Upgrading Socialism

This chapter presents a structural account of East Europe’s industrial transformation during the era of reform socialism. “Reform socialism” refers to institutional reforms socialist states began introducing beginning around 1968, when economic problems like technological backwardness, low productivity and poor product quality became apparent to Communist leaderships across the region. While reforms were carried out unevenly, they are significant in that they coincide with a number of important developments in the world economy. The chapter argues that the 1970s was a crucially transformative decade for socialist economies, and especially for states on the forefront of economic reform. What proved most critical in determining the future industrial fate of socialist countries was the decentralization of trade authority away from central ministries to enterprises and Foreign Trade Organizations. The decentralization of trade authority gave enterprises direct exposure to the competitive pressures—and thus the dominant actors—of the world market.