What is it about?
Using standard growth regressions, I show that Eastern European economies fell behind after the Second World War because of low rates of investment and weak reconstruction dynamics. Their performance compared to western market economies can be explained with conditional convergence factors until the 1970s; Socialism only mattered for the growth deterioration that they experienced in the 1980s. Both low investment and weak recovery after the war were caused, in part, by severe labor scarcity, which in turn was the outcome of comparatively much larger population losses during war and as the result of the postwar settlement.
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Why is it important?
We show that Socialism was not particularly effective in accumulating capital or driving structural change forward. New estimates show that investment rates in Eastern Europe were remarkably low in the early postwar era. Insufficient investment and continued structural backwardness, rather than the inefficiencies of the Socialist system, were to blame for their falling behind.
Perspectives
This article was the first step in an ambitious research agenda that aims to reinterpret the development of Socialist economies in Eastern Europe after World War II, which will hopefully lead to a monograph.
Tamas Vonyo
Universita Bocconi
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This page is a summary of: War and socialism: why eastern Europe fell behind between 1950 and 1989†, The Economic History Review, July 2016, Wiley,
DOI: 10.1111/ehr.12336.
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