The Long Shadow of WWII Over Eastern Europe

The half century after 1945 was the most transformative era in the history of Eastern Europe. It was unique and paradoxical: the only period in modern times, when the eastern and western parts of Europe followed fundamentally different development paths and applied radically different development strategies. The post-war era brought simultaneously unprecedented growth and social modernization but also relative economic decline. Never prior to 1945 had Eastern Europe raised its productive potential and standards of living so rapidly, and yet, it did not only fail to catch-up with but fell behind western market economies.

Since the late 1990s, we have seen some convergence between the western core and the eastern periphery, but convergence in both income per capita and productivity is far from complete and slowed down dramatically after 2008. Transition towards the market economy and liberal democracy has not been an unequivocal success and we have been witnessing dangerous reversals in these transition dynamics.

To what extent are these troubles the bad legacies of state socialism, or historical shocks that came before? This question that has been the focus of my research on post-war growth in Europe and the growth performance of former socialist economies. If the economic consequences of World War II were catastrophic everywhere, in Eastern Europe they were apocalyptic. Hostilities on the eastern front brought unimaginable destruction. The most devastating battles of global military history were fought in the 1940s over the landmass stretching between Berlin and Stalingrad. Thousands of towns were removed from the face of the Earth, the transport infrastructure suffered seemingly irreparable damage. The division of Germany and the Cold War untied input-output linkages between regional markets. In several countries, industrial production in late 1945 fell back to levels that had been surpassed already at the start of the twentieth century.

But, the worst outcome of the war was the immense loss in human resources. Forty million Eastern Europeans died in the conflict, including five of the six million European Jews who perished in the Holocaust. Millions more emigrated, either running from the advancing Soviet armies or defecting when communist parties rose to power. The expulsion of fifteen million ethnic Germans from Central and Eastern Europe after 1945 and forced population exchanges enhanced this exodus. These migration waves are featured rarely in the economic history of Eastern Europe. Yet, their joint impact with wartime casualties was monumental. Hungary, Romania, and Yugoslavia witnessed no population growth between 1939 and 1950. Czechoslovakia and Poland did not recover from the demographic shock of these years before the 1960s. The war had left behind a plethora of industrial and commercial assets without owners and entrepreneurial know-how to operate them.

My recent research has evaluated the growth performance of Eastern Europe since 1945 in light of these inauspicious historical beginnings. My findings suggest that wartime legacies thwarted post-war reconstruction and subsequent economic progress as much, or more, than socialism. Contrary to the conventional view, centrally planned economies invested much smaller proportions of their national income in both physical and human capital than the fastest growing western nations, precisely because of bottlenecks caused by the war and the conditions it left behind. By the time socialist governments had managed to scale up their investments, Eastern Europe was hit by new calamities: the oil shocks of the 1970s and the sovereign debt crises that emerged in their aftermath, which caused investments to plummet and eventually undermined the economic legitimacy of communism. The consequences for transition economies were outdated production facilities as well as inadequate technical know-how and inappropriate working skills that have limited the ability of the region to catch up, even in the context of European integration and the vast capital and technology transfers received since the 1990s.

The long shadows of war transcend economics. The response that Central European governments have recently shown towards forced migrants may have caused outrage rightfully, but it highlights the legacy of the ethnic homogenisation that the war and the post-war settlement brought to the region and of the horrific memories this had left behind. Similarly, the authoritarian response of several new EU member states to the economic crisis of recent years and the perplexing support of vast majorities of voters for such response are not entirely surprising to the historian who has studied the political response to the even mightier economic challenges of the post-war era.