Economic crisis in Eastern Europe : prospects and repercussions

Abstract

Since the mid-seventies a crisis has developed in Eastern Europe and the Soviet Union. This paper reviews the symptoms of the crisis, grouped under i) deterioration of growth performance, ii) external imbalance, iii) internal imbalance, and outlines an explanatory model of the functioning of Soviet-type economies, which embodies their specific systemic features (in particular the centralisation of political power and economic decision-making, and the systemic commitment to economic growth, full employment and price stability) and is capable of generating economic and political cycles of the kind experienced by Eastern countries. The implications for East-West relations are also considered; the combined effect of economic crisis in both systems is claimed to be exercising a positive influence on those relations, especially in Europe.