Economic Effects of The End of The Cold War and The Break-up of Eastern Europe

When the Communist system failed and collapsed in the early 1990s there was a move away from state control of the economies of Poland, Hungary, and Czechoslovakia. Up to 1992, the Communist state had decided what goods were to be produced where, as well as who would be allowed to buy or receive the resultant output and at what price. Wages and prices were strictly controlled, as was the distribution of consumer goods. This spawned a massive black market, which concerned itself with illegal imports of western goods, such as; Levi jeans, Beatles records, chewing-gum and other items. 

The quality of goods in the old Communist system was always poor. Goods were crude and rough, this can especially be seen in Soviet arms, which were simple and rudimentary but most of the time they did work. Consumers preferred foreign goods, and ports such as Odessa in Ukraine were the main suppliers of this illegal Western merchandise. Black marketers struck deals with British and American shipping companies to supply them with items which could not be bought in the Communist states often in exchange for Russian gold coins (as simple Russian Roubles meant nothing to Westerners), old Imperial artefacts which were scavenged, looted and stolen, even Caviar and stamps were traded. 

In the new market-led economies, manufacturers had to find their own buyers and prices were decided by interplay of supply and demand. Competition was suddenly introduced into these economies for the first time in nearly 50 years. This had huge repercussions on the previous Communist industries because the objectives of a Free Market economy were totally different to that of the Communist Command Economy. Factories in the defence industries (among the largest employers under Communism) were the worst hit, as priorities shifted away from armaments, governments cut defence spending since there was no longer the threat of an imminent war. Over-night millions of arms flooded into an underground market. Huge divisions of the Red Army suddenly stopped receiving orders from above. So they dumped their guns and simply walked away. Some divisions rushed to Moscow for what they thought would be a fight for the Motherland, only to realise the USSR was in disarray and anarchy. They too dumped their arms. The clever ones took advantage of this and started selling the arms. Today, most wars in Africa and the Middle East are fought with Soviet arms. 

During this very short period of anarchy, chancers became millionaires and even billionaires. Prices of shares and land were secretly fixed at very low rates, often between small groups of friends. Thus, allowing oil fields and mines of diamond, gold and copper to be bought for pennies. Simple officers in the Red Army snapped up positions of power in government, some became arms-trader, mafia bosses and drugs barons.