GDP Chronology 1944-2018

Photo: bundesfinanzministerium.de

How we developed, in comparison to Hungary and Germany

There is, without doubt, a need for our society to conclude the Bulgarian “Transition”. An objective view of the socialist and post-socialist periods is required, in order to effectively consider the future strategies for our  development.

The current article aims to review some key economic changes in the past 70 years of Bulgarian history, compared with the development of Hungary – a country having similar historical and geopolitical past to ours, as well as that of Germany – one of the strongest economies in the world.

There is no doubt that economic development is directly linked with the observed social and political changes. Therefore, the discussion below considers key points of recent Bulgarian history; these have been reflected in the observed  clear differences in each of these countries’ GDP trends.

Period of Socialism (1944-1989)

9th of September 1944 is recognised as the beginning of the socialist regime in Bulgaria. 75% of the external influence on Bulgaria after the war was allocated to the Soviet Union, with the remaining 25% supposed to belong to Great Britain (see [2], [6]). The following post-war years were characterised |by administrative and institutional changes, that were supposed to establish a complete transition on all societal levels. The harsh and swift actions taken by the authorities, in order to repress all kinds of opposition, certainly differed from the initially declared “line” of development towards a “more democratic” governance. Two examples of the totalitarian character of the new regime were the political purges, executed in all levels of the administration. Furthermore, a lot of “suspected counter-revolutionaries” were imprisoned in the “labour-educational” camps, exclusively built for these purposes (see [9], [10]).

The situation in Hungary was not similar – as a satellite state of the Soviet Union, the authorities replied with significant power to those objecting to the changes. At that time, as it is now, Hungary had a slightly higher population compared to ours, living on a slightly smaller territory. However, those differences fall within statistical limits which allow a non-scaled comparison with Bulgaria as a “similarly developed” economy.

On the 5th of March 1953 Joseph Stalin passed away and the effect was immediate. His political successors, led by Nikita Khrushchev, took control of the Communist Party of the Soviet Union and started dictating many of the key political events in the rest of the countries in the Eastern Block. In Bulgaria all of this led to the removal of Vulko Chervenkov, the successor of Georgi Dimitrov as a first secretary of the Central Committee of the Bulgarian Communist Party (BCP). Indeed, Todor Zhivkov became a leader of the party in 1956 and officially a prime minister in 1962, largely supported by Khrushchev’s influence.

The 60s and 70s could be described as a rather quiet and stable period mainly due to Zhivkov’s success in maintaining good relationship with all Soviet leaders. As a result, Bulgaria was supported favourably by the USSR, by receiving massive investments in a number of industries (see [6]).

Meanwhile in Hungary, the post-war changes led to a more dramatic development following Stalin’s death. The political “de-stalinization” agenda brought several changes of Prime Minister. In 1956 a revolutionary riot was put down with the cost of many civilian lives (see [10]). In the following years Hungary’s development was impressive and placed the country in the group of the most high-ranking socialist countries, having achieved enviable financial stability. The solid foundation of this prosperous trend appears to be the economic reform of 1968, known as the Hungarian “New Economic Mechanism” (see [9], [10]).

Each graph in this article shows a comparison between the similar economies of Bulgaria and Hungary, compared against one of the world’s economic leaders – Germany. All Gross Domestic Product (GDP) figures are estimated using the American dollar at 2011. Information about Bulgaria and Hungary’s GDP is not available for some of the early post-war years.

Graph 1 – showing real GDP per capita for the three countries throughout the period 1944-1989.

The economic crisis, which pervaded most countries worldwide at the end of the 70s, strongly affected not only Bulgaria but all other countries of the “Eastern Block” in the 80s. Such recessions always decrease the GDP measure of a country – as seen in Graph 1. On the 9th of November 1989 the “Berlin Wall” was breached, and a day later, Todor Zhivkov’s forced resignation was confirmed on the November plenum of the Central Committee of BCP –  the beginning of the Bulgarian “transition”.

