The economic factors in the collapse of state socialism and the new international environment, 1973–1989

Abstract

The collapse of a regime always has more than one cause. In my interpretation, however, among the various international and domestic factors that led to the collapse of state socialism in Central and Eastern Europe, basic economic facts were primary. Accordingly, we must first unravel, out of the numberless threads that make up the fabric of history, the dramatic changes in economic processes brought about by the shock to the world economy caused by the oil crisis of 1973. The economic base of state socialism was visibly undermined from the 1970s on, accelerating its collapse. For a full understanding of this process, it is important to give a relatively detailed explanation of the international economic situation, the Western reaction to a changing economic world, and the Eastern inability to adjust to it. These developments are not only the main factors in the collapse of socialism, but also explain the requirements and trends of postcommunist transformation. This is, therefore, the proper point of departure for analyzing the two crucially important decades around the turn of the century. The year 1973 was indeed the beginning of a new chapter of greater European economic history, which, in the case of Central and Eastern Europe, led to the collapse of their state socialist regimes. It should be noted, however, that this chronological division is also somewhat artificial.