1989: Austrian Economy in Post-Socialism

As a neutral country between the blocs, Austria’s nationalised economy and banks were already entangled in the economies of several states of the Council for Economic Mutual Assistance (COMECON) in Eastern and Central Europe at the start of the 1980s. “Eastern trade” – usually financed by state banks –flourished. Austria’s companies were part of meaningful construction and infrastructure projects, mostly in the GDR, Poland and Hungary: often despite protests by the people suppressed by dictatorial regimes, such as at the construction of the Danube Nagymaros Waterworks in Hungary.

Also because of the historical connection with the area as well as geographic proximity, Austria was optimally prepared for the deepening of these relations when the Iron Curtain fell and a market economy was introduced – even if this connection was often accompanied by historically loaded fantasies of a savage, barbaric east that was to be civilised. This was an image that struck many wounds, especially in Central Europe. For decades Austria had itself been a target country for foreign direct investments, and now Austria also invested abroad, which in turn resulted in an accelerated internationalisation of private companies. Austria was soon one of the most important countries of origin of foreign capital in all East-Central European countries. From the Austrian perspective, the opening of the East was a success story: the economy received growth and innovation impulses, which demonstrably led to an additional increase of the real gross domestic product (GDP), created 100,000 to 150,000 jobs, but also weighed on the wage share due to competition.

In the region itself, the effects of the opening have been mixed. There were sharp declines, mostly with the 2008 global economic crisis. The free flow of labour has also meant that an increasing number of workers from the low-wage countries of Eastern Europe are leaving for core EU countries, which has led to a brain drain in recent years.

Web Exhibition “An Ever-Closer Union”: https://1989.hdgoe.at/