The following difficult years for the Bulgarian economy and state are analysed by the articles of “The End of the Transition” campaign. The new direction towards a “democratic” governance can hardly be described as successful in the beginning of the 90s. A high level of uncertainty on the effectiveness of these changes continues to concern the Bulgarians even today. The switch from “planned” to “market” economy, based on private property, the freedom of speech and the multi-party system, brought hopes and dreams but was the Bulgarian GDP positively affected? The analysis below presents the economic evidence.

The beginning of the transition and the 90s

The former BCP (now BSP – Bulgarian Socialist Party) won the very first post-socialist elections. For the first time in almost half a century, a  strong opposition structure (the Union of Democratic Forces – UDF) emerged. A new national constitution was agreed, in order to comply with the new political standards of the country and its new direction of development  There was a clear level of dissatisfaction within the society in the first years of democratic governance, due to the broken promises of effective changes and increase of the living standard  (see [1], [3]). The political, economic and social crisis led to the loss of faith in government once again (see [12]).

Bulgaria experienced hyperinflation at the beginning of 1997 and the opposition won the following elections. The growth in economic instability forced the new government, led by Ivan Kostov – leader of UDF, to introduce a “currency board” that was expected to stabilise the financial sector. Those radical changes aimed to follow the model of the better developed countries in Western Europe. Kostov’s 4-year mandate exhibited a clear “privatisation” policy.

The changes in Hungary were still similar to the events in Bulgaria – the Democratic and Socialists party frequently swapped places in government. However, the economy of the country appeared to be far more stable and – despite the recession in the beginning of the 90, the Hungarian GDP per capita steadily increased, compared to the Bulgarian trend, as it can be seen from Graph 2.

Graph 2 – showing real GDP per capita for the three countries throughout the period 1990-2016.

Beginning of the new century, and up to today

After 2001 the government was led by Simeon Saxe-Coburg-Gotha – the last representative of the Bulgarian monarchy. Various effective reforms were prioritised, and supported by DPS and “New Time” as coalition partners. During the 4-year mandate of NDSV (in Bulgarian: National Movement Simeon II), Bulgaria entered NATO significantly progressed towards achieving its  strategic goal – joining the European Union. Despite the positive trends in various economic variables, serious corruption scandals linked to the government led to a mass distrust in NDSV (see [13]).

The elections of 2005 did not result in a clear winner, and therefore, a grand coalition known as “The Triple Coalition” – combining Coalition for Bulgaria (BSP and alias), NDSV and DPS, was formed, with Sergei Stanishev (leader of BSP) as a Prime Minister. On 1st of January 2007, Bulgaria joined the European Union. However, public support drastically dropped once again due to another set of broken promises and postponed reforms. The unsuccessful educational reform, for instance, led to a massive nation-wide strike (see [14]). These years of extremely low public trust  resulted in the rise of a new political project – GERB (in Bulgarian: Citizens for European Development of Bulgaria), which has been “in charge” since then, with the exception of two short periods. In the same period, Hungary became a NATO member in 1999 and joined the European Union in 2004. Similar corruption scandals were destabilising politics but the GDP trend of the nation  shows significant convergence with Germany, unlike the Bulgarian trend.

Graph 3 – showing statistics of convergence between the three countries throughout the period 1944-2016.

The graph shows the ratio of the Bulgarian or Hungarian GDP per capita as part of the (moving) German level.

These results unambiguously highlight the impact of the world economic crisis in 2007. It had a far greater influence on the well-developed German economy which was responsible for a lot more investment in the sectors of construction, manufacturing and trade. Bulgaria was hit by the global consequences of the crisis around 2-3 years later (see [15]).

Graph 4 – showing real GDP per capita for the three countries throughout the period 1944-2016.

In Hungary today Viktor Oban and his national-conservative party – “Fides” are governing for a third consecutive mandate since 2010. They have introduced new policies in the country’s foreign relations, such as the strong position on the migration crisis (see [11]).

In Bulgaria, GERB have been elected three times since 2009 but they did not complete neither of the first two mandates. This uncertainty led to three ”caretaker” cabinets within just 4 years – bringing extra pressure on the institutions and causing financial and economic instability.

GERB, in a coalition with “United Patriots”, were elected to government in the spring of 2017. Now, a year later, its politicians are, according to media opinions, continuously involved in political scandals, related to: public procurement, corruption, inefficient oversight of EU funds and suppressing the freedom of speech. These form an essential part of the basics of a democratic political structure, and controversies related to them characterise well the political reality in our country.

