Central and Eastern Europe, 1944-1993: Detour from the Periphery to the Periphery

Berend, a Hungarian economic historian who later taught at UCLA and who served in senior academic positions under the communist system, wrote an economic history of the region from the Soviet occupation to the early transition years.

The title states the argument. Central and Eastern Europe was economically peripheral to Western Europe before 1944, adopted a state socialist model intended to close the gap through forced industrialisation, and emerged in 1993 still peripheral, with the gap in most cases wider than before. The detour therefore failed on its own terms.

Berend traces the mechanism. The Soviet model prioritised heavy industry, extracted resources from agriculture, and achieved rapid growth in the 1950s from mobilising underused labour and capital. That extensive growth exhausted itself once the labour reserve was absorbed, and the system proved unable to shift to intensive growth based on productivity, because it had no mechanism for reallocating resources away from established industries, no price signals conveying scarcity, and no way to absorb technological change from outside. He documents the reform attempts, particularly the Hungarian New Economic Mechanism, Yugoslav self-management and Polish episodes, and argues they failed because partial reform of a planned system produces incoherence rather than improvement. The 1970s borrowing from Western banks postponed adjustment and produced the debt crises of the 1980s.

Berend's position as both participant and historian gives the book unusual authority on the reform debates. It is a serious economic history with data, not a memoir.

It was written at the beginning of the transition and its assessment of what would follow is necessarily provisional. Subsequent scholarship, including Berend's own later work, revised the account of the transition years. Kornai's work covers the theory of the shortage economy more rigorously.