Eastern Europe Essay

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Economic conditions  in eastern  Europe have varied considerably since early modern times, and the region has been devastated  by a number  of wars: the War of Polish  Succession,  the  Napoleonic  Wars,  World War I, and World War II. During these conflicts, the boundaries  of many countries  changed, altering the nature of inter-country trade.

Historically, the vast majority of the people in eastern Europe—as elsewhere in the world—were involved in agriculture, although traders did operate along land routes of commerce  and along rivers. A considerable part  of eastern  Europe  was never  occupied  by the Romans, but archaeologists have discovered evidence of extensive trade with parts of the Roman Empire. In medieval times, traders along the Baltic Sea started to establish what became known as the Hanseatic League. Its origin goes back to 1159, when Duke Henry the Lion of Saxony rebuilt the town of Lübeck. Other ports soon became associated with Lübeck, and it was not long before a trading agreement tied the various ports together. In an account of a storm in the Baltic Sea in 1351, it was recorded that there were 61 English ships taking refuge in the port of Danzig alone, giving some idea of the trade even at that early stage.

With the start of the Agricultural Revolution, and later the Industrial Revolution, there was great interest in the minerals in eastern Europe, with Frederick the Great annexing Silesia in 1740 in order to get control of the iron ore there. However, developments  in eastern Europe during the Industrial Revolution badly lagged behind western Europe, as can be seen by the mission  of the  Swedish businessman  and industrial spy Reinhold Rücker Angerstein (1718–60), who took little interest  in eastern  Europe. And it was to western Europe that Peter the Great had looked when he sought to build up the Russian economy.

Trade between countries in eastern Europe continued to increase during the 18th and 19th centuries. By the start  of the 20th century,  Russian businesses tended to dominate eastern Europe—indeed, the Russian Empire then covered more of eastern Europe than  at any stage other  stage in history.  The other eastern European countries, as they became independent—Greece in 1821, Romania in 1859 (as Wallachia and Moldavia), Serbia in 1867, Bulgaria in 1878, Albania in 1912—became heavily reliant on German and Russian business  expertise  and  technology  as they sought  to  erode  the  previously heavy Turkish  economic influence. The railway network helped tie the economies of these countries closer together.

World War I And II

The fighting in World  War  I left the  region  devastated, but also led to the creation  of new countries. Poland  was re-created  and  was given access to the sea along the  Polish Corridor,  in the  hope  of making the country  more  viable and less susceptible  to attack from Germany. The formerly German  city of Danzig (now Gdansk) was turned into a free port. The Austro-Hungarian Empire was split to form Austria, Czechoslovakia,  Hungary,  and  parts  were  given to Poland; other parts of Serbia became the Kingdom of the Serbs, Croats, and Slovenes (and from 1929, the Kingdom of Yugoslavia).

During the 1920s and the 1930s, the countries  of eastern Europe started improving their trade, with telegraph  and  then  telephone  lines connecting  the various capitals. To connect Istanbul (formerly Constantinople)  with Berlin, lines ran through  Sofia, Bucharest, and Budapest. However, during this interwar period, the isolation of the Soviet Union meant that many of the countries  of eastern Europe started closer economic interactions  with each other, and the newly independent Baltic States of Lithuania, Latvia, Estonia, and Finland started trading with each other, with Sweden, and with Germany. German companies were also involved in investing in these countries, and in the Soviet Union. There were German and British capitalists who used Latvia as a point  of entry  into the Soviet Union as some trade links were expanded in the mid-1930s. Romania managed  to develop its economy  through  its oil, with  the  Ploesti  Oilfields being important in the German war effort.

During World War II, the whole of eastern Europe was, once  again,  devastated  by war, and  after  the war, Albania, Bulgaria, Czechoslovakia, East Germany, Hungary, Poland, Romania, and Yugoslavia all had communist  governments  with centrally planned economies  dominated   by state  corporations.   They were all part of COMECON, as was the Soviet Union, which meant  that  trade  between  all these countries increased, but at the expense of any trade links that had been established with western Europe. Some foreign companies  did operate  in eastern  Europe during the Cold War, but these were heavily restricted in their scope and largely involved in selling or buying products to and from eastern Europe, rather than any significant investment  in either country’s economies. There were exceptions in Yugoslavia, especially when

Australian  industrialist  Lang Hancock  managed  to establish  a barter  deal  with  Romanian  communist leader  Nicolai Ceaucescu.  There was also the  controversial gas pipeline that took gas from the Soviet Union to Poland, East Germany, and Czechoslovakia, and from there to western Europe, enabling the Soviet Union to earn desperately needed hard currency.

The Fall Of Communism

The fall of communism  in 1989 and the collapse of the  Soviet Union  transformed eastern  Europe  considerably. All the countries  had had their economies dominated by large state corporations, many of which were inefficient and wasteful. Some, like the Gdansk shipyards, had to be phased out, in spite of their role in ending communist  rule in Poland. The coal miners from the Jiu Valley in Romania flexed their muscle in ensuring that former communist  Ion Iliescu managed to keep in power in 1990. The industrial  workers of Ukraine were able to exert their political power from time to time.

