The Influence of the Socialist Regime Reform in Eastern Europe on the Economy

Abstract

In the late 1980s and early 1990s, countries started the transition from planned economy to market economy. This study focuses on the role of the socialist regime reform in Eastern Europe on the economy and deeply analyzes the economic consequences and differences of the transformation through the analysis of cases and academic research results in Poland, Czech Republic, East Germany and other countries. The results show that the impact of the reform on the economy of Eastern Europe is obviously complicated and different: in the short term, “shock therapy” has caused the economies of various countries to shrink, resulting in hyperinflation, large-scale unemployment and informal labor market expansion; In the long run, Central and Eastern European countries rely on the opportunity of European Union (EU)’s eastward expansion to achieve economic recovery and westernization integration through trade liberalization and institutional improvement, while some former Soviet Union allies are caught in growth stagnation due to weak institutions and corruption. The significance of this study lies in clearly revealing the multiple paths and key influencing factors of economic transformation in Eastern Europe and providing a typical case for understanding the interactive relationship between institutional change and economic development.