Eight years after the Berlin Wall’s collapse, how meaningful are the political and economic differences that once divided Eastern and Western Europe? Herewith, a primer on the transition to democracy and capitalism in the old Soviet bloc and former Soviet Republics.
Statistics gauging economic change since communism’s collapse are deceptive. All countries initially foundered. Only since 1993, with the onset of widespread privatization of economic activity, have most of them grown. However, even post-1993 averages (compiled by the U.S. Agency for International Development from international lending-agency data) may be misleading in evaluating economic success. Take Albania, which averaged 8.4 percent growth during this period–and attribute much (perhaps all) of its measured growth to a massive Ponzi scheme, which collapsed this winter, bringing down the entire Albanian economy.
Central Europe
Czech Republic (2.7 percent growth–measured for all countries as average annual GDP change since 1993–75 percent private-sector share of GDP in 1996. Democracy strong: free elections; successful transfer of power; free media.) Despite economic growth and the lowest unemployment in Eastern Europe, the Czech economy has suffered a recent setback. In the last six months, several of the nation’s biggest banks collapsed because of loose lending and fraud. To reassure foreign investors, last week conservative Prime Minister Václav Klaus announced a 5 percent cut in government spending. Opposition Social Democrats may use Klaus’ austerity program to mobilize growing discontent. Chain-smoking President Václav Havel’s failing health is another concern. Though Havel’s position is largely ceremonial, he helps give credibility to the widely mistrusted bureaucracy and police.
Hungary(1.25 percent growth; 73 percent private. Democracy strong: free elections; successful transfer of power; constitutional protection for the media and minorities.) Because it privatized early and aggressively, Hungary has attracted $15 billion in foreign investment since 1989–more than any other Eastern European nation. To curry favor with NATO and the European Union, for the last two years its centrist government (led by Gyula Horn, also an ex-Communist) has battled popular nationalist parties. It installed Western-style legal protections for minorities and gave up long-standing claims to Transylvania, the Hungarian-populated section of Romania.
P oland (5.25 percent growth; 60 percent private. Democracy strong: free elections; successful transfer of power; no state-run media.) It is considered Eastern Europe’s greatest economic success. Poland’s government privatized more cautiously than Hungary’s or the Czech Republic’s. Western fears about the 1995 election of ex-party apparatchik Aleksander Kwasniewski as president (displacing Lech Walesa, who calls him the “red spider”) have been allayed by Kwasniewski’s support for further privatization and his enthusiasm for NATO expansion. (This summer Poland, Hungary, and the Czech Republic will probably be invited to join the alliance.) Amid much protest from the right wing, Kwasniewski’s government restored the legal rights to abortion and divorce removed by the Walesa government.
Romania(4.7 percent growth; 50 percent private. Democracy relatively weak: free and fair elections; state-controlled media.) Communist Party boss (ostensibly a social democrat) Ion Iliescu ruled between a mob’s execution of longtime strongman Nicolae Ceausescu in 1989 and his own loss of an election last year. His successor, a geology professor named Emil Constantinescu, promised rapid privatization and protection for an independent media. Romania is jockeying to be included in NATO expansion, but nobody takes its candidacy seriously.
Slovakia(3.65 percent growth; 70 percent private. Democracy relatively weak: free elections; strong state security force; state-pressured media.) Inheriting the most depressed regions of former Czechoslovakia and a massive, outmoded arms-manufacturing industry, it fared badly after its 1992-1993 split with the Czech Republic. Slovakia has had less success than other Central European countries at ousting corrupt Communist bosses from its bureaucracy. Prime Minister Vladimír Meciar is accused of having orchestrated the kidnapping of the Slovakian president’s son, among other charges.
The Balkans
Albania(8.4 percent growth; 75 percent private. Democracy weak: widespread police killings and beatings; no free elections; state-controlled media.) Between 50 percent and 90 percent of the country invested nearly $3 billion in a Ponzi scheme that collapsed this winter. When the government failed to fulfill promises to compensate investors, rioters pillaged the capital, Tirana, and battled government-organized militias. So far the staunchly anti-Communist government has relied on repression to survive the crisis.
Bosnia(No economic data. Democracy weak: elections held last September amid accusations of fraud.) Thoroughly destroyed by war, it is economically devastated and ethnically divided. The Dayton Accord separates the country into two provinces: the Muslim-dominated Bosnian Federation and the Serbian Republika Srpska. Serbian and Croatian minorities complain they will not get a fair shake in the Muslim-majority state. The U.S. military will leave Bosnia at the end of this year.
Bulgaria(-2 percent growth; 45 percent private. Democracy weak: no elections until this month.) Bulgaria’s economy remains socialist. Price controls are drastic: McDonald’s restaurants in Bulgaria sell the cheapest Big Macs in the world, and oil costs the same as in Saudi Arabia. Shortages and slipping wages sparked street protests this winter that forced the ruling socialists to hand power over to a caretaker government. A centrist coalition won elections this month. Emigration to Western Europe has been significant: Five hundred thousand people have left Bulgaria (total population, 9 million) since 1989.
Croatia(0.15 percent growth; 50 percent private. Democracy questionable: allegations of electoral fraud; authoritarian but popular government; little repression of media.) Since Yugoslavia’s disintegration, Franjo Tudjman, a right-wing dictator, has exploited Croatian nationalist sentiments. Demonstrations this winter against Tudjman quickly dissipated (at the time, he was being treated in the United States for cancer–he may not live much longer). Despite rampant war profiteering and a large state presence in the economy, growth has been steady, and Tudjman remains popular.
