The former soviet states are a great natural experiment in economics. Countries that liberalized their economies, like Estonia, Lithuania, Czech Republic, and Latvia (the "mostly free" countries here: https://www.heritage.org/index/ranking) have grown much faster than countries that retained socialism and central planning, like Ukraine, Belarus, and Moldova. See: https://www.theguardian.com/news/datablog/2011/aug/17/ussr-s.... Remarkably, much of the economic growth came before Estonia, Lithuania, (Czechkia and Slovakia), and Latvia joined the EU. Indeed, their democratic and economic reforms, along with corresponding growth, paved the way for EU membership.
I would argue that in the case of Ukraine and Moldova, the main reason for their bad economy today is the large scale corruption that took place during post-soviet privatization in the 90s. This has lead to the extreme Oligarch power structure that we see today.
Also Belarus is benefiting mostly from 1) refining Russian oil, which they buy at lower prices, 2) gambling (which is illegal in Russia, so Russians go to Belarus) and 3) reselling European food to Russia to bypass Russian anti-sanctions.
Their economy is quite shitty and simply parasitizing on Russia.
We've banned the GP account, but please don't take HN threads further into flamewar. The site guidelines ask you not to reply to egregious comments but rather to flag them.
You cannot use this as an example of a natural experiment. Natural experiment features external variation. In contrast, the amount of liberalization of the economy likely had a lot to do with the country's history, e.g. Ukraine's markets had been less developed than Estonia's before Soviet Union and as a result they couldn't afford to liberalize as much.
Ukraine liberalized its economy and it pretty much destroyed the place.
The whole GDP growth fetish is a lot of horse shit; some measure needs to be taken that the increase in GDP doesn't destroy the lives of some large swathe of the population like it did in Russia. Belarus may be led by a repressive dictator, but the fact that it didn't experience the absurd declines in life expectancy and quality of life in the 90s that Russia did will keep him popular, even if they do have to pay more for oil.
Ok so let’s look at the countries highest on the Economic Freedom index.
Hong Kong tops the list right? It has what you would expect...
Capital has flowed in and normally that would have pushed blue collar workers and children and elderly out, with people commuting 2 hours each way as in SF. But since these are islands, the poor live in coffin like shoebox apartments, far smaller than anything allowed in US cities. Millions form entire communities of poverty around there, raise children there etc.
How large an effect are we talking? 20% of Hong Kong is below the poverty line. I did the math and any four people below the poverty line cannot together afford a studio apartment in normal areas of Hong Kong.
Hong Kong has had to aggressively increase its welfare and safety nets. It has over 40 public hospitals and 20 private ones.
Suffice it to say that around the world, government-run and single-payer healthcare and schooling has been compatible with high scores on economic freedom. It’s only in the USA do we have this ridiculous fearmongering about that.
Hong Kong has, in many measures, a very strong safety net and strong public sector. Ditto for Singapore etc. And larger countries in Scandinavia, and Canada and Australia etc. are similar.
Much of the centrally coordinated infrastructure investment has paid off - in the US we had the interstate highway system, China lifted more people out of poverty in 20 years through centrally planned “ghost cities” than any place on Earth ever, and the USSR did a great job of increasing literacy, electricity, bringing universities, rights to women and minorities, to countries like Uzbekistan and that whole region. Child mortality declined greatly, as people got better access to healthcare.
Not to say that everything is black and white, but “economic freedom” and capitalism isn’t the only way science and technology and prosperity moves forward.
China hasn't fixed poverty though. A lot of migrant workers are left out in pensions, getting as low as 80$ per month.
Moving to those ghost cities have wrecked an entire generation, as it seems.
Moving people out of poverty includes the pension challenge. Which is the hardest one and I'm pretty sure that the one-child policy didn't contribute well to that part.
No doubt about it, getting off the addiction to the pyramid for social security will require a lot of automation (Japan is dealing with this now). But it’s the only sustainable way forward.
Look, China may not have eradicated poverty but certainly it was able to make the average wages go up 5x a decade for 20 years. Could this be done by uncoordinated market activity of private actors? Perhaps, but the USA has never been able to pull it off so fast.
Now one can argue the US always had a far higher starting point so it ran into diminishing returns. And that is a fair argument.
But keep in mind USSR’s GDP grew faster than USA and they faced the aftermath of two world wars, lost 30 million people and also subsidized lots of other countries in the Warsaw Pact (their version of the Marshall Plan). Compare apples to apples, eg the GDP of Romania after it joined the Eastern Bloc vs Hawaii after it was annexed as the 50th state of the US. Or compare GDP growth of Georgia and Puerto Rico.
It’s not actually clear which system led to more economic prosperity, and as I said the USA had the advantage of oceans protecting it, the dollar was the reserve currency all around the world after Bretton Woods, and we could import cheap goods all year long by just printing dollars. That has a massive effect on prosperity.
China's growth was the result of uncoordinated market activity of private actors. They switched systems.
I don't think Romania and Hawaii form an apples-to-apples comparison.
