Why were the Balkans underdeveloped? A geographical hypothesis

The Balkans are an odd man in Europe. Its income level is much lower than the average income level of Western and Central Europe. This is a well-known fact but is worth of another look. The median GDP per capita in Western Europe is around $40,000 (expressed in constant 2005 international dollars used by the World Bank). Balkan countries’ incomes range from a bit over $10,000 to just over $20,000 (excluding Greece). In other words, the gap between Western Europe and the Balkans is at least 2 to 1, and on average about 3 to 1. (Obviously, taking the richest to the poorest country, the gap would be much higher). If you look at the map of Europe without knowing much history, you should be surprised by such gaps: the distances are small; the flight time between Vienna and Belgrade is about an hour, but the income gap between the two cities (after adjusting for the lower price level in Belgrade) is probably around 4 to 1. This is equivalent to losing 30% of your income every 15 minutes. Why is that the case?

I would agree with the standard historical explanation that sees the type of colonial power as the main “culprit”. The areas controlled by the Ottomans for between three to four centuries do have lower incomes, lower educational attainments, lower levels of trust in institutions etc. than the areas that were part of the Habsburg Empire.  Moreover, this is not a new phenomenon: the gaps, in non-income variables (like literacy or numeracy rates) were even wider in the past, and especially so in the early 19^th century when most of Balkan countries (as well as the dissatisfied nations under the Habsburgs) began their movements towards independence. This is the first part of the standard explanation.

The second part of the standard explanation is slower growth due to communism. This may perhaps best seen in the income gap between Greece and other Balkan countries, a gap that was smaller in the 1930s than in 1989. For example, according to the 2017 Maddison Project data, the Greece-Romania GDP per capita ratio was 1.4 just before the Second World War but increased to 1.9 by 1989.

This is, I think, so far a standard explanation with one detail which I find rather puzzling. In the multitude of papers and books that deal with colonial origins of today’s institutions and thus incomes levels, there is –rather inexplicably—hardly any mention of Ottoman colonial influence which of course does not apply solely to the Balkans but to the Middle East and North Africa as well. I hope it is one of the lacunae that future work will fill.

But my interest here is to speculate why the Balkans were not more developed even at the time of the Roman Empire. Looking at the map again, this presents an even greater puzzle. Balkans (which at the time did not have a single name since the appellation of the Balkans comes from the Ottomans) were “squeezed” between  two most advanced and developed parts of the then known world: Greece/Asia Minor and Italy (Rome). Why were then developments in the Balkans so slow?

If one looks at the data on urbanization, the Balkans (excluding Greece) were not much urbanized. The distribution of the largest ten cities around 150 was as follows: 3 in North Africa (Carthage, Lepcis Magna and Ptolemais), 2 in Egypt (Alexandria, Memphis), 2 in Greece (Athens and Corinth), 2 in Italy (Rome and Syracuse), 1 in the Levant (Antioch). The smallest of them was estimated to have had 80,000 inhabitants. The biggest Balkan city was Iader (today’s Zadar in Croatia) with 30,000 inhabitants (data from Andrew Wilson, “City Sizes and Urbanization in the Roman Empire”).

In terms of income, around the same time, the differences were large too. Maddison’s data show the Balkans (again without Greece) to have had per capita income of a little over $400, approximately the same level as Gaul. But this is a surprise since the Balkans are wedged between the two wealthiest parts of the Euro-Mediterranean world:  Greece and Asia Minor with more than $500 per capita and Italy with almost $700 per capita. Normal expectation would be that the area’s income should be some weighted average of Italian and Greek incomes and thus perhaps 50% higher than it was (and certainly higher than the faraway, in civilizational terms, Gaul, not to speak of the end of the world: the British Isles).

Gibbon wonders about that too and mentions what is an interesting hypothesis and perhaps the answer to our query: geography. The geography of Dalmatia and Moesia (to take the provinces as they were in Trajan’s time) is such that there is only a narrow strip of Mediterranean coast along the Adriatic, followed almost instantly, as one moves towards the hinterland, by high and impassable mountains. They make for spectacular contrast as anyone who has travelled to the Bay of Kotor in Montenegro can vouch, but they also make communication with the hinterland difficult.

