Eastern Europe is a region rife with political upheaval, shifting borders, remarkable ethnic diversity and complex relations with both Europe and North America. This course offers an in-depth study of its history and current state.

Utilizing Western European models of economic development and democracy, these countries have transitioned toward free markets and private ownership; creating an abundance of optimism.

The 1990s

The collapse of the Soviet Union brought shockwaves through eastern Europe. Countries previously under Communist control found themselves free to develop their national identities and economies independently. Poland, Romania and Bulgaria saw rapid reforms emerge across east central European nations in 1989. In Poland specifically, Solidarity won an impressive victory in free elections held between June and October of that year to seize control of government. Reform movement brought an end to four decades of dictatorial Communist rule in Romania; with Ceausescu’s overthrow resulting in bloodshed and civil war in that country; while Yugoslavia being split up into seven separate nation-states has further compounded instability.

Transition from Communist to capitalist systems presents numerous difficulties for new governments. Economic reform is a top priority, while unemployment continues to climb and raw materials prices increase rapidly, contributing to inflationary pressure and leaving government debt burdened with heavy payments for raw materials and debt servicing. Furthermore, devolved power may unleash nationalistic forces previously suppressed under Communism which have the potential for revival under devolution of power to local communities.

Faced with these difficulties, many eastern Europe nations have turned to international institutions for support. Western European nations joined the OECD and EFTA and pledged their help economically for eastern europe countries; close ties were forged with NATO and the US; further cooperation was encouraged via the Organization for Security and Cooperation in Europe (OSCE).

In July 1989, a major step toward the integration of eastern europe into European communities was taken with the Arch Summit. At this ministerial-level gathering of 24 countries – consisting of 12 EU member countries, six EFTA members, Japan, and Turkey – assistance was extended for investment protection, structural adjustment, reform of customs cooperation as well as customs reform. Assistance will also be considered later when Romania and Yugoslavia achieve full democracy status.

The Baltic States

Estonia, Latvia and Lithuania are three former Soviet bloc nations that are among the most prosperous in terms of prosperity today. After independence they quickly disassociated themselves from old Soviet connections to join NATO and EU; transitioned quickly from socialist economies to market economies with democratic governments; expanded exports including electric motors, machine tools and radio receivers among others; quickly transitioned away from economic monopoly models into market economies with democratic governance systems – becoming key producers.

However, their economic growth has been hindered by the global financial crisis and weak global demand for their products. Furthermore, domestic challenges arise such as low birth rates and outbound migration by young people seeking better job prospects.

These former Soviet bloc countries are among the most stable and have some of Europe’s highest literacy rates, making up some of the least corrupt societies with open societies allowing journalists to report freely about their home nations without fear of government repression. Furthermore, these nations boast among the most liberal LGBTQ rights legislation and pridefully celebrate this in their capital cities.

Violence is rare in Tallinn and Riga cities; only rare incidents of assault may arise. Russian mafia groups do exist within Vilnius’ gopnik population but these should not pose an immediate threat to tourists. Homosexuality is generally accepted but not openly promoted.

Overall, the Baltics enjoy an extremely positive reputation abroad. Press freedom is so high that international watchdog groups don’t even bother including them in their annual reports! Furthermore, this region aspires strongly to join Western Europe and has attempted to align its political systems – including media regulations – with those of EU members states.

Eastern Europe can be an ambiguous term, but typically refers to countries left behind by Russia’s move past the Iron Curtain in 1991. Since that point, these countries have slowly adopted Western European ideals such as democratic governance and private ownership of businesses – many have become members of the European Union while others still require work on their economies and reforms before being considered eligible for membership.

Stabilization

Eastern European nations continue to struggle to transition from socialist to capitalist economies, depending on natural resources such as coal, iron ore and petroleum as their primary resources; their poverty rates and unemployment rates remain high; as part of their effort to break away from Soviet bloc, many Eastern European nations have turned towards Western Europe for trade and financial assistance, with several now becoming members of European Union – though Slovenia and other former Yugoslav states still haven’t taken this leap yet.

As communism crumbled, these countries quickly had to transform their economies and depend on international trade for economic survival. Short term this meant freeing prices from central control in order to prevent shortages and balance of payments crises; long term it meant opening world markets, diminishing domestic monopoly power and encouraging foreign investments.

Many of these countries also found themselves facing bulging budget deficits and increasing public debt levels, needing to address both problems at once by decreasing debt levels while protecting banking systems against market sentiment shifts that might render assets worthless.

One way in which they did this was by peg their currencies to the euro, making trading with European Union countries that shared similar currency policies easier, as well as helping investors anticipate where interest rates might head. By giving investors an indication of where rates were headed, inflation rates stayed in check and investors knew exactly where interest rates were heading.

Political borders in Eastern Europe reflect ethnic identities; many of its countries once existed under the shadow of one of four major powers–Ottoman Empire for Balkan states, Russia for Baltic republics, Habsburg Teutonic kingdoms for Hungary and Romania–leading them all to feel connected through history, and longing to reclaim their heritage.

Some experts have further divided Eastern Europe into subregions. For instance, Czech Republic, Hungary, Poland and Slovakia could be considered Central Europe; Bulgaria, Albania, Bosnia-Herzegovina Croatia Macedonia Montenegro Serbia Slovenia Kosovo are often placed within Southeastern or Southern Europe.

Privatization

Privatization is widely seen as the keystone of Eastern European countries’ transition from Communist to market economies, especially since many state-owned enterprises contain massive capital reserves that must be converted into profitable market companies through privatization.

Eastern European societies lack the rational structure of corporate governance that characterizes successful enterprises; privatization aims to address this deficit by providing this incentive structure for economic agents. Without it, no amount of deregulation and decentralization can produce a functional market economy.

Histories show that attempts to stave off collapse by replacing central planning with decentralized decision making have often failed, leading to economic stagnation, acute shortages, balance of payments crises and financial chaos. New governments in Eastern Europe are determined to avoid this pathological approach and establish market-oriented economies instead.

Eastern Europeans are taking steps towards this end on three main fronts: stabilization, liberalization and privatization. All three aspects are equally essential; however privatization might prove the most daunting conceptually and practically.

Consideration has been given to how Eastern European countries can successfully transfer state-owned assets into private hands while fulfilling two fundamental goals – efficient operation of privatized firms and functioning capital markets.

East European nations are currently discussing several important issues, and no single solution appears likely. Some commentators have advocated “spontaneous privatization,” wherein the state withdraws from running businesses and allows them to fend for themselves in a free market environment. This approach could allow workers to escape the stiff wage increase tax that employers charge and gain some degree of control over management; additionally, it could reduce government investment requirements during privatization processes.

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