Romania: a country in Europe, occupied by the Soviets after World War II, with 16 million people. Neighbors Hungary, Yugoslavia, Ukraine, and the Black Sea.
Hawaii: a U.S. territory for half a century, with 620 thousand people. Noted for its proximity to Johnston atoll (825 miles from Honolulu), Midway Island (1311 miles), and San Francisco (2393 miles).
What would you say is an Apples-to-Apples comparison?
And with China, I don’t think it is at all accurate to say that the millions of miles of new roads, bridges, infrastructure, ghost cities etc. were built because private market actors woke up one day and decided to make massive infra investments. It was central planning. And a lot of the science, electric vehicles etc. is sponsored by govt too, that is why China is the world leader.
Edit: A better example for you would be Singapore, with its history of public housing, which gets privately owned (or 99-year-leased). They also have public roads.
Can you please back up your assertion with sources? Here is the opposite of what you said:
Developers acquire new plots of land from local governments and are mandated to construct something more or less immediately.[10] Developers can't sit idly on vacant land and wait for the surrounding area to develop until it's economically viable.[10] This creates the quick-buck mentality in developers to rapidly build in the new area without the necessary demand for housing.[10]
I backed up pretty much the opposite of what you said. Massive government involvement setting the rules and mandates for developers who take the project.
I don't care what those jackasses say: the only thing they haven't sold off at this point is agricultural land, and the lizard men in the State Department are trying their hardest to loot this as well.
Belarus is reduced to a feudal family enterprise, with all resource allocation and import-exports tied in there. The system is thoroughly corrupt but with only one major stakeholder on the top.
Belarus, as the article clearly states, unlike Ukraine, isn't a craphole at all.
Saying "muh corruption" isn't an argument. Russia had a problem with corruption as well until they elected a patriotic strong man who got it under control to the point where oligarchs were no longer fighting pitched gun battles in Moscow. What's your plan for dealing with neoliberal induced corruption in Ukaine?
I love the point and sputter. I said, Putin got corruption under control to the point where oligarchs (none of whom were or are FSB agents) are not fighting pitched street battles in Moscow. As a result their GDP, unlike Ukraine's, is doing fairly well. They even have a GINI index better than in the US. Imagine that!
Do you have a plan for fixing Ukraine's corruption under the neoliberal looter regime the US put in place there?
Russia's gdp is directly proportional to oil prices, not oligarchs arrests. You can google for charts if you like.
No, I do not have a plan for Ukraine. In fact I think no plan would make any difference at this point
I don't need to google for charts to know that you're regurgitating an addle-pated neocon talking point. Oil prices are down, Russia's economy, despite sanctions, is up. I guess autarky ain't so bad after all.
Russia manages to field new nuclear submarines, new ballistic missile designs, a nuclear ramjet cruise missile and various other insane technological contraptions. Meanwhile in the US we need to hitch a ride ... with the Russians, to achieve low earth orbit, and we've shipped our heavy manufacturing capabilities to China and Mexico. But hey, at least we design iphones in California!
Ukraine did not "liberalize" it. The economy was destroyed by "privatization", which effectively meant giving away state resources to those already with money and power - the former Communist class and criminals.
It was planned post-Soviet chaos, and chaos attracts grifters and opportunists. The regular people down in the trenches had no clue that they were being robbed blind.
Don't be thick. A handful of oligarchs seizing all the wealth created by Soviet "slave" labor and sharing very little did destroy Ukraine long before the loonies in Lviv decided to overthrow the shameless crook from the Donbas.
> By the next morning, soldiers in unmarked uniforms had taken the Crimean parliament and raised the Russian flag. Throughout the day, the little green men—as the irregular Russian soldiers came to be known—fanned out across the city, capturing government buildings. Soon, behind closed doors and under Russian guns, the autonomous region’s parliament voted to request Russian security assistance.
If you comment about those issues, it would be nice you knew something about it.
Ukraine is very liberalized economy, perhaps more than in the west - and yes, the results are less than stellar, for a complex number of reasons.
About Estonia, Lithuania, Latvia the economic results seem OK, but the social one is close to tragedy: in 3 Baltic countries emigration has been terrible, and the lost a large part of their population, threatening the social fabric. https://www.oecd-ilibrary.org/social-issues-migration-health...
Industry and even agriculture decline in Baltics are a major reason for emigration. The old EU countries got cheap labour and killed competition. Do you really think the Ignalina power plant was closed for environmental reasons? And the lack of funds for the trans-baltic railway, was it due to these countries lack of cooperation?
Note though that when many of the former soviet economies liberalized some of their economic and social outcomes were initially not so great. They experienced high inflation and, in some cases, a sharp drop in life expectancy. [1,2]
I understand that some economists explain the high inflation by saying that pent-up demand was "unleashed" after the Soviet Union collapsed. To me this seems kinda hand-wavy (is it possible to measure pent-up demand?).
