European Political Economy (EPE)
Fall Term 1994
Jochen Lorentzen
European Studies Department
Central European University

Course Outline

This course treats key economic problems and policies of Central and Eastern European (CEEC) and of Western European countries, both past and present. It considers the conditions under which industrialisation took place in the 19th century and analyses the reasons for the uneven pace of development in Europe's core and in the periphery. The economic difficulties of CEEC and Western Europe in adjusting to a changing world economic environment in the 1970s and 1980s are explored, as are the various attempts to overcome them.

The course is designed to enhance a critical understanding of economic development in a historical context, and to appreciate the constraints on contemporary economic management, especially in the area of trade and investment policies, in CEEC and the European Union.

The course is assessed on the basis of a mid-term paper and a final two-hour in-class exam which will give the choice of a number of short essay questions.


The economic difficulties of CEEC are typically thought of as the result of some 40 years of (bad) planning. But CEEC has always been less developed than Western Europe æ certainly for the first four decades of this century, and also for much of the 1800s. This is important to bear in mind in discussions about the desirability and feasibility of, for example, EU enlargement or the creation of free trade zones in Eastern Europe which will be examined later on. How the periphery has developed and why parts of ECE have remained backward for so long, is the topic of part A.

1. Introduction and Overview
Required reading:
Heilbroner, Robert L. 1985. The Making of Economic Society. 7th ed. Englewood Cliffs, NJ: Prentice-Hall. Chaps 3,4.
Strange, Susan. 1988. States and Markets. London: Pinter. pp. 1-43.

2. Regional Income Disparities in Europe, 1830-1970
Required reading:
Berend, Ivan T. and György Ránki. 1982. The European Periphery and Industrialization 1780-1914. Cambridge: CUP. Chaps 1-3.
Janos, Andrew C. 1989. The Politics of Backwardness in Continental Europe, 1780-1945. World Politics 41, no.3: 325-358.

Of related interest:
Gerschenkron, Alexander. 1966. Economic Backwardness in Historical Perspective. Cambridge, MA: Belknap. Chaps 1,2.
Kindleberger, Charles P. 1978. Economic Response. Comparative Studies in Trade, Finance and Growth. Cambridge, MA: Harvard University Press. Chap. 7.
Pollard, Sidney. 1988. Peaceful Conquest. The Industrialization of Europe 1760-1970. Oxford: Oxford University Press. Chap. 1.

3. Trade and Investment between Core and Periphery

Required reading:
Berend and Ránki (1982, chap. 5)

Of related interest:
Cameron, Rondo E. 1981. Economic Relations of France with Central and Eastern Europe, 1800-1914. Journal of European Economic History 10: 537-552.
Good, David F. 1981. Economic Integration and Regional Development in Austria-Hungary, 1867-1913. In Disparities in Economic Development since the Industrial Revolution. Eds. Paul Bairoch and Maurice Lévy-Leboyer, 137-150. New York: St Martin's Press.
Kindleberger (1978, chap. 3)

4. International Capital Markets and CEEC

Required reading:
Aldcroft, Derek H. 1977. From Versailles to Wall Street 1919-1929. London: Allen Lane. Chaps 7,10.

Of related interest:
Aldcroft (1977, chap. 12)
De Cecco, Marcello. 1984. The International Gold Standard. New York: St Martin's. Chaps 1,2,6.
Kindleberger, Charles P. 1986. The World in Depression, 1929-1939. Berkeley: U of CA.
Strange, Susan. 1985. Protectionism and World Politics. International Organization 39, no.2: 233-259.


In the 1970s, CEEC ran into a series of economic problems that they never really managed to get out of again. Part B will look at one of the most dramatic manifestations of this trend external indebtedness. More precisely, it addresses the following questions:
* How and why did external debt become a problem in the first place?
* How was CEEC's external debt managed by national authorities and international financial institutions?
* How did CEEC's payments problems differ from the debt crisis in other parts of the world (esp. in Latin America)?

