A Discussion of “The Long-Term Effects of Communism in Eastern Europe”
Communism ended in Eastern Europe over three decades ago, but does that mean the market system that took its place is secure? What impact do the cultural and economic attitudes of the people have on the sustainability of the market system in these countries?
As I have written before, I started teaching my graduate global economy class with a book by economist Barry Clark, The Evolution of Economic Systems, because it uses a holistic approach to understand a country’s economic system.
Time for a Paradigm Shift in Economics?
An economic system has three components: the economy, the state, and the civil society, but a holistic approach assumes that the parts of any system are so interrelated that they can only be understood as components of a whole.
Thus, the economic system is the framework of economic, political, social, and cultural institutions organizing and coordinating economic activity.
Capitalism is a market centered economic system, but the state and civil society are still vitally important. Markets only succeed within a framework of institutions like trust, thrift, and fairness that come from the enforcement power of the state through laws and the community through norms and culture that define prevailing attitudes. Without this institutional support of the markets, the market system would likely fail.
What happens then to a country that has been living under one economic system that suddenly falls and is replaced? The economy and the state may change overnight, but attitudes usually do not. Can the new economic system survive without full institutional support?
Institutional Change in Eastern Europe
With that in mind we can look at the experience in Eastern Europe since the fall of Communism. Data on many macro indicators shows formerly Communist Eastern Europe has caught up with Western Europe but have the attitudes converged like the macro indicators?
That is the question investigated by Fuchs-Schundeln and Schundeln (2020). They use data from 14 Western European countries, 11 EU Eastern European countries, and 6 Non-EU Eastern European countries to determine the impact of having lived under Communism on attitudes.
They acknowledge that some of these Eastern European countries would call their past system “Socialist” and not “Communist” but do not want to engage in that philosophical debate. For the purpose of their paper, they define Communism as “a broad concept” including characteristics like
“strong elements of central planning of the economy with a high share of government-owned firms or cooperatives and limited and highly regulated markets…(and) severely restricted democracy, typically by instituting a de facto one-party regime” (p. 174)
With that in mind they have 3 sets of countries to examine:
- West Europe: Austria, Belgium, Denmark, Finland, France, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden, United Kingdom
- EU East: Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovak Republic, Slovenia
- Non-EU East: Albania, Bosnia and Herzegovina, Kosovo, North Macedonia, Montenegro, Serbia
On a macro basis, both East groups have converged to the West — on things like GDP, democratization, and income inequality. For the last one, converging means income inequality has risen because the market economy makes it possible for more extreme wealth.
Can Attitude Changes Keep Up?
While there may have been economic convergence, has there been a similar adjustment in the attitudes? This is an important question because institutional changes, like increased market freedom and democracy, are only sustainable if they have popular support.
Their main way of testing this is to look at each of the three sets of countries by cohort. They can see how attitudes differ across age groups for each group of countries. They look at 4 cohorts:
- Those born before 1945
- Those born between 1945 and 1960
- Those born from 1960 to 1974
- Those born after 1974
The first group grew up under Communism and spent over 40 years in the system. While the youngest have only known Communism, if at all, before they became adults.
First, they look at the attitudes towards the market economy using survey data. All cohorts in the West had an approximately 42% approval of the market economy. For the EU East, the oldest cohort only had 20% approval while the youngest matched the West at approximately 42%. The Non-EU East showed a similar change across cohorts except their youngest actually had higher support than the West at almost 50%.
So it seems any attitude differences about the market economy among these sets of countries is disappearing over time, which is showing institutional support for a market economy is growing. This is good news for this to be a lasting change.
Second, they look at the attitudes towards democracy. Again, all cohorts in the West had about the same rates of support for democracy, at approximately 77% favorable.
We do see higher support for democracy across cohorts again for both EU East and Non-EU East. But both sets of countries are below the West. For the oldest cohort it is approximately 40% growing to almost 60% support for the youngest.
The growth across cohorts is encouraging but the lag behind the West does have to raise concerns about the amount of institutional support for democracy. Under a stressful event, like an economic shock or war, would this lower level of support for democracy make them more likely to shift to an authoritarian leader?
Third, they look at the attitudes towards support for income redistribution through government social policies. For this issue, they only have survey data for the West and EU East countries.
Again, we see there is little difference among cohorts in the West with support for government income redistribution at around 73%. The cohorts of the East support it even more. The oldest cohort feels 88% in support and the youngest is approximately at 78% support.
What is interesting here is the countries of the East have fewer income redistribution programs compared to the West but seem to support it more (p. 187).
The EU East countries come from a system where income was much lower than it is today but also much more equal. There was not really a need to redistribute income. But now, the market system has allowed higher income for all. Still, while all are doing better, some are doing a lot better. Thus the growth in income inequality.
So we see the older cohort wanting more equality like they were used to and thus higher support for income redistribution. This issue may indicate some institutional weakness if not addressed with more income redistribution policies in the future.
Adjustment Takes Time
The cohort differences across these different issues then does seem to show that Communism, as they defined it, has had a lasting impact on the attitudes of those who have lived under it. And the impact is higher on older cohorts.
Even as these countries have seen their macro indicators improve, the authors report that survey data shows that people in the formerly communist countries report lower happiness than those in the West (p. 190). And again, the older cohorts are more unhappy. The change in state and market institutions happened quickly but their attitudes have not changed to keep up.
Laudenbach, et al. (2019) also explored the lasting impacts of Communism by examining emotional tagging — people who experience living under Communism as a positive experience will have more negative beliefs about Capitalism and more positive beliefs about Communism, and vice versa. While not explored in this current paper, this could add an extra dimension in understanding the cohort differences.
Sports, Religion, Communism, and Capitalism
The fact that the youngest cohorts are showing attitudes more in line with those in the West is encouraging that the institutional changes are sustainable, but we can also identify a potential weakness. As the authors note in their conclusion, the desire for more income redistribution in the East than is currently in place may lead to voting for more extreme parties (p. 190). And the lower level of support for democracy could lead to authoritarian leaders who undermine their post-Communism institutions.
Change is hard. Most of us resist it. What the authors’ analysis reveals is if time is allowed to pass, the changing attitudes observed in the younger cohorts can lead to growing support for these economic reforms. Hopefully the institutional changes towards markets and democracy in Eastern Europe these past few decades will take root in the cultural preferences of the people so they won’t be pulled to strong leaders that undermine their progress.
References:
Fuchs-Schundeln, Nicola and Matthias Schundeln, 2020. “The Long-Term Effects of Communism in Eastern Europe.” Journal of Economic Perspectives, 34(2): 172–191.
Laudenbach, Christine, Ulrike Malmendier, and Alexandra Niessen-Ruenzi, 2019. “Emotional Tagging and Belief Formation: The Long-Lasting Effects of Experiencing Communism.” AEA Papers and Proceedings, 109:567–571
By Ellen Clardy, PhD on .
Exported from Medium on December 15, 2022.
