The Role of Eastern Europe in Development Economics' History (1)

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Abstract: Until the 1980s, development economics was dominated by analytical approaches formulated during the 1930s and 1940s in response to international instability. The relative backwardness of Eastern Europe had stimulated early thinking that carried over to the post-World War II agenda of reconstruction and nation-building. This paper examines the influence such analysis had on the history of development economics. Explanations for Eastern Europe's backwardness suggested strategies for development that played an important role in orienting development thinking. In addition, research institutes and development thinkers that had dealt with Eastern Europe played central roles in formulating development economics from the 1940s on.

1 Introduction

Eastern Europe played an important role in the early modern formulation of thinking on 'development economics'. In the interwar period, its location between the more advanced Western Europe and the rapidly advancing Soviet Union raised questions about the causes of its underdevelopment and the possible strategies that could bring about development. Early thinking on 'labour surplus' economies came out of Eastern Europe and the 'Big Push' strategy of development was based on Eastern Europe. Generalisation about development processes based on one geographic area is a common pattern in development thinking. The most recent case is the effort to distil development lessons from the 'East Asian miracle' (IBRD 1993). The early 1990s approach, with the demise of Comecon, was based on Latin America and was termed the Washington Consensus. It favoured liberalisation and market development (Williamson 1990).

It is ironic, and the result of the continuing underdevelopment of Eastern Europe, that these modern lessons directly contradict the earlier lessons. In the thirties and forties, most development economists saw the need for heavy government involvement in the economy. Even the conservative English journal, The Economist, noted in 1942, 'Given the need for state control as a means of exercising a positive and directive function, it remains to evolve a suitable technique' (p. 100). Now the state is assigned a much more limited role, and laissez-faire is often advocated as the key to development. Policy in Eastern Europe should concentrate on 'stripping away the administrative economic cocoon to reveal the butterfly of comparative advantage' (Junz 1991, p. 177), and '[we must] give full scope to the entrepreneurial spirit' (Weschler 1989, p. 89).

Nonetheless, one of the striking similarities in the pattern of development thinkers is their confidence: once the problem is correctly identified, there is little doubt that it can easily be solved. For example, a 1943 study of Eastern Europe's agriculture stated: 'The task may be gigantic; but the men are there, the knowledge is there. They only need to be applied to the job' (Yates and Warriner 1943, p. 67). One of the principal development writers of the same period, Paul N. Rosenstein Rodan, reflected the optimism about the development prospects in Eastern Europe, stating that this was 'in many respects the most fruitful and interesting field of action, because the solution of the problem there can be envisaged within the lifetime of one generation' (Rosenstein-Rodan 1944, p. 159).

In a similar vein, Jeffery Sachs, a central figure in Poland's economic transition, noted in 1991 that the problems of Eastern Europe were primarily political, not economic, and that stable political leadership, acting decisively, would solve the problems of Eastern Europe in a relatively short period of time (Sachs 1991, pp. 26, 31). (2) Sachs's shock therapy for these economies was designed to restructure them so that they could return to the mainstream of European life (Sachs 1991, p. 26), since '(e)ven after forty-five years, they have the makings of a regular European economy here' (Weschler 1989, p. 88). 'The restructuring of Eastern Europe is the great economic experiment of this generation' had much the same ring (Jefferson and Petri 1990, p. …