CHART: fates of former USSR countries vary greatly, and Ukraine is headed wrong way

The countries, like Ukraine, that failed 

to take that path have stagnated.

East is least

by Kevin A. Hassett

The dramatic events in Ukraine the past few weeks were ignited when Ukrainian president Viktor Yanukovych, a Russian ally, said he would suspend efforts to bring Ukraine closer to the EU and thousands took to the streets to protest. Clearly, the threat of Russian political oppression was in the minds of the protesters, but the economic stakes were enormous as well. Indeed, a look at the data suggests that Yanukovych’s act was against the economic interests of his own people.

When the Soviet Union collapsed in 1991, former Soviet and Eastern Bloc countries chose between two distinct paths. Ten Central and Eastern European nations (the so-called CEE-10) made integration with the European Union a top priority. The rest, like Ukraine, moved much more slowly toward Western standards, and some even settled under a new Russian umbrella.

Prior to the breakup, Eastern Europe was underdeveloped relative to the West, mostly because of the failure created by central planning. When a market economy is unleashed in such a setting, “convergence” of the standard of living to that of the developed world can be quite rapid. If the U.S. wants to grow sharply, it needs to push the very frontier of what is possible farther out. A former Soviet or Eastern Bloc country, on the other hand, could grow rapidly simply by copying the developed world. Some did.


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