Academic journal article East European Quarterly

Development Theories in the East European Context: The Impact of New Dependency Theory and Neoclassical Economics

Academic journal article East European Quarterly

Development Theories in the East European Context: The Impact of New Dependency Theory and Neoclassical Economics

Article excerpt

What is the future for East Europe? Academicians are split on this issue. Some believe in the old syllogism pervasive in these former communist nations which states "If it had not been for the system, we would be just like the West" (Przeworski, 1991). Such advocates back the "bitter pill" strategy, involving mass privatizations, trade liberalization, fundamental changes in property rights, and slashing state budgets, They believe a heavy dosage of Western capitalism is enough to transform these once centrally-planned dinosaur economies into free market racehorses in a short period of time.

Others have a more pessimistic attitude about what transition really means for East Europe. Valerie Bunce (1985) worries about the strong likelihood for Western exploitation of the East. In such a context, a plan like the bitter pill would bankrupt Eastern firms and subject labor to slave wages. Adam Przeworski (1991) agrees with the assessment "The East has become the South," contending that an already poor East Europe is destined to fall under the yoke of "poverty capitalism." Even if East Europe is able to rid itself of being tagged a region of poverty-stricken "borscht republics," parity with the West becomes a daunting task. "It is highly unlikely that East and West Europe will ever be regarded on an equal basis," announced Ljubisa Adamovich (1996).

The clash between free market purists and pessimists is the latest in a long line of debates between two schools of thought: modernization and dependency theories. Much of this debate is predicated upon arguments from derived orthodox variants, each of which fails to capture the true circumstances of the current scenario facing East European nations.

Yet neither school of thought is without value. Newer variants of these theories account for many shortcomings of their classical predecessors, and are more effective in identifying potential pitfalls and solutions to these crises. While neo-dependency theory is superior in identifying the problems faced by many of these would-be free marketers, the neo-modernization school has more utility in providing viable alternatives to overcoming such difficulties. From both of these theory improvements a model for East Europe's transition (with improved sensitivity to the external and internal context of economics and politics) can be initiated.

Though the essay will deal with problems encountered by most East European nations and the former Soviet Union, Macedonia will serve as an important focal case study from which evaluations of orthodox and contemporary theories can be made for several reasons. First, Macedonia and other small Balkan states are typically ignored in texts on economic development in East Europe. Evidence will show that these less well known states have the same problems to tackle and opportunities for solutions as Poland, Hungary or the Czech Republic. Second, Macedonia's external political dynamics provide for an excellent test of existing development theories. Finally, a great deal of important insight provided was by Macedonian scholars and other regional experts at a special conference on economic and political transformation in 1996.

On paper, the orthodox version of modernization theory offers macroeconomic and individual prosperity for its followers. The "classical" wing of modernization theory tends to assume that countries which do not belong to the OECD club remain in a "traditional" state of development which is viewed as backward (So, 1990). To reach the promised land of modernization, a Western-style strategy of growth attainment is offered by classical modernist Walt Whitman Rostow.

In Rostow's (1960) modernization plan, a traditional country begins with undeveloped potential but begins to cultivate industries and markets. At this point, deaths decrease due to biomedical and agricultural discoveries leading to a population explosion in the phase called "precondition for takeoff. …

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