income in the Southern peripheries of Europe actually increased by 38 %, while in Central and Eastern Europe it declined by 19 % (Table 7). Countries such as Austria, Ireland and Finland also leaped forward and by the 1990s, actually surpassed the average Western living standards. Czechoslovakia had been on a par with Germany before the war and well ahead of Spain. In her growth spurt during the 1960s, Spain overtook Czechoslovakia, first, in private cars and phones per capita and then in GDP per capita. Portugal followed the trend during the 1980s.111 This clearly demonstrates that Communism perpetuated backwardness in Central and Eastern Europe by not allowing it to move forward at the same rate as other European countries with similar backgrounds. Indeed, this is not only visible in the figures for GDP per capita; the same trend can be seen if we compare the levels of social development. Consider life expectancy for example. In the 1930s, the position of Central and Eastern European countries was clearly better than a number of other European countries in this regard, but patently fell behind Western Europe during Communist rule. Average life expectancy, of course, increased everywhere, but people were healthier and lived longer when they were not living in Communist countries. It is true that healthcare was free in the Communist states, but this did not help people to stay healthy as the quality of the healthcare was, unfortunately, too low.
Table 9
Source: Lugus O & Vartia P, 1993
This picture becomes even clearer when we move away from statistics that are to a greater or lesser extent distorted – portraying the Communist economies in a more favourable light than was actually the case – to a more detailed study, namely, to a comparison of the Communist countries with some of the poorer countries in Western Europe such as Portugal or Spain, whose economies differed little from those of the less developed Central and Eastern European countries prior to the Second World War. Jeffrey Sachs, for example, compared Poland and Spain: two countries that in the 1950s were largely agricultural, Catholic, peripheral regions of Europe (Table 8). The sizes of the populations and per capita incomes were also quite similar. They had both had disastrous experiences just prior to the mid-century mark – Poland suffered some of the largest civilian casualties relative to population size in Europe during the Second World War and Spain suffered its Civil War – which not only crushed democracy but also stifled economic development. In the 1930s, Poland was ahead of Spain in terms of per capita income and the situation in 1950 had not changed greatly although by this time, the data for Poland was in all likelihood falsified. Nevertheless, it is clear that Poland was clearly a larger industrial power and a larger exporter of goods than Spain. By 1988, however, Spain’s per capita income was four times that of Poland. The enormous increase in income was also reflected in Spain’s greater ownership of consumer durables, where Poland had also been ahead of Spain before the Second World War.112
The difference between the two countries shows up most dramatically in their differing export performances. Even in the 1970s, Poland’s total dollar value of exports still exceeded Spain’s; but during the next decade, Spain’s export earnings surged ahead while Poland’s stagnated. So, after starting from a similar point in the mid-1950s, Spain shot ahead of Poland over the next 35 years. Spain began to catch up with the rest of Western Europe, while Poland fell farther behind. The central reason for Spain’s success was its shift from isolation to integration within Europe and the democratisation process that allowed the country to become a full member of the European Community.
A similar picture can be in found in Northern Europe when comparing developments in Estonia and Finland. It would be harder to find two countries more similar than these two Lutheran countries situated on Europe’s Eastern border. Because of their shared heritage as Finno-Ugric nations, Estonia and Finland have similar languages and cultures. Both countries were largely agricultural, although some industrialisation began early in the 20th century. Moreover, Finland and Estonia paralleled each other in terms of socio-economic development during the inter-war period (1920-1938). In some respects, Finland’s economic development was greater, but this was not true for all measures of growth. In sum, there were few real differences between the two countries by 1940. At this time, however, Finland and Estonia experienced disasters that set them on different courses for the next 50 years; Estonia lost its independence and one-third of its population, while Finland succeeded in keeping its independence but suffered a loss of territory and population. Life under the two different political systems resulted in vastly different economic structures and behaviour patterns that created a huge disparity in the development of Finland and Estonia.113
During the 1950s, living standards in Estonia and Finland were more or less the same. Finland had to pay war reparations to the Soviet Union, which significantly decreased living standards in the country. Gradually, however, Finland opened itself up to the world, while Estonia remained locked away under the control of the command economy. From this point onwards, Finland’s GDP grew several times faster than Estonia’s until in 1988, its GDP per capita was at least four times that of Estonia. Indeed, this may even prove to be too optimistic a picture as the calculations were based on an official exchange rate that was far from realistic. Other observations present a level of household income per capita in Finland that was 4.6 times higher than the Estonian level in 1988. If we base these calculations on a more realistic exchange rate, then Finland’s income per capita can be estimated to be 8.4 times higher. On the basis of these calculations we can conclude that in 1988-89, the Estonian GDP per capita was some 15-17 % of the Finnish GDP per capita, which was then at the level of the European average. This puts the Estonian GDP per capita at the end of the Communist period at a much lower level than most international studies would suggest. But even on the basis of the most optimistic official figures that estimate the Estonian GDP per capita to be four times smaller than Finland’s, it is clear that Finland totally surpassed Estonia during the country’s extended period of Communist domination.114
Table 10
Source: Lugus and Vartia, 1993
Table 11
Source: Lugus and Vartia, 1993
The slower economic growth in Estonia lowered the country’s living standards relative to those of Finland. In 1939, they had been very similar. When we consider the amount of goods that can be bought with the hourly wage, we see that out of 24 items of foodstuffs for which we have comparable data, the price per hour of work (PPW) by an industrial worker for 13 items was higher in Estonia, while for 10 items, Finland had the edge. In comparison with 1938, the PPW for a Finnish employee appeared, by 1988, to be between 1.45 and 2.1 times higher than the PPW for an Estonian employee, though there were two products that were relatively cheaper for an Estonian employee: rye bread and white bread. In general, however, it should be conceded that a Finnish employee would be considered clearly better off. The extreme case is coffee, which was 13.1 times more expensive for an Estonian worker than for a Finnish employee. The gap widens even further if we consider the quality of products available in the two countries, many of which, it must be remembered, could not always be purchased in Estonian shops (Table 9).
It is also possible to compare the PPW for employees with respect to certain manufactured goods and services. In 1938, this was also broadly similar for Finnish and Estonian employees yet by 1988, the Finnish workers were significantly better off. The differences in the PPW with respect to manufactured goods were even greater than they were in the case of foodstuffs. An Estonian employee had to work approximately six times longer to buy a colour TV, about four times longer to buy a refrigerator and 2–2.4 times longer to buy a pair of socks or a bar of soap than his Finnish counterpart did (Table 10). The difference in living standards is also reflected in greater Finnish ownership of consumer durables (Table 11).
Okey 2004, pp. 41.
Sachs 1994, pp. 22-26.
Olev Lugus and Pentti Vartia 1993.
Dellebrandt 1992.