It is then not surprising when one reads about the multiple travels of poets, writers, soldiers and emperors between Italy and Attica and the Aegean, that the travel was always done by the naval route crossing the Adriatic preferably at its narrowest point, Otranto, between today’s Puglia and Albania. It would have been much more perilous and longer to take the land route. So two things happened: the part which communicated directly with the most advanced world was limited to the coastal areas of the Adriatic and never expanded into the hinterland; and the inconvenience of the land route between Italy and Greece made hinterlands additionally underdeveloped and less urbanized than we would expect.

But the “worst” part is that after several mountain ranges end, the terrain, as one moves further East and gets closer to the Danube gets flat and thus ideal for all kinds of invasions from the steppes. This is indeed what happened and the number of peoples who took that route, attacked and pillaged the area is innumerable. Rome as it expanded eastward had to build its famous limes along the Danube (and later to expand it by annexing Dacia) and while the region became more important in the 2^nd , 3^rd and 4^th centuries its importance was translated mostly in military and strategic terms. Not only did many Emperors hail from the Balkans (which is not surprising since in the later Empire only generals could realistically aspire to become emperors) but the cities that grew in the “frontier” area were basically military garrison towns. They had some luxurious buildings where top officers and emperors resided but little signs of a lively middle class that one finds in the cities that dot the coastal areas of Asia Minor or the Levant. Balkan cities, if I can venture this generalization, were military encampments. Marcus Aurelius who spent most of his late years on the “frontier” fighting there did not seem to have left any trace. Had Constantine chosen Serdica (today’s Sofia) instead of Byzantium, as he seemed to have thought at one point, the situation might have become different: a true city life could have been born. But this did not happen.

So if the mountains were some 400 km to the East would the entire history of this part of Europe, and quite possibly Europe too be different?

The influence of Karl Marx—a counterfactual

The two hundredth anniversary of Karl Marx’s birth is giving rise to many conferences dedicated to numerous (and God knows there were many) aspects of Marx’s work and  life. (I am going to one such conference in Haifa.) Add to it an even greater number of reviews of his work and influence (Peter Singer just published one a couple of days ago), new books on his life, a movie on Young Marx and the list goes on.

I will also look here at Marx’s intellectual influence—but from a very different angle. I will use the counterfactual approach. I would ask what would had been his influence had not three remarkable events happened. Clearly, like all counterfactuals, it is based on personal reading of history and guesswork. It cannot be proven right.  I am sure that others could come with different  counterfactuals—perhaps better than mine.

The first event: had there been no Engels. This counterfactual had been discussed but it is worth reviewing. When Karl Marx died in 1883, he was the coauthor of The Communist Manifesto, a number of political and social short studies, newspaper articles (in the New York Daily Tribune) and a thick but not well-known or much translated book called Capital (volume 1). It was published 16 years before his death and during the intervening years he wrote a lot but published little. Toward the end of his life, he even wrote little. Similarly unpublished and in a mess were hundreds of pages of his manuscripts from the late 1840s, and the 1850s and 1860s. Marx was known among the rather small circle of worker activists, and German, Austrian and increasingly Russian social-democrats. Had it remained so, that is, had not Engels spent more than ten years putting Marx’s papers in order and producing two additional volumes of Das Capital, Marx’s fame would have ended at the point where it was in 1883. It would have been rather minimal. I doubt that anyone would have remembered his birthday today (he was born on 5th of May).

But thanks to Engels’ selfless work and dedication (and Engels’ own importance in German social-democracy), Marx’s importance grew.  Social-democrats became the largest party in Germany and this further carried Marx’s influence forward. Under Kautsky, The Theories of Surplus Value were published. The only other countries where, within a very narrow circle though, he was influential were Russia and Austria-Hungary.

The first decade of the 20th century saw increasing influence of Marxist thought, so much so that Leszek Kolakowski in his monumental Main currents of Marxism rightly calls it “the golden age”. It was indeed the golden age of Marxist thought  in terms of the caliber of people who wrote in the Marxist vein, but not in terms of global influence. For Marx’s thought made no inroads into the Angle-Saxon world (the first English translation of Das Kapital—which is still, strangely, referred to by its German title--was in 1887, that is twenty years after its original publication). And in Southern Europe, including France, he was eclipsed by anarchists and by “petty bourgeois socialists”.

