DEVELOPMENTS IN EASTERN EUROPE AND THE THIRD WORLD -ECONOMIC IMPLICATIONS

This article evaluates how the political upheavals and market transitions in Eastern Europe affected developing countries. It traces three transmission belts: trade reorientation from CMEA partners to OECD markets; aid diversion as donors redirected concessional flows to support transition; and financial contagion via tighter credit conditions and changing risk appetites. The paper estimates likely shocks to commodity exporters that had relied on administratively set prices and clearing arrangements, and it discusses opportunities arising from technology transfer, joint ventures, and triangular cooperation. It argues that the net effect depended on a country’s diversification, institutional readiness to engage new markets, and ability to manage short-term balance-of-payments stress while investing in competitiveness upgrades.

The body first reconstructs the pre-1989 economic architecture linking Eastern Europe and the Third World—barter-like clearing unions, long-term supply contracts, and project assistance with Soviet bloc equipment. It then analyzes the rapid dismantling of these mechanisms as Eastern European states liberalized trade and prices, leading to contract renegotiations and arrears. Case notes examine impacts on African and Asian partners in energy, machinery, and pharmaceuticals. The second half focuses on policy responses in the South: hedging export risk through diversified markets; leveraging export credit agencies; and retooling standards to meet OECD market requirements. The article also reviews aid composition changes as donors prioritized balance-of-payments support, technical assistance, and bank recapitalization in transition economies, squeezing traditional aid envelopes. Finally, it highlights niches—engineering services, education exchanges, and agro-processing—where South–East partnerships could still thrive. The conclusion urges recipient governments to deploy temporary safety nets for vulnerable sectors while accelerating trade facilitation, customs modernization, and skills upgrading to exploit new opportunities.