Economic Development of Eastern and Western Europe

Economic development of Eastern and Western Europe over the course of the nineteenth and twentieth centuries obviously differed, but not to the extent that historians or economists have frequently imagined. Put simply, the economic histories of Eastern and Western Europe are frequently viewed according to either region's differing political organizations, with the capitalist West opposed to the Communist East, but in reality, the period of time defined by the rise of the Iron Curtain represents less of a competition between two ideologically opposed economic systems and more of a bubble in time, where the economic development of either region briefly parted ways before rushing back together at the end of the Cold War. The same kind of oligarchical capitalism that has tended to define Western Europe reins in Eastern Europe, and the differences are matters of style, rather than substance. By comparing and contrasting the economic development in Eastern and Western Europe over the course of the nineteenth and twentieth centuries, it will be possible to demonstrate that far from exhibiting a battle of economic ideologies, this time period merely demonstrates the ascendency of global, oligarchical capitalism following the decline of traditional monarchies and empires, and furthermore, reveals how the spread and subsequent decline of Communism over this time period is nothing more than a blip on the otherwise seamless line of oligarchical consolidation of economic (and thus political) power.

Of course, one cannot begin a consideration of economic development in the nineteenth and twentieth centuries without addressing the Industrial Revolution, because this term and the developments it connotes are central to contextualizing any discussion of nineteenth and twentieth century economics. The Industrial Revolution denotes "that period in […] history that witnessed the application of mechanically powered machinery in the textile industries, the introduction of James Watt's steam engine, and the 'triumph' of the factory system of production" over earlier artisanal modes, but as Cameron (1993) notes, the term Industrial Revolution "is unfortunate, because the term itself has no scientific standing and conveys a grossly misleading impression of the nature of economic change" (p. 165). The central problem with the term is that it connotes a sudden and violent change in the manufacturing economy, and although the change was sudden when one is considering the whole of recorded human history, the fact remains that the "revolution" occurred over the better part of the nineteenth century, and could not be considered "complete" until well into the twentieth century. Even then, the Industrial Revolution was not nearly as much of a universal phenomenon as one might imagine; to see just how geographically limited the ascendency of the factory system of production was, and how Eurocentric the idea of the Industrial Revolution is, one might note that where the vanguards of the Russian Revolution gained their power through the organization of urban factory workers, because Russia, like its European neighbors, participated in the Industrial Revolution, the Chinese Revolution under Mao depended upon the support of rural, agrarian peasants.

However, despite its drawbacks as a scientifically rigorous term, the Industrial Revolution nevertheless offers a useful starting point for this discussion of Eastern and Western Europe, because the ascendency of manufacturing and the mechanical economy over the course of the nineteenth century set the stage for the dramatic political and economic upheavals of the twentieth. In the eighteenth and early nineteenth centuries, the global economy was largely regulated by economic polices that served "a dual purpose: to build up economic power to strengthen the state, and to use the power of the state to promote economic growth and enrich the nation" (Cameron, 1993, p. 130). However, the mass production of goods in the nineteenth century forced (or allowed) a shift away from earlier mercantilist/imperialist modes of global trade, because economic power was gradually siphoned away from the state and into the hands of factory owners and corporations. The Opium Wars of the nineteenth century may be viewed as the violent effect of this transition, because the military might of the British empire gradually became subservient to the desires of British textile manufacturers, who wanted greater access to the Chinese market (for the most part, the "imposition" of opium on China was largely a means to an end, rather than the end itself).

Furthermore, as hinted at above, the Russian Revolution would likely not have been possible without the shift to the factory style of production, because the concentration of workers in cities and factories is a major reason why the Revolution was able to attain the critical mass necessary to overthrow the Tsar. Though peasants played a crucial role in the eventual establishment of Bolshevik rule, it was the industrialized cities and factories that gave them the edge they needed, and allowed the Soviet Union to grow into the industrial behemoth it became during World War II. The shift towards urban factory production simultaneously created a class of disenfranchised individuals and put the tools of economic and political power within their grasp. In addition, at the same time that industrialization was setting the stage for revolution in Russia, it created the circumstances necessary for the Great Depression in the West, because the explosion in corporations and finance as a result of the shift from individualized, artisanal modes of production to mass production in factories, coupled with laissez-faire economic policies, set the stage for collapse. Put simply, the scope and severity of the Great Depression would not have been possible without the explosion in economic development and increasing interconnection between countries and corporations made possible by industrialization.

The period immediately following industrialization is often viewed as a new kind of conflict between the opposing economic ideologies of corporate capitalism and communism, but in reality, viewing it in this way depends upon a kind of false equivalency between the form of capitalism that emerged after the Industrial Revolution and the newly emergent communism. While communism was a somewhat novel development, capitalism as such has characterized practically all of human history, because the accumulation of capital, whether by pharaohs, kings, or corporations, has been the deciding factor in the distribution of political power. Recognizing this, one must note that communism itself is, in many ways, a form of capitalism, because power still depends upon the accumulation and control of capital; the only difference is the amount of people in control.

