Re: GLOBAL KEYNESIANISM

At 08:47 AM 4/28/2000 +0300, you wrote:
>I think there is also a good case to be made that absent the Soviet Union 
>there would have been no Marshall Plan, no Keynesian demand driven global 
>order, and thus no rapid development of West Europe.

In a post-Second World War world where the Soviet Union was absent, the
Marshall Plan might well have not happened, but as I argue at the bottom of
my message, Europe's economic revival after the Second World War may well be
inevitable with or without a Marshall Plan, and currently peripheral areas
might well have had a chance to develop in tandem with the core.

>Regarding Latvia, where I now live, it saw levels of prosperity similar to
>Finland up until about 1970. 

Really? That _would_ match up quite nicely with Ash's arguments. I wasn't
clear on that.

But after 1970, didn't the state socialist system in place in Latvia (and
Estonia) hamper the further modernization of both countries? I was under the
impression that as of the mid-1980's, standards of living in the Baltic
States were roughly on par with that of Mediterranean capitalist Europe --
Portugal, Spain, Greece. That seems to be significantly below the
contemporary level of Finland, never mind the old-developed Scandinavian
welfare states.

>Finland itself prospered tremendously by handling the import/export trade 
>with the USSR.

True, and I am familiar with the sharp post-Soviet depression suffered by
Finland. But wasn't Finland's trade with the Soviet Union a consequence of
its military defeat and quasi-satellite status? Finland's relationship with
the Soviet Union was its second choice after full formal independence.

>Moreover, by your logic, a decade out from Soviet rule, E. Euro should
>be flourishing.  It is not. Indeed, Latvia's e economy is still some 40%
>smaller than its 1989 Soviet era size.  Of the 25 or so republics and
>nations making up the Soviet bloc, probably only Poland has a larger
>economy than in the Soviet era.

True, but hadn't the economic decline in most of central Europe begun before
the Wende? Poland seems to have been in the midst of a pronounced economic
depression after the mid-1970's, while the situations in the independent
Balkan states and Soviet Asia were little short of catastrophic.

I think that the drama of the Wende may have distracted people from the fact
that the collapse of the Soviet bloc did not come at once, but rather, was
the culmination of a decades-long process. At a time roughly corresponding
with the Kondratieff down-cycle, the Soviet bloc and developed Western
capitalist/social-democratic economies diverged. The latter economies
suffered rising levels of unemployment, largely static or even declining
wages, and growing income inequality. In the Soviet bloc all of those
features were were even more important. The collapse of Communist party rule
in the Soviet European satellites and Yugoslavia beginning in the early
1980's, and in the Soviet Union itself beginning in the late 1980's, seems
to have reflected these economic conditions, considerably worse than in the
West. Wasn't a major motivation for the anti-Communist revolutions in the
Soviet bloc popular discontent at standards of living that were
deteriorating considerably more rapidly than in western Europe?

The current appalling economic conditions seem, from the vantage point of a
Canadian, to be the drawn-out consequence of the appalling inefficiency of
the state socialist economic system, perhaps combined with the fact that the
Soviet bloc collapsed in the midst of the Kondratieff down-cycle. There seem
to be at least a few indications that with the coming up-cycle (particularly
in the 2000-2020 period) many of the best-endowed states in central Europe
(the Visegrad Four, the Baltic States, Slovenia) will be fully incorporated
into the European Union economic system, and will have a chance at a rapid
and sustainable convergence with the European capitalist core. A calamitous
economic collapse in the Soviet bloc may have been inevitable; an economic
revival in the coming Kondratieff up-cycle and limited convergence with
western Europe may also be inevitable.

>In sum, it is impossible to do a counter-factual on how affluent these 
>areas
>would have been absent a USSR.  As I have always maintained, it was
>people in the West that were the primary beneficiaries of the USSR.  
>Absent the
>USSR, there is no reason to develop these regions, and due to overcapacity 
>in the West and East Asia, every reason to see they don't develop.

Perhaps. But even without the Marshall Plan, a European economic history
that roughly parallels our history seems inevitable, if perhaps delayed.
Europe was massively endowed with industrial and human resources, and its
core states (France, West Germany, Benelux, northern Europe) did end up
developing stable open systems of government against overwhelming odds as
did some of the peripheral states (Italy at once, the rest of Mediterranean
Europe later). And even if Europe is less prosperous overall, I cannot
imagine how, say, Czechoslovakia or the Baltic States would be so
impoverished relative to the core.

>Best,
>
>Jeff Sommers