This is where the things would have ended had there not been the Great War. I think that Marx’s influence would have steadily gone down as the social-democrats in Germany moved toward reformism and “revisionism”. His picture would have probably been displayed among the historical “maîtres à penser” of the German social-democracy but not much of his influence would have remained, neither in policy nor (probably) in social sciences.

But then the October Revolution came (the second event). This totally transformed the scene. Not only because he was “allotted” the glory, unique among social scientists, to be single-handedly ideologically responsible for a momentous change in one big country and in world history, but because socialism, due to its worldwide appeal, “catapulted” Marx’s thought and fame. His thinking, whether for good or ill, became unavoidable in most of Europe, whether among intellectuals, political activists, labor leaders and ordinary workers. Evening schools were organized by trade unionists to study his writings;  political leaders, due to the particularly dogmatic turn taken by the Communist parties, planned  their moves and explained them by the references to the hitherto little known Marx’s historical writings.

Then as the Comintern began to abandon its Eurocentrism and to get engaged into anti-imperialist struggles in the Third World, Marx’s influence expanded to the areas no one could have predicted it would. He became the ideologue of the new movements for social revolution and national liberation in Asia, Africa and Latin America. Whether political leaders stuck to his precepts or abandoned them (as Mao did by putting peasantry rather than workers in the role of the revolutionary class), Marx influenced them—and it is in the reference to him that they explained their policies. Thanks to Trotsky and Stalin in Russia to the left-wing republicans in Spain, popular front in France, Mao in China, Ho Shi Minh in Vietnam, Tito in Yugoslavia, Castro in Cuba, Agostino Neto in Angola, Nkrumah in Ghana, Mandela in South Africa, Marx became a global “influencer”. Never had a social scientist had such a global reach. Who would have thought that two bearded 19^th century Germans would adorn on special occasions the Gate of Heavenly Peace in Beijing?

And not only did he have global influence, but his influence cut across class and professional lines. I have already mentioned revolutionary leaders, politicians and trade unionists. But the influence spread to the academe, to high schools; it influenced strongly both those who opposed him and those who extolled him. That influence went from elementary Marxism that was taught to high-school students to sophisticated philosophical treatises or “analytical Marxism “ in economics. The publication of Marx’s manuscripts from 1844-46, brought us the unknown young Marx and that moved the discussion to an even higher plane: there was now a philosophical battle between the Young and classical Marx.

None of that would have happened without the October revolution and a decisive turn away from Eurocentrism and towards the Third World. It is the latter that transformed Marx from a German and European  thinker into a global figure.

As communism’s crimes became better known, and gradually increasingly laid at Marx’s door, and as communist regimes sputtered and their mournful and poorly educated ideologues regurgitated predictable phrases, Marx’s thought suffered an eclipse. The fall of communist regimes brought it to its low point.

But then –the third event—globalized capitalism that exhibits all the features that Marx so eloquently described in Das Capital, and the Global Financial Crisis, made his thought relevant again. By now he was safely ensconced into the Pantheon of global philosophers, his every extant word published, his books available in all the languages of the world, and  his status, while still subject to vagaries of time, safe—at least in the sense that it could never fall into obscurity and oblivion.

In fact, his influence is inextricably linked with capitalism. So long as capitalism exists, Marx will be read as its most astute analyst. If capitalism ceases  to exist, he will be read as its best critic. So whether we believe that in another 200 years, capitalism will be with us or not, we can be sure that Marx will.

His place is now there with that of Plato and Aristotle, but were it not for the three favorable and unlikely turns of events, we might have hardly heard of an obscure German émigré who died long time ago in London, accompanied to his grave by eight people.

When autarky becomes the only solution

The latest, and by far the most serious, round of US sanctions against Russia has shown two things very clearly—neither of which has received much publicity in the comments so far. The first is the extraordinary power of the modern state. The second is that when powerful states impose sanctions that limit one’s access to markets, technology and capital, the only remaining option turns out to be autarky.