On a related note, something that comes close to a natural experiment is a comparison of the economic history of Finland and Russia. Finland was part of the Russian empire and, like the rest of Russia, was very poor at the time. It then broke away during the civil war, which is, of course, around the time that Soviet communism began to take root. Meanwhile, a little later, Finland took took a different economic path and instead implemented some social democratic policies and is now per capita richer than Russia and indeed many countries in Europe. [3]
Even during soviet occupation, all of the Baltic countries were already way ahead,compared to the likes of Azerbaijan or Kazachstan. There are many more reasons,such as mentality, culture, geographical location and education that influenced it. Economical model was only one piece of the whole picture.
sorry I don't get it: what is Slovenia a counterexample of?
It seems to be a fairly wealthy country now, with a market economy and liberalised services.
A huge chunk of their economy are state owned companies. They didn't privatize everything like most other post communist countries and they are still doing rather well. They are quite small, so not directly comparable to bigger countries but still interesting.
I'd also be curious the effect of EU funding - I know Estonia received hundreds of millions if not billions over the years on development and I'd guess it's much the same for Latvia/Lithuania as well
Latvia received EU subsidies of 2.76% of GDP in 2017 [0]. It contributed 0.69% of GDP, for a net EU contribution to Latvia of 2.07% of GDP.
According to government posters pasted all around Latvia, EU support constituted about 12.8% of government budget(!), or 9.6% net after accounting for Latvia's contributions to the EU budget.
Look at Germany. It’s a better experiment. Former democratic part got billions from westerners and didn’t evolve far. They got basically new infrastructure build from western money, but people left former communistic paradise. Salary gap is still huge. That’s why Tesla picked location there and not in the western part of the country.
The US has similar variation in GDP per capita in its states, despite having had essentially the same economic system at least back to the civil war over 150 years ago.
Berlin is in the east of Germany. I live in Berlin, and have considered cycling to Poland and back as a day trip.
One of my German coworkers remarks often that wages for any given job in former-DDR-areas are much lower than the same jobs in pre-reunification-Bundesrepublik-Deutschland-areas.
West Berlin was a political enclave in DDR. ~150 km from the inner German border [1]. Just outside Berlin is pretty much ex-DDR territory. At the same time Berlin does have quite a strong foreign community and high migration, lately negative for Germans and positive for other ethnic groups [2]. It is the second largest city (by population) in Europe after London with much lower living costs [3]. Also Daimler and BMW have strong presence in Berlin. Those factors may have influenced the Tesla's decision a lot.
Sadly the EU is not that eager on taking new memberships right now. Look at North Macedonia and Albania's potential membership negotiations getting initially opposed we are too busy right now and then conditioned by France ok, but one step at a time.
Albania maybe but Noth Macedonia? 2.1M people. The EU took more refugees from the Middle East than there are N. Macedonians. The Republic of Serbia has signed a free trade agreement with the Eurasian Union (Russia's version of the EU).
Not GP but in Spain we have ton of Romanians, and it’s one of the most popular “blame the immigrant” targets. You can see how that becomes a political problem.
(I don’t agree with those views, I’ve been to the country a couple times and I think the culture and the people are beautiful)
I'm not really picking sides here, but the roaming gangs are really visible compared to regular Eastern European immigrants. There's just this watershed moment when the Romanian borders opened where all of a sudden you started noticing them, while the influx of for example Poles was much more gradual and consisted of mostly people that came with the idea at least to work.
I know that Romanian criminals, from petty to violent and organized, have been a thing in Spain since I was a kid, well before their entry into the EU.
That being said, what I saw in fact after their adhesion was that the quality of immigration seemed to improve (at least from what _I_ could see). Good number of honest and sometimes very well-educated people in services.
I guess the question to ask respective to their adhesion is whether the total amount or proportion of Romanian-origined criminality increased.
You wrote: "Before you talk [...] you may want to apply some reasoning". That's plainly an insult, and your reply here just found a way to repeat it. Posting like this will get you banned on HN, so please just don't.
Georgia suffered a massive civil war from the time the Soviet Union fell until 1995, that caused its GDP per capita to fall by 2/3 to 1995. The economic reforms happened in the 21st century and growth since then has been very quick. From Wikipedia:
> Since the early 21st century visible positive developments have been observed in the economy of Georgia. In 2007, Georgia's real GDP growth rate reached 12 percent, making Georgia one of the fastest-growing economies in Eastern Europe. The World Bank dubbed Georgia "the number one economic reformer in the world" because it has in one year improved from rank 112th to 18th in terms of ease of doing business. Georgia improved its position to 6th in World Bank's Doing Business report 2019.
It is well known. VEF, Eletrotehnika, Tondi Elektroonika and others. Also big biotech hub in Soviet times. AFAIK. Even the first soviet atomic bomb was partly build there ("Sillamäe").
I spare you the details for the Czech republic since this should be well known. They were always an industrial and manufacturing hub, even during German occupation in WW2. Airplanes, Tanks, guns, cars (Skoda!), machinery etc. Don't forget, they are a comparably small country.
