Did the Fall of the Berlin Wall Hurt Economic Growth?

A quarter-century since the fall of Berlin Wall, recent events in Ukraine are evidence enough that conflict between Russia and the West didn’t disappear with the end of the Cold War. But that isn’t the only way that the optimism of 1989 has been disappointed. The early 1990s were filled with hope that the economies of Eastern Europe and Central Asia would boom once they were freed from the shackles of state control. In fact, the economic performance of the former Eastern bloc has been pretty grim—for some countries, worse than under communism. That’s a lesson in the messiness of change, but it also highlights why economic growth is only a partial measure of progress.

According to World Bank figures, the low and middle-income countries of Eastern Europe and Central Asia as a region have increased their average GDP per capita 43 percent since 1990. That’s slightly better than Sub-Saharan Africa but worse than South and East Asia, Latin America, or the Middle East and North Africa. For 25 countries in the former Eastern bloc, the per-capita GDPs of 13 (containing most of the region’s population) have expanded more slowly since 1990 than the global average. Of the 165 countries for which the World Bank has data, Russia’s GDP per capita (measured in purchasing power parity) was 33 highest in 1990 and 42 highest in 2013. Ukraine dropped from 55 to 93. Bulgaria and Latvia dropped one spot, Romania four, and Hungary eight. Poland did manage to climb 16 spots, to 45 richest, but it was very much in the minority. While Albania, Poland, Belarus, and Armenia have more than doubled their income per capita since 1990, six countries in the region are poorer than they were that year, including Ukraine and Georgia.