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The Princes and the Pauper: An Analysis of transition economies in Eastern Europe.

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The Princes and the Pauper: An Analysis of transition economies in Eastern Europe Nicole E Colraine Econ 142 09/30/2004 "From Stettin in the Baltic to Trieste in the Adriatic an iron curtain has descended across the Continent. Behind that line lie all the capitals of the ancient states of Central and Eastern Europe. Warsaw, Berlin, Prague, Vienna, Budapest, Belgrade, Bucharest and Sofia; all these famous cities and the populations around them lie in what I must call the Soviet sphere, and all are subject, in one form or another, not only to Soviet influence but to a very high and in some cases increasing measure of control from Moscow."1 Winston Churchill spoke these famous words at the end of the WWII as Eastern Europe formed a communist buffer zone between the Soviet Union and Western Europe. However, by the 1980's it was obvious: the comparisons of England versus Estonia and Belgium versus Bulgaria bore no reasonable similarities other than one system was prosperous while the other was not - Eastern Europe was in shambles in comparison to its Western counterparts. However, the years 1989 - 1991 marked a crossroads in history -- This was the period of social uprisings in Eastern Europe. During this time frame, the oppressive single-party regimes of Bulgaria, Czechoslovakia, Estonia and Hungary disintegrated. Resultantly, the need to transition to a democratic society arose because socialism failed to provide an effective method of structuring a functional economy. ...read more.


Furthermore, the government failed to fully liberalized food prices and was significantly subsidizing the agriculture industry. Ineffective stabilization policies, such as granting agricultural subsidies and artificially low energy prices triggered rampant hyperinflation in Bulgaria and in 1997 the lev was rendered worthless as a medium of exchange.9 Furthermore, price liberalization has not served to benefit everyone; in fact this process has negatively impacted many workers and consumers in Bulgaria, the Czech Republic, Estonia, and Hungary. The price of consumer goods increased drastically in the first few in executing price liberalization policies, as an economy attempts to transition to global competition. Moreover, the dissolution of the old system sparked falling wages and increasing unemployment in old industrial enterprises. Privatization Central planning has left Bulgaria, the Czech Republic, and Hungary as countries with massive inefficient integrated industrial enterprises that simply cannot compete in on an international level. Most of these enterprises were forced out of business due to privatization and the withdrawal of state subsidies. In these circumstances, policy makers faced a complicated decision; the elimination of such subsidies would force enterprises to shut down, while continuing to extend lines of credit to failing companies would only fuel inflation. This is still a major in problem in Bulgaria where "soft credits ... prop up inefficient state-owned enterprises". However, in 1998 the practice of granting government loans to failing post-communist industries was reduced. 10 Furthermore, in addition to these problems, the archaic technologies and waste-elimination used by many SOE's (state-owned enterprises) ...read more.


Conclusion While popular support for demonstrations tumbled communist governments in Estonia, Hungary and Czechoslovakia in 1989, Communism never really ended in Bulgaria. Bulgaria has failed to implement the fundamental institutional changes needed to end corruption. Furthermore, Bulgaria remains a hybrid system comprised of remnants of central planning and statist mantras fused with defective democratic market and institutional reforms. Conversely, Estonia has been praised as a success story in transition. This transition has been motivated by the desire of Estonians to rejoin the West and distance itself from Russia politically and economically. As a consequence, transition has proceeded mostly on a single track and a single direction: Estonia has rapidly adapted itself to Western values, standards and Institutions. Reference: Dillon, Patricia and Frank C. Wykoff (2002): Creating Capitalism: Transitions and Growth in Post-Soviet Europe. Edward Elgar Publishing. Hofstede, G. H. (1991): Cultures and Organizations. New York: McGraw-Hill. Mygind, Niels (1994): Societies in Transition, CEE. pp. 53-83; 121-142 Wright, Erik (2004): Approaches to Class Analysis. Cambridge University Press. pp. 1-26 http://www.nationmaster.com/encyclopedia/Iron-Curtain 1 http://www.nationmaster.com/encyclopedia/Iron-Curtain 2 Hofstede 33Dillon and Wyckoff, p.136 4 Ibid, p. 142 5 Ibid, p. 38 6 Mygind, p. 236 7 Dillon and Wyckoff, p.166 8 Ibid, p. 126 9 Ibid 10 Ibid, p. 129 11 Ibid, p. 121 12 Ibid, p.144 13 Ibid, p. 145 14 Ibid 15 Ibid, p.149 16 Ibid, p.167 17 Ibid. 18 Ibid, p.46 19 Ibid, p.124 20 Ibid, p.168 2 ...read more.

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