Mark Adomanis, Contributor
I specialize in Russian economics and demographics.
The Economist’s multimedia library recently featured a short video about how it is long past time to scrap the term “Eastern Europe.” While I agree that crude geographic distinctions aren’t very useful, the video accurately notes that Prague is further West than Vienna and that both Finland and Greece are significantly further East than many members of the old socialist bloc, I can’t say that I agree with the larger premise. There are still yawning differences in per capita wealth between the core countries of “old Europe” and the emerging markets of the post-Communist countries.
Using data from the World Bank database I quickly created a chart showing how selected East European countries have fared compared to Germany over the past 20 years. I used purchasing power parity figures to give the fairest possible picture (if I had used market figures the differences would be even more glaring).
Some countries (such as Poland and the Czech and Slovak Republics) have done a quite admirable job of catching up with Germany though they still remain many, many years away from true convergence. Other countries (such as Bulgaria and Romania and Hungary) have done a much less impressive job and have actually been making significant negative progress since the start of the financial crisis.
I’ll be following this up with a more detailed post sometime over the next few days, but what this chart suggests to me is that there are still huge differences between the developed “core” of the EU and the periphery. Most troublingly, since the onset of the great recession/global financial crisis in 2008, none of the countries in question have continued to converge: they’re either stagnated in comparison with Germany or actually grown more slowly than it. Over 20 years after they transition from communism Romania and Bulgaria have real per capita income levels that are about a third of Germany’s, roughly equivalent to the difference between the United States and Belarus. So while there is some very good news in parts of the former Communist east, and while that represents a real advance for human freedom and wellbeing, it is extremely premature to declare victory: formerly communist countries are going to remain much poorer than the “core” Western countries for the foreseeable future.