• Home
• /
• Opinion

Eastern Europe has risen after the fall of the Berlin Wall

Much is made of China's rise from poverty over the past 40 years, but the story of Eastern Europe is just as remarkable. After all, the region is now close to bridging the gap with the Western Europe.

When the Berlin Wall came down on November 9, 1989, that moment instantly became a defining image of the late 20th century, an emotional snapshot frozen in time. Anyone old enough, aware, and sentient can likely tell you exactly where they were and what they were doing when they heard the news.
The end of the Cold War, the promise of democracy, and above all hope for a better future were all manifest in the moment.
Now 30 years on, more of a prosaic outlook and some disappointments are clear in former Communist bloc countries. Nationalism and right-wing parties seem to be gaining strength in Eastern Europe and the flight of human capital to other countries is a problem for some. They still lag Western Europe in per capita income, quality of life, and overall development.
But by most metrics, things have improved greatly. The past three decades have brought some of the most dramatic economic growth any region in the world has ever experienced. People are living longer and healthier lives. The quality of air is better and individuals, on an average, are twice as wealthy.
Going just by the numbers, some of the figures appear rather startling. Poland's GDP has risen 788 per cent since 1990, followed by the Slovak Republic at 739 per cent, Estonia at 592, Lithuania with 577, Romania at 514, the Czech Republic at 506, and Hungary with 348 per cent growth in the period.
"In the last 25 years, Poland has offset 500 years of economic stagnation and shortened the distance to the West in terms of the level of income and quality of life to an extent never experienced before. Poland has entered its true Golden Age," Marcin Piatkowski, a former World Bank economist, wrote in a recently published book titled Europe's Growth Champion.
He credits Poland's first economy minister in the open era with having the courage to introduce a shock therapy of sorts that was extremely painful, yet equally effective.
Leszek Balcerowicz, Poland's first post-communist finance minister, launched ambitious reforms that liberalised prices, tightened fiscal and monetary policies, opened the economy to free trade and competition, and made the Polish currency convertible. Over the next two years, economic output fell, wages collapsed, joblessness soared, and poverty rates went up. Yet the housecleaning worked. The country's economy has since grown the most compared with any in Eastern Europe since the Wall fell.
While GDP figures tell the story of economic growth, other numbers measure an improving quality of life. The lifespan of citizens has soared in some countries, with those in Czech Republic living 8.1 extra years on average followed by Slovenia with 8, Poland at 7, Hungary with 6.7 and Croatia at 5.7 additional years in the average lifespan.
And measured by the Gini coefficient that rates economic equality in populations, the region is among the most equitable in the developed world. Slovenia is the most equal country in Europe according to the rating system, followed by the Czech Republic, the Slovak Republic, Hungary, Croatia, Poland and Estonia, all of which rank ahead of France and the UK, and far better than the US, which has a worse score than China for economic inequality.
While communism was an economic disaster, it did leave behind relatively well-educated societies with low levels of inequality because they shared in the poverty. And unlike Russia, Eastern Europe mostly avoided the post-collapse scramble when a few people walked off with the majority of prized former state assets.
Joining the European Union also greatly helped as eight countries in Eastern Europe became part of the single market within 15 years after the Wall fell. Now integrated with the Western European supply chains, entrepreneurial sector has emerged.
Joining the EU also meant operating in an improved institutional setting that helped forestall the rise of monopolies while improving environmental protection from industrial emissions.
But not all the former communist states have been able to nurture homegrown business. Smaller countries are dependent on German manufacturing to provide jobs. "If Volkswagen can't sell to China, Slovakia gets hammered the next day," Piatkowski says in his book.
And as they develop, nations are finding that capitalism and democracy are fraught with challenges of their own. Surprising to many is Eastern Europe's nationalistic, right-wing zeitgeist, seemingly ironic in nations that once suffered under the yoke of authoritarian regimes. But perhaps now finally free to be independent, they are fiercely protective of what it means to just be themselves.
The road ahead will likely be less exciting. After the elation of being set free, the mundane work of governing and growing their countries could be a letdown. Now integrated into a Europe that increasingly carries the signs of a post-industrial landscape to come, margins for growth and improvement will be increasingly hard won.
Still the progress has been stunning. Much is made of China's rise from poverty over the past 40 years, but the story of Eastern Europe is just as remarkable. After all, the region is now close to bridging the gap with the Western Europe, the most economically mature region in the world. It has set the bar high indeed.
Jon Van Housen and Mariella Radaelli are editors at www.luminosityitalia.com