What are the origins of East Central Europe’s economic backwardness?

On the basis of Andrew C. Janos’s 1989 and 2001 papers

In the first part I’d like to elaborate on the argument stated in Janos’s 1989 paper.

In the beginning of the paper Janos writes about several theories, which were developed in order to explain the economic differences between countries. Later he demonstrates each of these theories in some aspect regarding the backwardness of CEE countries. The most popular of these schools of political economy are those in whose center of attention are scarcity and abundance. The second branch of theories revolve around the notion of nation states and etatism. The main point here is that poverty demands more etatism, but more etatism may still result in poverty and relative backwardness. The third collection of opinions places the emphasis on the international demonstration effect, changin human needs and relative deprivation.

Based on these theoretical pillars, mentioned above, Janos develops a genuine view of CEE backwardness. He states that the relative poverty of CEE has it’s origins in the first agricultural revolution, which dates back to the long 16th century. This time the innovation hub of Europe was the region of England, Netherland, North France and the Rhineland. Therefore the revolutionization of agriculture happened here. This caused a population boom, better quality of life and higher food safety. Thanks to better technologies people had more time to engage in other activities like studying, thinking or just to be more subtle, even military had a better quality catering. However the mentioned innovations spread extremely slowly, according to Janos, the new ways of cultivating crops reached Hungary only around the beginning of the 19th century. So we can see that this may produce serious relative backwardness towards other parts of Europe. I believe in this context this is a valid argument, however nowadays it does not hold.

The The spreading of innovation is extremely fast paced nowadays, since we have highly connected networks, like the internet. diffusion thoughts, innovations, ideas and product in these networks happens in minutes, not in centuries. This diffusion of information is not just able to happen, but it’s an economic necessity for every entrepreneur to happen . In 2015 if somebody starts a firm, which aims to revolutionize agriculture, he sees the whole World as his market, since there aren’t boundaries anymore, limiting such a distintive idea to just a country or a region. I believe that the only question right now is, that a given country is how connected to the system of globalization, if it’s well wired, the relative inequality to the core nations will diminish in the future. On the other hand countries like North Korea or Saudi Arabia will have problems regarding this in the future.

In the second part I’d like to elaborate on the argument stated in Janos’s 2001 paper.

In this paper Janos draws comparison between the effect of two hegemonic powers Soviet Union and the West. In my opinion this comparison is valid.

If we think about the motives of the Soviet Union and the West we see the same, ice-cold, economic rationale on one side and major historical opportunism on the other.

Under economic motives I mean that the Soviet Union had to rebuild itself after severe damages caused by the two world wars. As Janos writes this happened through a classic colonial explotation of the occupied countries. The Western powers simply seen an exceptional opportunity to subsidize and invest into the economies of the countries of Central and Eastern Europe. If we think in terms of the stock market we can realize that the changing of regimes created a bear market for long term investments. There were cheap assets with a relatively unpredictable risk level. We also shouldn’t forget the fact that investors had the unique possibility to lower the country risk of their investments through the subsidies, military and political pressure of their native countries.

Historical opportunism means in my intepretation the process that if a great power recognizes an opportunity to gain more power, it will live up to it. This happened in 1945 and in 1989. In 1945 the Soviet Union grasped the opportunity to enter the political vacuum in CEE. In 1989 the same happened by the surprsied west, which does not expected a collapsing Soviet Union. Both times the reigning hegemony tried to export his culture and consumer habits. It seems now the west was more succesful.

As I’ve written in a sense it’s an interesting and sound comparison, but on the other hand we can’t compare the underlying ideas of the two hegemonies. Since I believe that communism should have remained an interesting though experiment while capitalism can be a building block of a succesful society.

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