Why post-Soviet countries oriented to West fail economically?

The Maddison Project Database and the Total Economy Database of the Conference Board both provide estimates of real GDP per capita, GDPpc, in almost all countries worldwide. The GDPpc is the key parameter to describe the level of economic development in a given country. We described the process of the transition from socialism to capitalism in the post-Soviets courtiers (see this post) using the GDPpc published by the Total Economy Database and concluded that the transition finished around 2003 to 2005 with the following growth along the capitalist path. The prediction was that the former socialist countries have to grow at a rate of 5% to 10% per year depending on the initial level of GDPpc. We compared many times the evolution of GDPpc in Russia and Ukraine and reported that Russia has been following the predicted growth trajectory while Ukraine is still below its peak level in 1989. The main problem is that this gap cannot be closed and will last for decades. One can conclude that, in economic terms, Ukraine is a failed economy.

Since Ukraine was not able to reach a stable growth trajectory it is interesting to revisit other post-Soviet countries with tight political links to the West: Georgia and Moldova. Figure 1 shows that these two economies also failed: Georgia is still below the 1988 level and Moldova reached it in 2019. There are no signs that these two countries and Ukraine will be able to grow in the future at a rate corresponding to the level of GDPpc. One of the reasons is that they gave up all competitive advantages.

Kyrgyz Republic is an example of a failed economy as well. The political turmoil can never assist economic growth and there is a large probability that the political conditions will prohibit economic growth in the future.  

Armenia is an example of successful growth after the deep fall in the mid-90s. In 2019, it more than doubled the peak level in 1989. Azerbaijan has been also growing along a steep trajectory between 2003 and 2008, but the Great Recession and oil price fall effectively stopped the growth at the level of $15,000 per head as observed between 2009 and 2019.

There are two most positive examples of the countries with multi-vector foreign policies – Kazakhstan and Belorussia. Both countries retained their industrial and human capital and have been growing along the projected trajectories of economic growth. Belorussia stopped growing due to internal and external political problems but it has full potential to restart the growth process.

Economic problems have very specific character – one cannot regain the lost time – economic losses are irreversible. These losses most negative for the poor part of the population since social guarantees and benefits are not funded appropriately. I would say – do no mess with West – if the failed economies had economic and political hardship with the Western Economic Powers. But Georgia, Moldova and Ukraine consider themselves as allies of the West.

So, better to say – do not make friends with West.

Estonia, Lithuania and Latvia are not examples of economic success for the other post-Soviet countries. They are fully sponsored by the EU and no economic problems of the other countries can disturb them. Moreover, a larger part of the economically active population from these three countris has moved to the west.