I will discuss the two points in turn.

Despite all the talk about the waning power of the state and the rising power of ”foot-loose” large corporations what the sanctions do show is that the state is still the most powerful actor in contemporary global capitalism. Apple or Amazon could not impose sanctions and destroy Rusal. Actually, no company in the world —even those who are Rusal’s major customers—could not destroy it. But a state can. Putin showed the power of the Russian state, at the time when it seemed weak and insignificant, when he overnight imprisoned Khodorkovsky, the richest man in Russia, and despoiled him of Yukos. Trump, or rather US treasury, shows the power of US state in destroying overnight the largest aluminum producer in the world

The second lesson is, to a large degree, for Russia the replay of the 1920s. It is today often wrongly asserted that the USSR chose a policy of economic autarky. On the contrary, all the 1920s, as soon as War Communism and foreign intervention ended, was spent by Russia in pursuit of foreign capital with which to rebuild its destroyed industry, and optimistically, to catch up with the West. But that capital was not forthcoming. The Western powers refused to recognize the Soviet government, and since the Soviets repudiated previous debt of the Tsarist Russia, their access to capital markets was shut both because of default on the debt and because of ideological reasons.

This created the situation in which Soviet development had to be conducted entirely based on domestic accumulation and technology. As is well known, the implications of that was first seized by Trotsky and Preobrazhensky:  it meant comprehensive planning  of the economy and extraction of the surplus from the only segment of the population that could generate it: the Soviet peasantry. Soviet industrialization thus took place on the “blood and toil” of Soviet (which essentially meant Ukrainian) peasantry. This policy, which by definition included collectivization, was then, beginning with the First Five-Year plan in 1928 conducted with characteristic brutality by Stalin. 

What current sanctions, and those that may yet come (as for example on Gazprom), show is that Russia is now at the same crossroads at which it was in the early 1920s. Its access to Western markets, technology and capital is all but cut off.  It is true that there are nowadays other sources for all three, including in China. But the breadth of sanctions is such that Chinese actors, if they themselves plan to do business or raise money in the United States, will too avoid doing business with Russian entities. So Russian industry will be left to grow, if it can, using only domestic resources, which compared to global resources, are small and inadequate (given how Russia’s relative economic and population role in the world has declined). Autarky is thus preordained.

The questions is then whether such an economic choice will also entail, as it did in the 1920s, dictatorial domestic politics. This is quite possible because autarkic developments are hard to implement if there is no corresponding political pressure. Moreover, there would be for sure attempts from those who are affected by sanctions and all those who need access to global markets to reverse the policies that have led to the sanctions. Such attempts make them become direct political foes of the current government. The logic of political repression then becomes inescapable.

It would be wrong however to believe that the current impasse in which Russia finds itself can be overcome through different policies. It could have been done several years ago, but no longer. The reasons listed in the imposition of sanctions that cover everything from the annexation of Crimea to fake news are so comprehensive that no new post-Putin government of any conceivable kind can accept them all. They can be accepted only by a totally defeated country. In addition, US sanctions are notoriously difficult to overturn. The US sanctions against the Soviet Union started in 1948 and were practically never discontinued. The Jackson-Vanik amendment that linked trade to the freedom of Jewish emigration was on the books from 1974 until 2012, i.e. lasted more than a quarter century after the ostensible reason for its imposition ended. And it was repealed only to be replaced by another set of sanctions contained in the Magnitsky Act. The sanctions against Iran have been on, and despite the recent talk of their loosening, for almost 40 years. The sanctions on Cuba have lasted, and many still do, for more than half-century.  

Putin has thus, through a series of tactical successes, brought to Russia a comprehensive strategic defeat from which neither him, nor the governments that succeed him, will be able to extricate the country. There is moreover no ideology, short of extreme nationalism, on which the autarkic system can be built. Bolsheviks in the 1920s had an ideology which led them ultimately to accept autarky and to work within it. Such an ideology does not exist in today’s capitalist Russia. Yet the industrialization debate of the 1920 may again become indispensable literature for economic policy-making.