Post-Cold War Recession Myths Debunked

The oft-perpetuated myth, that rapid economic reforms post-Cold War drove the Eastern bloc into early recession, has been debunked by an economics professor at the libertarian think tank Cato Institute’s conference on the Cold War.

In his research, economics professor Oleh Havrylyshyn, who works at the University of Toronto and George Washington University, found that “countries that moved early, moved fastest, and went furthest in market liberal and market reforms are the very same countries that have had very sharp increases in GDP per capita.” He compared Ukraine to Poland and concluded, “Poland and Ukraine had about the same standard of living in 1990” yet “in the year 2013, Poland’s per capita income was 3 times higher” than Ukraine’s. “The socioeconomic performance is much better in early reformers than” in the Central Asian and Eastern Europe ex-USSR countries he said recently at the Cato Institute.

Havrylyshyn said, “The same countries that did the greatest amount of economic liberalization were also the same countries that had achieved” more democratization. The rest of his data “shows the same pattern,” said Havrylyshyn, and he concluded the countries that implemented faster economic reforms more quickly performed better than other ex-USSR countries since the end of the Cold War.

He believed previous studies were “premature in drawing conclusions” about the successes and failures of post-Cold War economic reforms. He said past researchers were too concerned with results fitting into certain categories, but now, “We’ve got 25 years of hard evidence” to write about.  Previous studies were wanting “because of the simple logic of the expected effects on economies in transition.” Also, “you couldn’t avoid a recession,” he said, referring to the often chaotic conditions in former Soviet satellites, not to mention the USSR itself.

It would take five to seven years—or more—for economies that had been commanded and controlled for half a century to heal, he argued. Too often, the older studies “were measuring half” of the economies and did not have the data we have now, said Havrylyshyn.

Also on the panel at Cato that day, Peter Murrell, the Mancur Olson chair of economics at the University of Maryland, disagreed with Havrylyshyn. He argued that in Poland, the Catholic Church and Solidarity movement “were immensely important in shoring up the Polish society at that point.” He felt, “Poland was probably very fortunate in this very sense” of having a support network already in place, claiming that, in Russia, the country had no similarly strong institutions.

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