Crisis in Eastern Europe: The Downside of a Market Economy Revealed?

Abstract

After the collapse of communism, the Central and Eastern European countries decided to implement a market economy embedded in a democratic order. A constituent element of the transition was a fully-fledged integration with the global economy. One of the consequences of this integration is that the countries are now severely hit by the financial crisis. Until recently, however, it all looked flourishing and economic growth figures indicated a steady catch up with average welfare levels in the European Union (EU). On the website of the European Bank for Reconstruction and Development an essay competition was launched for those who were born in 1989. In an introductory statement, a Russian joke is quoted: ‘Everything the Communists told us about communism was a complete and utter lie. Unfortunately, everything the Communists told us about capitalism turned out to be true’.1This article addresses the impact of the financial crisis in Central and Eastern Europe and in essence starts from this quote. It seeks to explain the extent to which the financial crisis in the Central and Eastern Europe question reveals the downside of a capitalist system embedded in a global economic order.