Differences of East and West European Economies

1 January 2018

European Economies Before and After Communism After World War II, Europe was divided along the Iron Curtain, a political, military, and ideological barrier constructed by the Soviet Union to separate itself and its allies from miscounts areas. The West, defined by the North Atlantic Treaty Organization (NATO), members were Belgium, Canada, Denmark, France, Iceland, Italy, Luxembourg, the Netherlands, Norway, Portugal, the United Kingdom, and the United States, with Greece, Turkey, West Germany, and Spain joining later.The East was defined by the Warsaw Pact, a treaty establishing a mutual-defense organization composed of the Soviet Union, Albania, Bulgaria, Czechoslovakia, East Germany, Hungary, Poland, and Romania. This remained in place until the fall of the Soviet Union in 1991. Communism – the social, political and economic ideology that defined the East, aimed at establishing a classless, moneyless, and stateless socialist society.

This movement saw intense rivalry between their world and countries with market economies and Liberal democratic governments like the West.

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There are many reasons why communism doesn’t work. The three main reasons for the collapse of the Soviet Union are centrally planned economy, industry at the expense of consumers, and shortage of workers by immigration. In Eastern Europe the government of the Soviet Union made all basic economic decisions rather than private persons as would happen in a free market. In theory, it seems more rational and fair than the marketplace, but in practice it yields inefficiency, lazy bureaucracy, and little incentive to work hard or be innovative.Free market encourages people to develop businesses, work hard to reap rewards, and develop new ideas. The Soviet Union kept their satellites In a state of economic isolation and backwardness by not encouraging them to think for themselves.

During the Cold War the Soviet Union felt challenged by the United States to become a superpower. Instead of providing for its people it built up its nuclear weaponry and competed in the space race. Availability of goods and services, such as transportation, communications, auto service stations, barbers, etc. Ere quite poor in the East compared to their Western counterparts. Restaurants were crowded, the service was slow, and the lines in supermarkets were long. The East emphasized industrialization at the expense of the consumer. The Berlin Wall, built in 1961 to stop East Germans from escaping to West Germany, became a symbol of the Cold War.

West Germany benefited greatly from the appearance of some 14 million refugees from East Germany and the territories of Poland and Czechoslovakia.The labor force was abundant and those who came from other countries were not too concerned with the initial conditions for work. This turned out to be a beneficial situation for an economy that needed to be rebuilt from shambles. The West could rebuild their infrastructure and provide better living conditions for its inhabitants while those in the East saw their living conditions degrade over time. Western Europe was successful after World War II because the governments in power believed that the economies they were building would benefit from a strong pro-market stance.Expanding trade led to higher wages which led to social peace and low inflation rates which further expanded output that led to increased investment and expansion of international trade. Communism stifled growth.

The East concentrated their efforts on building up the military and space exploration at the expense of expansion and growth. Since the fall f the Soviet Union, most eastern countries have developed market-oriented economies. Average standards of living fell drastically in the early asses but began to rise by the end of the decade.

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