The Investor's Shelf — one book
Central and Eastern Europe, 1944-1993: Detou

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

Ivan T. Berend
1996
T3 423 pages · about 7h 3m to read OL2726038Wgoodreads

Economic history that explains the industrial base the Czechs privatised.

Summary

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.

Key takeaways 7

  1. State socialist industrialisation produced rapid growth in the 1950s by mobilising unused labour and capital, and that source was exhausted by the 1960s.
  2. The planned system could not shift from extensive to intensive growth because it had no mechanism for reallocating resources away from existing industries.
  3. Partial reform of a planned economy produces incoherence rather than gradual improvement, because plan and market instructions conflict.
  4. Western bank borrowing in the 1970s postponed necessary adjustment and produced the debt crises of the following decade.
  5. The region entered the communist period economically peripheral to Western Europe and left it more peripheral than before.
  6. Heavy industry priority and agricultural extraction were common to all the region's economies regardless of national differences.
  7. Reform economists inside the system identified the structural problems accurately long before political change made action possible.

Who should read it

Investors and analysts working in Central and Eastern Europe who need the economic history that produced the region's starting position in 1990.

Where it sits in the reference 3

Countries
Countries
Philosophy

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