Abstract
8ELLISON CENTERA Recount of the Conference on Political Economics of Eastern EuropeBY KAZIMIERZ POZNANSKIAlthough small in size, the conference on Political Economics of Eastern Europe, aggressively examined the current fi nancial state of the countries of Eastern Europe. The three speakers, all econo-mists with Eastern European expertise, provided in-depth assessments. They particularly focused on Eastern Europe’s market-building reforms, commonly called post-communist transition. Professor Leon Podkaminer came to the conference from the Vienna Institute of International Economy, the leading West European think tank working on Eastern Europe. He addressed some big-picture topics as he analyzed the region’s macroeconomic performance. He explained that the region is now emerg-ing from a deep recession initiated both by the transition to independent states and by shifting to a market-economy. As evidence of this trend, he showed data indicating growth rates well above the average for Western Europe. Using the Barro model, Podkaminer calculated that “catching up” with Western Europe is within the reach of most East European economies. Much of this economic growth has been fed by net imports and trade defi cits, he explained. Infl ow of foreign investment and large-scale foreign borrowing allowed these countries to accumulate substantial reserves of foreign currency. There are signs, however, that the region is moving from trade defi cits toward trade surpluses. The recent positive balance achieved by the Czech Republic is an indication of this trend. Even though great advances have been made in the economy, much of the region’s population remains unemployed. Other lingering economic problems, such as wide-spread poverty, also originated in the transition period. All-in-all, the economic outlook in Eastern Europe, according to Professor Leon Podkaminer, is one of both great promise and numer-ous obstacles.Professor Jan Monkiewicz of the Central School of Commerce in Warsaw, contin-ued the discussion by addressing the condition of the fi nancial sector, namely banking and insurance. By now, most of the banks and insurance companies have been privatized by turning them over to foreign investors. In the insurance sector, foreign investors have also established some new companies. Large-scale recapitalization of banks by the respec-tive states has preceded the sale of banks, reaching as high as $12 billion in Poland. This recapitalization is due to the recent stellar performance of those banks. Interestingly, as in the case of Poland, half of the credit issued today comes from abroad and not from the privatized local branches. Thus, only state regulation remains in the hands of East Europeans. However, the most recent European Union reforms may change this situation. Within the proposed rules, bank branch-es, or branches of insurance companies could be controlled by the country of their origin. Professor Kazimierz Poznanski dealt with a very similar topic. He also looked at the role of foreign investors in the regional privatization, focusing on two sectors: banking and steel production. The question of the valuation, or pricing of assets offered for sale by the states was raised. Using Poland as a point of reference, he found both banks and steel-mills were being sold with deep discounts. For instance, it is a rule of thumb in the Western world to set prices for takeovers of steel-mills at one billion dollars per million tons of capacity. In Poland, as well as the Czech Republic, Romania, Russia and Slovakia, the steel-mills have sold for close to one-tenth of the routine price. The poor economic conditions, lack of state support, inad-equate experience in asset pricing as well as priority given to fast privatization are among the reasons for this difference. In conclusion, state leaders have intended to set aside the expected payoff from these foreign investments for further restructure incentives. This, in turn, would provide for robust economic acceleration— a recovery from the initial recession— and the alleviation of the problems laid out by both Podkaminer and Monkiewicz.Other talks in the series included Professor Richard Ericson of North Carolina University’s talk on “Neo-Patrimonialism in Putin’s Russia”, and UC-Berkeley Professor Andrew Janos’ lecture on “Historical Perspectives on Eastern European Agriculture”. ◆Yiddish Theater ConferenceAn international conference devoted to the history, repertoire, and legacies of the Yiddish theatre. Begins May 7 with a special fi lm by the National Center for Jewish Film, Between Two Worlds: Yiddish Cinema. Followed by a two-day conference, May 8 – 9, 2006, held at the UW Faculty Club, and UW Hillel.