From an economic point of view, the divergence of GDP per capita development in comparison to Hungary (and against Germany as a benchmark) clearly shows that – even though we compared trends with a similar country in terms of historical and political development, the “transition” has left a less-attractive legacy for the upcoming Bulgarian generations.

The way forward is clear – setting persuading strategic priorities and goals for development, which should be strictly followed by each government, in order to “reach” the living standard of countries such as Hungary and, of course, persistently monitoring a benchmark comparison with the most developed economies, such as the above-mentioned Germany.

Author: Nikolay Raykov
Email: raikof.n@gmail.com
2018 Millennium Club Bulgaria

Bibliography

  1. Dimitrov, Vesselin (2001) Bulgaria – the uneven transition. Postcommunist states and nations;  ISBN 978-0-415-26729-8
  2. Dimitrov, Vesselin (2007) Stalin’s Cold War: Soviet foreign policy, democracy and communism in Bulgaria, 1941-48. Global conflict and security since 1945. Palgrave Macmillan, Basingstoke; New York. ISBN 978-0-230-52138-4
  3. Bulgaria in a Time of Change: Economic and Political Dimensions. Editor Diana Zloch-Christy. Brookfield, Vt: Avebury, 1996.
  4. Popivanov, Boris – Images of the Left in Bulgaria. ISBN 978-3-838-26717-3
  5. Spirova, M. – Political Parties in Post-Communist Societies: Formation, Persistence, and Change. ISBN 978-0-230-60566-4
  6. Bell, John D. (1986) The Bulgarian Communist Party From Blagoev To Zhivkov. Histories of Ruling Communist Parties. Stanford, Calif.: Hoover Institution Press. ISBN 0817982027
  7.  Bolt, Jutta, Robert Inklaar, Herman de Jong and Jan Luiten van Zanden (2018), “Rebasing ‘Maddison’: new income comparisons and the shape of long-run economic development”, Maddison Project – Maddison Project Database, version 2018. Working paper 10. https://www.rug.nl/ggdc/historicaldevelopment/maddison/releases/maddison-project-database-2018 [last access: 15-July-2018]
  8. Feenstra, Robert C., Robert Inklaar and Marcel P. Timmer (2015), The Next Generation of the Penn World Table. American Economic Review, ISBN 105(10), 3150-3182, available for download at www.ggdc.net/pwt
  9. Иван Кръстев – Падането на Будапеща. В-к Капитал, 16 май 1994
  10. Калин Петров – Източноевропейски страни 1956–1989 г. – Полша, Унгария и Чехословакия. Bg-Istoria.com – Онлайн лекции по история. https://www.bg-istoria.com/2012/11/24-19561989.html  [last access: 15-July-2018]
  11. Мнения Daily – Мигрантите изместиха политическия мейнстрийм надясно. В-к Капитал, 2 юли 2018
  12. Екатерина Михайлова – Законът, преходът, какво се случи и какво да се прави?. Форум Образование и Общество – проф. Богдан Богданов. https://www.bogdanbogdanov.net/bg_forum.php?page=discussion_show&discID=125 [last access: 15-July-2018]
  13. Георги Ангелов и Димитър Чобанов (Институт за Пазарна Икономика) – Три години управление на НДСВ. Mediapool, 25 юни 2004. https://www.mediapool.bg/tri-godini-upravlenie-na-ndsv-news29590.html [last access: 15-July-2018]
  14. Мария Василева – Учителската стачка прераства в граждански протест. Mediapool, 24 октомври 2007. https://www.mediapool.bg/uchitelskata-stachka-prerastva-v-grazhdanski-protest-news133089.html [last access: 15-July-2018]
  15. Огнян Георгиев – България и кризата: Краят на светлото бъдеще.  В-к Капитал, 8 септември 2017. https://www.capital.bg/politika_i_ikonomika/bulgaria/2017/09/08/3038117_bulgariia_i_krizata_kraiat_na_svetloto_budeshte/  [last access: 15-July-2018]

Leave a comment

Your email address will not be published. Required fields are marked *