The end of communism  usually is associated with non-communist governments  coming  to  power  in eastern Europe. Some managed to rule well, but many others were stymied by their own inexperience and by the communist bureaucrats, many of whom remained in their old positions. Others  were involved in fraud or allowed fraudulent  operators  to operate  schemes that would not have been allowed in western Europe. Taking advantage of the now unregulated  economic climate in eastern Europe, and the large savings that many people had accumulated  during the period of communist   rule,  inflation  devalued  the  savings  of many people, and some “pyramid” investment  institutions  managed to defraud people out of what was left of their money. Albania was the worst hit, and in the economic crisis of 1996, large numbers  of people lost their life savings in a matter  of months,  causing rioting in parts of the country. There have also been problems over restitution for property  seized by the Nazis during World War II from the Dutch and from those in other countries.

Gradually  the   economic   situation   in  many  of the eastern European countries settled down, and respected  western companies started to invest heavily in infrastructure. The telephone  system in most countries  was overhauled  and  modernized.  Public transport systems were often updated and made more efficient. The nature  of power  generation  was also changed for greater efficiency, and safer environmental standards  were enforced. Some countries  started to return  to having former communists  running  the country, and others ended up with technocrats.

During the communist  period, tourism  in eastern Europe  had  been  heavily restricted,  but  after  1989 many tourists  visited many parts of eastern  Europe, encouraged  by cheaper  package  holidays,  and  the opportunity to travel to new countries, both of which coincided with the introduction of cheaper air fares. Independence for the  former  Baltic States of Estonia, Latvia, and Lithuania,  as well as independence for Belarus, Moldova, and Ukraine, and the  “velvet divorce” between  the  two  parts  of Czechoslovakia to form the Czech Republic and Slovakia, all led to the creation  of a number  of “new” countries.  Travel has become much easier with some eastern European countries joining the European Union: the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, the Slovak Republic, and Slovenia in 2004; and Bulgaria and Romania in 2007.

War  in the  former  Yugoslavia also led to  Slovenia, Croatia, Macedonia, and Bosnia-Herzegovina all becoming  independent countries,  and  Montenegro split from Serbia in 2006. The war also saw the wrecking of the economy  and much  of the infrastructure of former Yugoslavia, a situation partially ameliorated by the availability of foreign aid.

Although the Russian Federation no longer dominates eastern  Europe in the way it had, it still has a major influence. This can be seen in threats  over the use and  cost  of Russian gas. When  countries  elect pro-Moscow governments, the Russians often permit gas to be sold at cheap rates to that  country.  However, if a leader is elected who wants to move away from Russian influence, such as Viktor Yushchenko in Ukraine, Russia threatens  to force that country to pay the market  rate for the gas or to reduce the gas output.  Part of this has been because of the expansion of the European Union and NATO and resurgent nationalism in Russia. However, in spite of occasional political problems, the amount  of international trade between all the countries  of eastern Europe has continued to increase.



  1. Nina Bandelj, From Communists  to Foreign Capitalists: The Social Foundations of Foreign Direct Investment  in Postsocialist Europe (Princeton  University Press, 2008);
  2. Iván Berend, From the Soviet Bloc to the European Union: The Economic and Social Transformation of Central and Eastern Europe Since 1973 (Cambridge University Press, 2009);
  3. Paul Blokker and Bruno Dallago, eds., Youth Entrepreneurship and Local Development in Central and Eastern Europe (Ashgate, 2008);
  4. Martin Bull and Mike Ingham, eds., Reform of the Socialist System in Central and Eastern Europe (St. Martin’s Press, 1998);
  5. Marise Cremona, , The Enlargement  of the  European  Union (Oxford University Press, 2003);
  6. William Dillinger, Poverty and Regional Development in Eastern Europe and Central Asia (World Bank, 2007);
  7. Jan Drahokoupil, Globalization and the State in Central and Eastern Europe: The Politics of Foreign Direct Investment (Routledge, 2009);
  8. Karen Henderson, ed., Back to Europe: Central and Eastern Europe and the European Union (UCL Press, 1999);
  9. Paul Robert Magocsi, Historical Atlas of Central Europe: From the Early Fifth Century to the Present (Thames & Hudson, 2002);
  10. Grigore Pop-Eleches, From Economic Crisis to Reform: IMF Programs in Latin America and Eastern Europe (Princeton University Press, 2009);
  11. Frank Schimmelfennig and Ulrich Sedelmeier, eds., The Europeanization of Central and Eastern Europe (Cornell University Press, 2005);
  12. L. Sowinski, “Eastern Europe Capitalizes on Growing EU Membership,” World Trade (v.21/5, 2008).

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