As such, one must consider the differing experiences of Eastern and Western Europe in the run-up to World War II and the war's aftermath not as substantively different phenomenon, but rather different approaches and styles within the same overall political paradigm, namely, the oligarchical consolidation of political and economic power (despite the ostensible goals of Russia's communist experiment, one would be hard pressed to identify any particular moment wherein power was not concentrated in the hands of a few central party members). Recognizing this is crucial for understanding the economic recovery after World War II and the development of Europe after the Cold War, because the reasons for Western economic success compared to the Soviet Union's relative austerity and difficulty are inextricably intertwined with the inherently oligarchical nature of capitalism as such. Essentially, any economy, whether traditionally capitalist or communist, depends upon a kind of stratification wherein some people have more or less than others, with the only difference being the means by which each system attempts to placate those with less.

In the twentieth century, the lower classes of nation-states with corporate capitalist economies were largely placated with the institution of certain social "safety nets" that offer nominally socialist benefits while maintaining an explicit system of capitalist production. For example, the New Deal following the Great Depression, while serving to revive the American economy by employing individuals, simultaneously served to buttress the system of capitalism that caused the Great Depression in the first place by precluding any kind of meaningful confrontation with that system. The same can be said of the Great Society legislation of the 1960s, or the National Health Service instituted by Great Britain following World War II, not to mention the minor successes of British labor movements in the 1930s and 40s (Cambridge University, 1989 p. 542). The Soviet Union simply took this tendency to its extreme, such that the majority of the economy was controlled by the state, but as history demonstrates, this was far less effective than more explicitly capitalist attempts to maintain class distinctions while placating the larger, yet politically weaker lower classes. Where the Soviet Union was dependent on force and coercion to maintain the economic and political power of its elite, Western Europe succeeded largely without the use of force simply because the limited social services it offered, coupled with the creature comforts that define capitalist consumption, were enough to keep its populace from seeking any kind of substantial reform or confrontation with the ruling oligarchy.

Thus, the economic recovery of Western Europe following World War II was made possible by the combination of a relatively easily placated lower class and the destruction of substantial manufacturing competition that arose out of the decimation of Germany and Japan. The relative success of Western Europe's economic policies following World War II is evidenced by the stark distinction between the economic development of East and West Germany following the war, because while the former was dependent upon, and controlled by the Soviet Union, the latter had access to the definitively more well-off Western Europe, and as such was able to expand its economy much more rapidly and freely. This is why, for example, West Germany had no problem cutting off all economic ties to East Germany in 1951; "the inner German trade was much more important for East than West Germany," because the East depended heavily on the importation of crucial materials such as steel, coal, and iron, while West Germany had a much broader range of options for both import and export partners (Teichova, Matis, & Patek, 2000, p. 54). Thus, while East Germany continued to suffer from the decimation of Germany's manufacturing capability as a result of the war, West Germany was able to reestablish itself with the help of its European (and American) partners.

The end of the Cold War did not mark a new era in the economic development of Eastern and Western Europe so much as the continuation of a process that was briefly interrupted by paranoia and stagnation (at least in the East) of the Cold War. Thus, the economic development of Eastern Europe following the end of the Cold War for the most part proceeded through a rapid and sometimes tumultuous process of establishing or reestablishing traditional modes of capitalist production and wealth accumulation (Melich, 2000, p. 131). The aforementioned claim that communism was, more than anything else, a particular flavor of oligarchical capitalism is evidenced by the fact that Eastern Europe's process of "de-nationalization (privatization) and [the] creation of a capitalist class" was largely overseen by "new' or 'reform' elites [who had risen] up from among the old communist cadres, since under the totalitarian regime, others had been kept out of the option to acquire necessary skills" (Melich, 2000, p. 133). As a result, for those former Soviet states which did not maintain their totalitarian governments, the transition from communism to corporate capitalism has proceeded relatively easily, because although the transition to democracy brings with it its own troubles and conflicts, the economic transition has not actually been as dramatic or substantial as people commonly imagine.

The reintegration of Eastern Europe into a global system of corporate capitalism following the interruption of the Cold War has allowed the global economy to nearly complete the process that began with the gradual unmooring of economic power from the state over the course of the nineteenth century. Globalization has produced a relatively small cadre of corporations and individuals responsible for a vastly disproportionate amount of the economy, and who are not bound to any particular nation-state. There now exist a number of global corporations whose wealth exceeds the GDP of a substantial number of countries, and they represent the true ascendency of global capitalism, wherein political power is finally and completely subservient to economic power. In the past, a kind of equilibrium has been maintained between the two due to the fact that the state was imbued with some extra bit of legitimacy, either through concepts of divine right or democratic election, but now, nation-states essentially exist in order to maintain and facilitate the actions of the global economy. Although there are certain holdouts (Cuba comes to mind), for the most part, countries are controlled by and act in the service of global corporate capitalism, even if the nominal form of governance claims to represent something else, as in the case of China.