Industrial Companies and Territories: The Reform Process in Central and Eastern Europe

Abstract

Close examination of how market capitalism has developed in Central Europe since 1990 reveals a striking paradox. On the one hand, highly ideological forces that emphasized removing every trace of government involvement in the name of individual initiative and liberalized exchanges propelled the initial wave of changes. On the other hand, the authorities quickly made moves intended to soften the devastating impact of the new economic rules, particularly that affecting employment and regional imbalances. Their efforts sometimes simply reflected a desire to preserve national sovereignty that led authorities to refuse to hand over certain state-run businesses. This early, deeply ideological vision of a completely market-driven economy was gradually replaced by a more regulated approach to market capitalism, in which fierce efforts to preserve national sovereignty were blended with the desire to restore local and regional equilibrium that were overturned in the early phases of the transformation. In other words, national sovereignty was in fact successfully reclaimed, as much as a means of pursuing highly market-driven economic policies as to ensure solidarity. In this sense, these new, previously Soviet-style states cleared their own unique European path to development and capitalism that combined free-market policies with protectionism while allocating a strong role to the state.