Defining the Long-term Development Trends of Countries in East-Central Europe in the Context of Political Cycles

ABSTRACT

Historical development patterns are uneven. There are windows of opportunity for countries on the periphery to catch-up, others may lose momentum. Using the Maddison database accelerating and decelerating periods can be found. This paper compares the development trends of six East-Central European (ECE) countries with the average of highly developed countries, and three successfully catching-up countries. A methodological novelty of the paper is the usage of enveloping curves. The approach is based of Ferenc Jánossy’s seminal work on the long-term development trendlines of countries, which are interpreted as historic growth potential indicators. ECE growth performance is also compared to their own long-term potentials. The development pattern is interpreted in the mainstream political concepts of the various historical epochs. The analysis concludes that ECE region’s growth performance is more successful in state-permeated management of slack periods. Liberal epochs’ accelerated growth of highly developed countries could not be followed.

KEYWORDS:

• Convergence
• catching-up
• East-Central Europe
• economic development
• historic development trends

Notes

1. The countries are Belgium, Denmark, France, Germany, Italy, Netherlands, Norway, Sweden, Switzerland, United Kingdom.

2. Transition policies in ECE countries were of course not flawless. Yet, the transformational recession was unavoidable even with the most clever policies. Czechia, Slovakia experimented with more cautious policies and tried to accommodate the shocks of liberalization. Yet, they could not avoid recession or save their socialist industrial potential any better than Poland or Hungary.

3. A recent literature overview about the current use of Polanyi’s pendulum concept supports this idea (Kretschmer, 2019).

4. Economic reforms in Poland and Hungary could not achieve significant results; however, they could be regarded as liberalization attempts of the orthodox central planning system.

5. The “Great Moderation” period’s main success was perhaps the flattening of economic cycles’ swings in the OECD countries. However, the same effect was not observed in less developed countries. On the contrary, capital market liberalization led to serious currency crises in various countries. The 2008 crisis hit most developed countries the hardest: beliefs in the omnipotence of the neoliberal thought was crushed. Financialization of global business played eminent role in this. Polanyian dissatisfaction of globalization’s losers was manifested in the Brexit voting, Trump’s victory in the US or the advance of populist political parties in ECE countries (Szanyi, 2019).

Additional information

Funding

This work was supported by the European Social Fund [EFOP-3.6.2-16-2017-00007].