Ten Years Later, Central Europe's Economic Vision Still Unrealized

By Breffni O'Rourke

A decade into the transition process in Central and Eastern Europe, democracy is widespread. But there remain wide differences in the level of economic progress achieved by the individual countries. As part of RFE/RL's series marking the tenth anniversary of the events of 1989, correspondent Breffni O'Rourke examines some of these economic differences and seeks explanations.

Prague, 7 October 1999 (RFE/RL) -- Visions, by their nature, are hard to sustain. When the Berlin Wall fell 10 years ago, heralding a new era in Europe, much of the world shared a common vision. It was that the countries of the crumbling Marxist sphere would henceforth join the Western community in enjoying political freedoms and economic prosperity based on market mechanisms.

In the course of the following decade, the dream of democracy has been largely fulfilled -- with some exceptions -- in a vast arc of territory stretching from the Baltic to the Black Sea.

Economic well-being, however, has proved more elusive, and the revitalization of Central and Eastern Europe is still an unfinished story. The transition to market economies has not been easy, and the relative success or lack of success of individual countries reflects a mix of complicated factors.

Only Poland among the transition states has lifted its economic prosperity clearly above the level of 1989. Polish per capita incomes this year are expected to reach about 130 percent of 1989 levels. At the other end of the spectrum, Ukraine, with a stalled reform process, has seen people's incomes plummet to half the levels of 1989.

Because Poland opted for radical reforms, the simple conclusion might be that the so-called "big bang" method produces the best results, despite its high cost in social dislocation. Hungary, too, has successfully opted for a radical course, but Slovenia, Slovakia and the Czech Republic have income levels equal or greater than that of Hungary -- about 100 percent of their 1989 levels -- and have chosen more gradualist paths.

A senior economist with the Paris-based Organization for Economic Cooperation and Development (OECD), Val Koromzay, says that the real lesson of the last decade lies not in a choice between big bang or gradualism. The lesson is that the essential factor is coherent reform. He says time has been reasonably forgiving of countries that have been slower or faster. Those that got into trouble did so because they backtracked away from reform, owing to political opposition or perceived hardship. Poland, Koromzay says, always followed a clear line. He spoke recently with RFE/RL:

"They were always moving in the same direction and despite numerous changes of government, I think one can see clearly a thread of continuity, a direction."

Koromzay says that Romania, by contrast, has lacked this sense of purpose, and its political will has faded. He argues that nervous governments have sought to spare the population the pain of restructuring, but instead have condemned the people to a continuation of miserable living standards with little prospect of improvement:

"In Romania from the beginning there was this terrible concern about hardships that transition would cause, and every time they came to a hard decision, for instance on tightening budget constraints on enterprises, too often they blinked. And that in turn fed back and made their macro-economic policies incoherent."

Koromzay sees Bulgaria in another light. That country wasted the early years of transition under non-reformist governments. Its industrial production is still one-third less than in 1989, but recently it has gained fresh momentum under reformist Prime Minister Ivan Kostov. Koromzay says that is encouraging.

"Bulgaria is a different kind of lesson. It's a country which did not get its act together for a number of years, but it shows on the one hand how costly it is to delay, but on the other hand that if you can get your act together even at a rather late date, the possibilities for breaking out of a very bad situation continue to exist."

Progress across the transition region is needed soon, because after a decade of profound change, people are weary. In the Czech Republic, opinion polls show rising support for the communists among frustrated voters. Likewise in eastern Germany, recent state elections show strong support for the former communists. And in Poland, populist-nationalist trends opposed to reform are evident.

Another expert in the region's transition process, Giovanni Cornia of the United Nations University in Helsinki, says that democracy without economic progress is insufficient. He spoke recently with RFE/RL.

"Democracy with falling incomes and rising mortality is not a particularly attractive type of democracy."

Cornia looks on the darker side of the last decade and counts the social costs, such as the sharply rising death rates that characterized the early years of transition.

On broader themes, Cornia advances another theory to explain, at least in part, why some countries have done better than others. He says the countries that are succeeding today are those that have a better-developed institutional framework, dating in part from before the communist era. In other words, those nations of Central Europe that were traditionally more institutionally advanced than, say, their neighbors in the Balkans, are the ones that will lead the race back into the market economy today.