Regimes, Politics, and Markets: Democratization and Economic Change in Southern and Eastern Europe

By José María Maravall; Justin Byrne | Go to book overview
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2
The Economic Effects of Dictatorships

How did economic conditions affect the political regimes in Southern and Eastern Europe? And what effects did the regimes have on the economies? Evidently, economic conditions in these countries varied very considerably. Prior to the change of political regime, the economies were affected to very different degrees by the excessive burden of the states' falling competitiveness, public deficits, and unemployment. In Southern Europe, there was no system of public ownership and state economic planning. Currencies were convertible, exchange rates were not artificial, black markets did not exist, and generally speaking, prices reflected supply and demand. Inflation was high, but not out of control; at the beginning of the transition it stood at around 20% in Portugal, Greece, and Spain. The per capita foreign debt was also relatively low; at its highest, in Greece, it amounted to $331 per person in 1974. Similarly, although the Eastern European economies shared a number of basic characteristics, there also existed notable differences between them. Thus in 1989, whilst inflation was running at 251.1% in Poland, it stood at only 17% in Hungary, and 1.4% in Czechoslovakia. Whilst the per capita foreign debt in Hungary and Poland was immense ($1,656 and $1,113, respectively), it was much lower in Czechoslovakia ($444). Although the period of economic expansion had come to an end in all these countries, whilst Romania and Bulgaria had negative growth rates (-5.8% and -0.4%, respectively), Czechoslovakia maintained a positive rate of 1.5%.

It is obvious that economic polices are to a large extent determined by the conditions of the respective national economies. However, variations in these conditions do not prevent the comparative analysis of economic reforms. The nature of these reforms also depends on political factors such as a government's political support, and the priorities, ideologies, and competence of decisionmakers. These factors affect both the design of reforms (regarding

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