The Eastern European Economy in Context: Communism and the Transition

By David Turnock | Go to book overview
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8

PROSPECTS FOR THE REGIONS OF EASTERN EUROPE

Under socialism, regional development existed only at the level of ideological proclamations, for, according to Enyedi (1990), progress depended on the haphazard outcome of various sectoral decisions taken by ministries. The stronger regions were restrained by what Dostal and Hampl (1994, p.204) describe as 'the policy of nivelization of interregional disparities in living standards based on the industrialization campaign [which involved] an extraordinary suppression of any important selective tendencies at the interregional level'. Moreover, although they benefited from low energy costs, maintained by the FSU for the benefit of its allies through the 1980s, the regions of Eastern Europe did not enjoy the post-war economic boom experienced in Western Europe or the high levels of technological innovation which persistently marginalised the smoke-stack industries so strongly encouraged in the east. They had access to relatively undemanding markets in the FSU, but rejected specialisation in preference for a more autarkic approach which required heavy capital borrowings from the West to modernise and diversify exports. But while East European industries supplied each home market (and generated a good deal of pollution in the process), they rarely achieved the levels of efficiency necessary for a rewarding export business. Moreover, although the more dynamic regions were held back, there were still significant variations between regions at the end of the communist period (Tables 8.1 and 8.2).

Investment is now much more dependent on wider global considerations through external scrutiny of Eastern Europe's potentials. The Balkan countries tend to be regarded as relatively risky whereas Poland, Slovakia and Slovenia seem more stable; while the Czech Republic, FGDR and Hungary are particularly attractive. However, while central government can evolve policies best calculated to stimulate growth there is scope for specific responses to opportunities from individual regions which are now free to establish direct contacts with foreign business (Meegan 1994). The stakes are high because the successful regions will become partially 'disembedded' through the development of strong inter-regional linkages and growing dependence on external institutions (Grabber 1992, 1994). But at the same

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