Globalization Report 2020 – Snippets from Eastern Europe

Following the publication of our “Globalization Report 2020“ which considers a sample of European countries as well as other major economies from around the globe, we now look closer at the eleven Eastern European economies examined in this report: Poland, Bulgaria, Hungary, Romania, Czech Republic, Slovakia, Slovenia, Estonia, Latvia, Lithuania, and Russia.

The strongest increase in globalization in countries of Eastern Europe

A comparison of the degree of international interdependence between 1990 and 2018 measured by the Globalization Index of our Globalization Report shows that the largest increases of all 45 countries occurred in eight Eastern European countries (see Figure 1).

The strongest growth was in Romania.There the value of the Globalization Index rose from 22.7 in 1990 to 59.9 points in 2018. An increase of more than 37 points. The median of the Index of Globalization (the index value of the country ranking 23rd and thus in the middle of the ranking of all 45 countries) rose by only about 21 index points (from about 42 to about 63 index points) during this period.

A look at the development of the Globalization Index over time shows that there are two central reasons for this sharp rise: the fall of the Iron Curtain and EU enlargement to the East. In 2004, ten states joined the EU, including Estonia, Latvia, Lithuania, Poland, Slovakia, Slovenia, the Czech Republic, and Hungary. Bulgaria and Romania joined in 2007.

Both events intensified the integration of most Eastern European countries into the world economy. Russia, on the other hand, was only able to realize the progress of globalization through the fall of the Iron Curtain (see Figure 2).

Absolute globalization-related GDP income gain is below average in Eastern Europe

Although most Eastern European economies have made the greatest progress in advancing globalization, their absolute GDP income gain per year and per capita is only in the lower half of all 45 countries. With the exception of Slovenia and Russia, these globalization gains range from 207 euros in Romania to 533 euros in Hungary (see Figure 3).

At around EUR 990 per year, Slovenia is achieving above-average globalization-related income gains in real GDP per capita. The reasons for this are the early opening of the country and a higher starting level of real GDP per capita in 1990.

Russia, on the other hand, started in 1990 with a real GDP per capita of only about 2,800 euros – in Slovenia, it was almost 9,300 euros. Moreover, Russia’s integration with the rest of the world has been stagnating since 2002, resulting in low globalization-induced income gains in GDP per capita (115 euros).

Globalization gains above average in relation to the starting level

However, the fact that the absolute globalization-induced GDP income gain in most Eastern European countries is relatively low by international standards does not mean that globalization is unimportant for these countries.

When income gains expressed in euro is compared with the starting level of real GDP per capita, the ranking of the countries with the highest cumulative income gains changes significantly (see Figure 4).

The importance of this can be explained by using Poland as an example:

• The cumulative globalization-related income gains in real GDP per capita between 1990 and 2018 amounts to around 12,460 euros for Poland. Compared to all 45 countries, the country thus ranks 27th.
• However, if this amount is compared with Poland’s real GDP per capita in 1990 – which was 3,400 euros – this cumulative monetary advantage from globalization represents 366 percent of its 1990 GDP level. This is the third-highest value of all 45 countries.

Even Russia, which is only in 41st place in terms of globalization income gains per capita expressed in euros, is still in 29th place in this analysis.

The differences in the development of the Globalisation Index since 2002 between Russia on the one hand and the other ten Eastern European countries, on the other hand, illustrate the importance of a country’s economic, political and social interdependence with the rest of the world for the average material prosperity of its citizens.

Eastern Europe strength in the Environmental Sustainability Sub-index is related to the Fall of the Iron Curtain

It is also worth noting the Eastern European strength in the environmental sustainability sub-index. The eleven Eastern European countries all managed to improve here between 1990 and 2018, while fourteen of the remaining 34 countries in the Globalization Report have deteriorated or did at least not improved.

The extent of improvement in Eastern Europe is particularly noteworthy. Whereas in 1990 Eastern European countries still achieved an average index score of 65.27 in environmental sustainability, by 2018 they already have achieved an impressive average score of 75.36.

With this increase of more than 10 index points, they have easily overtaken all other countries 34 as those remaining countries only managed to improve slightly from an average of 72.77 in 1990 to an average of 73.74 in 2018. These results are likely to be driven by the transformation of Eastern European economies and its associated shutdown of old industries following the collapse of the Soviet Union.

In the case of climate targets, this has a favorable effect on Eastern Europe as 1990 is often used as the reference year there. For example, under the Paris Convention, EU countries have agreed to reduce greenhouse gas emissions to an extent of 40% by 2030 compared to 1990.

More detailed information on the “Globalization Report 2020” can be found in our Policy Brief and in the full study.

Here you can download the previous versions of our Globalization Report:

• Globalization Report 2014
• Globalization Report 2016
• Globalization Report 2018