Dark lines on Asia versus Eastern Europe (EE)

30 Sep

Tough facts put together by Rainer Kattel, Estonian economist, showing the mediocrity of the supposed economic miracle in Eastern Europe. Published in Journal of Post Keynesian Economics / Fall 2010, Vol. 33, No. 1 41

“While EE and other key developing countries experienced an exhilarating rise in FDI and exports, there is a stunningly obvious divergence in income growth between Asian economies and EE economies . China and Korea have seen their GDP per capita multiply at least four times since 1980, whereas EE economies have struggled throughout the past decades to stay above the 1980 level.

EE countries’ share in world trade grew from 0.73 percent in 1980 to 0.95 percent in 1995, and East asia’s share grew from 3.80 percent to 10.83 percent in the same period (Guerrieri, 1998, p. 29). this trend is especially pronounced for science-based industries: as EE grew from 0.29 percent to 0.39 percent in the period from 1980 to 1995, East asian economies grew from 4.83 percent to a staggering 17.82 percent (ibid., p. 38).

after the fall of the Berlin Wall, most EE and other former Soviet economies saw deep dives in their growth rates and in industry as well as service-sector value added. It took more than a decade for most EE countries to reach the growth and development levels of 1990. Many post-Soviet economies such as Ukraine, Moldova, and others, are still lagging behind their 1980s levels. In fact, for example, “even if Ukraine managed to grow steadily at 5 percent a year, starting in 2002, it would take until 2017 to regain its previous peak—implying a transformational recession of more than a quarter of a century at best” (World Bank, 2006, p. 33). For these countries, the recession they experienced in the 1990s is worse than the Great Depression in the United States and World War II in Western Europe.”

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