The Fall of the Eastern Bloc economies - Statistics & Facts
Following the Second World War, an ideological divide split Europe between liberal democracy in the west and communism in the east. Economically, western countries used capitalist systems with free-market economies, whereas eastern countries implemented socialist systems with government-controlled command economies. There were some exceptions, including the eastern democracies of Greece and Turkey, or the fascist Iberian countries, but most of the continent fell into this general pattern. The Soviet model became the foundation for most post-war command economies in the Eastern Bloc, and international trade became centered around the Soviet Union. The Council for Mutual Economic Assistance (COMECON/CMEA) was established by the USSR in order to consolidate Soviet power and economic control over the region, and to prevent the U.S. from gaining influence in communist countries as it did in Western Europe. Yugoslavia and Albania were considered a part of the Eastern Bloc for most of this time but played a more peripheral economic role as time progressed.
After recovery from the war, virtually all the Eastern Bloc countries experienced explosive economic growth during what became the continent’s most prosperous period. Eastern Europe often outpaced the west in many areas, during a time that brought about significant change for the people of Central and Eastern Europe; and rapid industrialization led to urbanization, while new technologies and the socialist system transformed daily life. Self-sustainability was at the core of communist ideology (particularly under Stalin’s influence), and in early years international trade was relatively low. When expanded, trade was largely kept between communist countries, with the USSR becoming the largest trading partner of the other COMECON countries. The USSR’s trade with other Eastern Bloc countries was, however, detrimental at times as imported goods were often more expensive and of poorer quality than those available from the west or Asia. Nonetheless, trade was kept within the Bloc in order to foster mutual growth and prevent foreign influence, but commitment to this system would eventually lead to the economic collapse of communist Europe.
Polish excess and the rise of Solidarity
As the USSR gradually allowed other COMECON members to trade with the west, some countries embraced this more than others. Poland developed the strongest ties under the Gierek regime in the 1970s and attempted to strengthen its position within COMECON trading bloc by importing western machinery to produce better quality goods. This worked for a brief period, and Poland saw the largest economic growth in the east by 1972, but one year later, conflict in the Middle East led to an oil embargo on Western countries, which had a knock on effect on Poland's economy. The 1973-1975 recession saw a decrease in the demand for Polish exports, an increase in the price of western imports, and a demand for Poland to repay its debt (which then led to further borrowing and larger debts). Poland’s industrial instability was then exposed, and the relatively progressive policies of the government allowed trade unions and (comparatively) free press to grow in influence as food shortages raised dissatisfaction among the population. Solidarity was the most powerful of these unions, with over a quarter of the country as members at its peak. The government's implementation of martial law, in an attempt to weaken Solidarity’s influence, led to further sanctions from the west before Soviet aid helped restore economic growth. Nonetheless, public dissatisfaction remained high throughout the 1980s, resulting in mass protests in 1988, the transition to democracy the following year with Solidarity's leader, Lech Wałęsa, eventually becoming the first democratically elected President since the interwar period.
Romanian austerity and revolution
Similarly to Poland, Romania saw its excessive trade with the west result in economic hardships in the late-1970s, although the Ceaușescu regime became the most oppressive in the Eastern Bloc as calls for democratization grew. Harsh austerity measures were implemented in Romania, and increased borrowing eventually lowered the national debt, however daily life became increasingly difficult for its citizens. Much of the food and resources needed by the population were exported, food rationing was intense, and a booming black market even saw cigarettes become a more valuable form of currency than Romanian leu. Romania's national debt was eventually cleared in 1989, but protests against government austerity in December resulted in the overthrowing of the communist government, the execution of Nicolae Ceaușescu, and the transition to democracy. Romania was the only Eastern Bloc country to end communism with violence, although it did dissuade other leaders from resisting change, and it served as inspiration for democratic movements in the rest of the Bloc.
Decline of Soviet power and the rising demand for democracy
For the Soviet Union, there was no single factor that caused its dissolution, but attempts to reform the stagnating economy did play a crucial role. Gorbachev's implementation of ‘perestroika’ in the late-1980s, which included some free-market policies being introduced to the government-run economy, was the most important economic factor. The removal of price controls saw the cost of certain items skyrocket, and accelerated the growth and normalization of the black market, which some estimates suggest was worth 10 percent of the Soviet GDP in the late 1980s. A history of excessive military spending limited the reallocation of funds to other areas of the economy, and the backlash to the political and bureaucratic restructuring hindered the effective implementation of these reforms. International factors, such as falling oil prices, additionally weakened the USSR's influence outside COMECON, although the largest international influences were the protests across the Eastern Bloc. Economic decline contributed to internal strife within the Communist Party; along with the liberalization of Soviet society and the media, these saw the government lose its control over the general population, who eventually demanded democratic reforms, independence for their own republics, and international integration.
For the other Eastern Bloc countries, the end of communism was generally peaceful (excluding Yugoslavia), and economic restrictions played a smaller role than in Poland or Romania. The most-commonly cited reasons for Czechoslovakian and Yugoslavian dissolution were ethnic or national differences. Economic instability in the rest of the Bloc did contribute to socialism's end, but was just one part of the reduction in living standards, political instability, and growing western presence that drove the desire for democratization. When Gorbachev discontinued the Brezhnev Doctrine in 1988, allowing Eastern Bloc countries to determine their own futures, the wave of protests across Eastern Europe created something of a domino effect. On December 25, 1991, the Soviet Union became the last Eastern Bloc country to democratize, bringing an end to communism in Europe.
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