Macedonia (-3.2 percent growth; 50 percent private. Democracy relatively strong: free elections, though minority groups claim oppression.) Though Macedonia avoided the Balkan War, ethnic tensions and instability are a problem. Last year, the country’s liberal, pro-West president was seriously injured in a car-bomb attack. A Greek minority demands that Macedonia, with its ethnically Albanian majority, be absorbed into Greece.
Serbia(No economic data. Democracy weak: corruption during elections; state-controlled media.) Slobodan Milosevic, an old party boss, has retained power since 1989, appealing to Serbian chauvinism to elude liberal reforms. War, hyperinflation, and unemployment, however, have recently undermined his popularity. Two months of street protests this winter were said to presage his ouster. His concession of the opposition’s demands (recognition of local election results and reopening of nonstate-run media), however, ultimately solidified Milosevic’s control.
Slovenia(3.5 percent growth; 45 percent private. Democracy relatively strong: free elections; constitutional protection for the media and minorities.) The most Western, liberal, and independent of the former Yugoslav republics, Slovenia escaped the Balkan War unscathed. Unlike the other agriculture-dependent Balkan economies, Slovenia has a significant manufacturing sector, much of it high-tech. Its per capita income is already higher than those of Portugal and Greece, members of the EU. However, because of its reluctance to privatize, foreign investment is scant, and growth has been lower than predicted.
The Baltics
Estonia(-1.25 percent growth; 75 percent private. Democracy relatively strong: safeguards against police abuse and state interference in the media.) Thanks to Finnish and Swedish investment, Estonia is the most prosperous Baltic state, though its recovery did not begin until 1995. Russia still maintains military bases near its border, and Estonia relies on Russian oil and gas. But Estonia has been increasingly defiant: It switched official allegiance from the Russian to the Greek Orthodox Church, criticized Russia’s war in Chechnya, and imposed requirements that make it difficult for its Russian-speaking minority to become citizens.
Latvia(-3.1 percent growth; 60 percent private. Democracy relatively strong: free elections; successful transfer of power.) Economists predict the country will soon benefit from its tight controls on inflation, which have stymied short-term growth. For the last two years, Latvia has been governed by a six-party “rainbow coalition.”
Lithuania(-4.2 percent growth; 65 percent private. Democracy strong: free elections; successful transfer of power.) After flirting with a return to communism, party bosses retook power in 1992. The conservative Vytautas Landsbergis–musicologist, former chess champion, and post-Communist Lithuania’s first prime minister (between 1991 and 1992)–was re-elected last year. The economy has foundered since the Soviet Union’s collapse.
Western Soviet Republics
Belarus(-7.8 percent growth; 15 percent private. Democracy nonexistent: no independent judiciary; repressive state security apparatus; state-controlled media.) The most Soviet of the former Soviet republics, it is ruled by Alexander Lukashenko, a dictator who recently consolidated his personal control over the country’s media and secret police. He has enhanced the country’s ties to Russia, vociferously opposes NATO expansion, and alleges that fledgling opposition movements are CIA plants (there is no evidence of this).
Moldova(-8.6 percent growth; 40 percent private. Democracy relatively weak: free elections; hostility toward minorities; government interference with press.) Initially touted as a model of reform, Moldova is now in a shambles. A rebellion by Ukrainian and Russian-speaking minorities ended in 1992, with the Romanian-speaking majority government retaining control over only half of the country. It was the center of a recently shut-down Internet porn scam that charged unwitting customers, mainly Americans, the cost of a long-distance call to Moldova when they downloaded dirty pictures.
Ukraine(-14.8 percent growth; 40 percent private. Democracy weak: widespread corruption and organized crime.) Fifty percent of the economy is invested in the black market to avoid taxes (as high as 89 percent) and corrupt government officials–largely former Communists who require under-the-table payments. Consequently, foreigners have only reluctantly invested $700 million–the same amount as in Estonia, which is only a fraction of the size of Ukraine. The government disbanded its nuclear arsenal in 1994 after a U.S. payment of $400 million. Despite nationalist hostility toward Russia, Ukraine remains too dependent to do anything more than grumble about the Russian military’s continued use of its ports.
Transcaucasian Republics
Armenia(1.03 percent growth; 50 percent private. Democracy weak: allegations of election fraud; arbitrary arrests; restrictions on freedom of press.) Alienated by its Muslim neighbors–Turkey to the west, Iran to the south, and Azerbaijan to the east–Armenia aligns itself with Georgia and Russia (which keeps 12,000 troops on Armenia’s border). An influential Armenian-American diaspora helps the country get more U.S. aid per capitathan any country except Israel. Since 1994, it has been ruled by an autocratic intellectual, who has banned opposition parties and controls the media.
Azerbaijan(-13.5 percent growth; 25 percent private. Democracy nonexistent: widespread corruption; no free elections; repression of minorities.) A recent cease-fire ended the Muslim government’s six-year war with Armenia over control of a Christian enclave in the northeast part of the country. Afterward, oil companies scrambled to tap its prodigious reserves. Before the Soviets took over, Azerbaijan was a boom country that attracted hundreds of European speculators. The government has been unstable–done in by a series of coups and the continued rule of Communist bosses.
Georgia(-15.75 percent growth; 50 percent private. Democracy fairly strong: free elections but continued human-rights abuses, including torture and forced confessions.) Western expectations for Georgia–the highly regarded former Soviet Foreign Minister Eduard Shevardnadze is the president–have been disappointed. The government battles rebels from Abkhazia, a Muslim province in the country’s northwest. Russia still maintains thousands of troops in Georgia. Only last year did the country begin to emerge from a severe depression, but it still lacks consistent electricity in Tbilisi, its capital.
