Eastern Europe's 'Time of Troubles',
RAND CORP SANTA MONICA CA
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Eastern Europe faces a time of troubles more serious than at any time since 1956. The proximate causes are economic. To be sure, we have heard dire economic predictions about Eastern Europe before. But the fact remains that economic growth in the region declined from 7.3 percent yearly in the first half of the 1970s to 4 percent yearly in the second half of the decade to negative growth after 1980. It has been argued that the East European economic slowdown would have occurred much more precipitously had it not been for three factors periodic investment campaigns at lower stages of development Soviet trade and other subsidies beginning in the 1960s and cheap Western credits in the 1970s. By the end of the 1970s, these palliatives lost much of their effectiveness. The East European economies had, by and large, exhausted the potential of extensive development, and thus a boost in investment a proven instrument for improving the performance of centrally planned economies at lower levels of development was less effective than it had been in earlier economic downturns. The associated rigidities of the East European economic mechanisms hampered in comparison with other economic systems at comparable stages of economic development adjustment to the second international economic shock of the late 1970s. Soviet trade subsidies, especially for energy imports, were reduced. And Western credits became more expensive and then dried up.
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