On the western side, the creation of the EC's Single Market ("1992") was in part a response to increased global competition from the US and Japan. Part B will analyse the economic motives behind the 1992 Project and compare the interests and strategies of major EC members, notably France, Britain, Germany and newcomer Spain.

5. Economic Crisis and Indebtedness
Required reading:
Brada, Josef C, Ed A. Hewett and Thomas A. Wolf, eds. 1988. Economic Adjustment and Reform in Eastern Europe and the Soviet Union. Durham: Duke University Press. Chap. 1.
Zloch-Christy, Iliana. 1987. Debt Problems of Eastern Europe. Cambridge: CUP. pp. 67-98.

Of related interest:
Hare, Paul. 1988. Industrial Development of Hungary Since World War II. Eastern European Politics and Societies 2, no.1: 115-151.
Paulat, Vladislav J. 1954. Investment Policy and the Standard of Living in East Mid-European Countries. Journal of Central European Affairs 14: 38-64.
Wszelaki, Jan. 1951. The Rise of Industrial Middle Europe. Foreign Affairs 30: 123-134.

6. CEEC and International Financial Institutions

Required reading:
Brada (1988, chap. 8).
Lorentzen, Jochen. Opening Up Hungary to the World Economy. Forthcoming in 1995. London: Macmillan. Chap. 1.

Of related interest:
Assetto, Valerie J. 1988. The Soviet Bloc in the IMF and the IBRD. Boulder: Westview. Chap. 7.
Gajdeczka, Przemyslaw. 1988. International Market Perceptions and Economic Performance: Lending to Eastern Europe. Eastern European Politics and Societies 2, no.3: 558-545.
Lavigne (1991, chap. 9)
Zloch-Christy (1987, chap. 4)

7. Economic Integration in Western Europe 1985-92: Successes, Failures, Open Questions
Required reading:
Colchester, Nicholas and David Buchan, 1990. Europe Relaunched. London: Hutchinson. Chaps 1-3.
Into the Void. Survey of the European Community. 1992. The Economist, 11 July.
Tsoukalis, Loukas. 1993. The New European Economy. 2nd rev. ed. Oxford: OUP. pp. 34-76.

Of related interest:
Cameron, David R. 1992. The 1992 Initiative: Causes and Consequences. In Europolitics, ed. Alberta M. Sbragia, 23-74. Washington: Brookings.

8. Poor and Rich in the Community: Redistribution and Cohesion

Required reading:
Tsoukalis (1993, chap. 8)

Of related interest:
Marks, Gary. 1992. Structural Policy in the European Community. In Europolitics, ed. Alberta M. Sbragia, 191-224. Washington: Brookings.
Pridham, Geoffrey. 1991. The Politics of the European Community, Transnational Networks and Democratic Transition in Southern Europe. Chap. in Encouraging Democracy. Leicester: LUP.
Shackleton, Michael. 1990. Financing the European Community. London: RIIA.

9. Western Europe in the Global Economy
Required reading:
Colchester and Buchan (1990, chaps 15-17)
Holmes, Peter and Alasdair Smith. 1992. The EC, the USA and Japan: the Trilateral Relationship in World Context. In The European Economy, ed. David A. Dyker, 185-210. London: Longman.
Kramer, Heinz. 1993. The European Community's Response to the "New Eastern Europe". Journal of Common Market Studies 31, no.2: 213-44.

Of related interest:
Hufbauer, Gary Clyde, ed. 1990. Europe 1992. An American Perspective. Washington: Brookings.
Milner, Christopher and David Allen. 1992. The External Implications of 1992. In The Single Market and Beyond, ed. Dennis Swann, 162-190. London: Routledge.
Yannopoulos, George N., ed. 1991. Europe and America, 1992. Manchester: MUP.

CRC-Curriculum Resource Center
CEU Budapest, Hungary
Modified: April, 1996


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