitation. Aldcroft’s whole book can be read as a history of failed development due to bad access to markets for peripheral countries, made worse by the limits that international politics imposed, especially for the new stats of Eastern Europe. A suitable example is provided by Poland between the wars. The reunification of Poland inevitably reduced the size of her accessible markets in the early 1920s as the Polish domestic market was far too small to make good for the loss of access to Russia. The implied dependency on German markets threatened the state, and Poland tried to channel her trade over the Baltic Sea ? often competing with Britain ? and improve access to “friendly” capital. When Scandinavia entered the Sterling Bloc and capital inflows dried up, Poland was left with a possibly hopeless strategy of autarchic industrialization that started in 1936. Other countries seem to fit into such a picture. Countries that fared best in the 1930s were those with (politically enabled) access to significant markets: Bulgaria and Greece that opened up to Nazi Germany; Estonia and Latvia that became de facto part of the Sterling bloc. The data on many of these states are still very poor, but there are signs for some improvement. While we still lack reliable GDP estimates for Poland, Latvia, Lithuania, or Albania, recent work on Estonia (by Jaak Velge) or Bulgaria (by Ivanov and Tooze) has started to fill some of those gaps and may help to rewrite the history of the European Periphery some day.

For the time being, Aldcroft’s book provides a highly readable and compact survey on what we currently know about the economic development of Europe’s periphery during the interwar years, linking up with the work of Berend and Ranki (1982) for the period up to 1914. It is a good starting point for further research into one of the most promising areas in European economic history.

References:

Ivan T. Berend and Gyoergy Ranki (1982), The European Periphery and Industrialization, 1780-1914, New York: Cambridge University Press.

Charles Feinstein, Gianni Toniolo, and Peter Temin (1997), The European Economy between the Wars, Oxford: Oxford University Press.

Paul Rosenstein-Rodan (1943), “Problems of Industrialization of Eastern and South-Eastern Europe,” Economic Journal 53: 202-11.

Paul Krugman (1991), “Increasing Returns and Economic Geography,” Journal of Political Economy 99: 183-99.

Nikolaus Wolf is a Senior Research fellow at the Centre for the Study of Globalisation and Regionalisation (CSGR), University of Warwick and a Research Affiliate (International Trade) at the CEPR. He works on European economic geography in the long run. Recent publications include “Estimating Financial Integration in the Middle Ages: What Can We Learn from a TAR-model?” Journal of Economic History (2006), with Oliver Volckart and “Endowments vs. Market Potential: What Explains the Relocation of Industry after the Polish Unification in 1918?” Explorations in Economic History (2007).