Central and Eastern Europe and the international economy: The limits to globalisation

Abstract

IN HIS RECENT ARTICLE 'The Maquiladora Syndrome and Central Europe' Ellingstad compares the role of foreign multinationals in Hungary with their role in Mexico.1 In Hungary, as in northern Mexico, multinationals have achieved substantial increases in productivity, without providing matching increases in real earnings; wage levels remain very much lower than in neighbouring countries. High value added components are imported or produced in the country by other foreign-owned firms. This inward investment results in increased regional disparities in income and wealth, uneven development. Central and Eastern Europe (CEE) thus provides a geographically convenient low-wage labour force, attractive to Western multinationals seeking competitive advantage internationally through cost leadership, to use Porter's terms.2 Hungary and Mexico are recognised to be very different economic environments, with Hungary possessing a long entrepreneurial tradition and a highly educated labour force, and with very different political traditions.3 Historically the ties between Western and Central Europe have been very different from those between the USA and Mexico. Nevertheless, despite its empirical limitations, the comparison pinpoints a central need in understanding developments in Central and Eastern Europe, the critical importance of viewing the region from an international business perspective, and in particular the perspective of multinational production strategies. This article addresses a similar issue to that raised by Ellingstad, but from a different perspective, that of globalisation theory. In doing so it attempts to bridge two literatures-management and CEE studies.