Economics of transition in the Balkans and Central Europe

by Tomás Réti

In the last century Balkan economies could be characterised with several long-term tendencies. One can mention among these, existence of strong central governmental power, which has intended to eliminate economic backwardness with the help of indu­strialisation. Government insisted industrialisation programmes had been accompained with spreading nationalist ideologies. New Balkan nation-states'governments have pre­ferred to implement self-supporting economic policies which got inevitebly in conflict with strong presence of foreign capital and its intention for expansion. Prior to Second World War, Balkan economies could also be featured with power-struggle between do­mestic capital supported by national governments and penetrating foreign capital. Fo­reign capital could establish strong influence due to the general weaknesses of their eco­nomic systems. However, it turned out that Balkan governments were unable to imple­ment self-sufficiency which relied primarily on ideological reasons and not on economic considerations. On the other hand, foreign investors's interest for the Balkan economies had not been so strong which could initiate necessary modernization. Furthermore, Balkan economies were mostly primary goods exporters, in their export structure raw materials and agricultural products gave dominant share. Primary products remained decisive in their export, and it had inhibited industrialisation. Economic deve­lopment of the region prior to 1945 has proved that neither foreign capital inflow, nor domestic investments were capable to reduce economic backwardness. Foreign in­vestments did not have a spillover effect, exports of primary products remained exter-mely sensitive to cyclical changes in the western markets (Lampe J.R. and Jackson M. R, 1982). Post 1945 Balkan economic model has meant discontinuity with regard to previous economic policies. Notwithstanding, still certain strong continuity existed with regard to growth of the governmental sector, its new functions as owner and asset-manager, and its endeavour to self sufficiency. After 1950 an extraordinary fast industrial growth occured which was unprecedented in the economic history of Balkan states. This development model has exploited first internal savings for the purpose of forced industrialisation, after it had been exhausted, it turned to external savings, and tried to pursue the same pattern of modernisation. Naturally, Yugoslav case of self management has provided many di­stinct features which were rather different from other Balkan' economies. However, the Yugoslav economic model has got to the same economic crisis by the end of the eighties.