Warsaw Pact Countries

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Analysis of Factors in the Economic Performance in the Post-Cold War Era of Former Warsaw Pact Countries and China Kyle Murphy
Senior Research Proposal
INTA 4740: Dr. Murat Bayar
Fall 2012

Introduction
Why the differences in economic performance of former Warsaw Pact countries and china since 1990? This question is quite puzzling because the factors that are responsible for this divergence in economic performance are obscured amongst ever-changing political and economic landscapes. Before delving into too deeply into the answer to this question, it is best to establish the fundamental pieces that serve as the basis for this question.

The countries that are involved in this puzzle are Russia, Bulgaria, The Czech Republic, Slovakia (Czechoslovakia), Hungary, Poland, Romania, Albania, and China. Each of these countries share a common beginning after the fall of the Soviet Union in 1990 for the birth of economic independence from the former Soviet Union, minus China. Additionally, each country adopts its own policies, customs, and ways of conducting its own political and economic affairs and the unique ways of executing these affairs. This work looks into the degree of corruption, membership to regional trade agreements and/or the world trade organization, population growth rate, literacy rate, and the level of democracy as key factors that influence the implementation of a democratic government and the process of trade liberalization. Whereas, trade liberalization is defined as a system of trade policy that allows traders to act and or transact with minor interference from government. This inherently suggests the law of comparative advantage that the policy permits trading partners to have mutual gains from trade of goods and services. This trade liberalization, more specifically the economic performance of the countries listed above, is analyzed through the Gross Domestic Product per capita in each country in terms of the variables listed above.

Literature Review
Why do certain nations enter or do not enter regional and/or national trade agreements, and what are the reasons these nations choose to do so or not do so? The literature presented looks at the effects, benefits, and gains for entering into those trade agreements. It then points out the two opposing strands of the impact of corruption on economic growth, with some less considered points of view. It turns to a thorough discussion of both the positive and negative effects of population growth on economic growth. Following population growth, the literature looks into literacy rate and how it correlates with economic growth. It then examines level of democracy and how different levels of democracy impact economic growth. Finally, it then takes a closer look into the transition period from an authoritarian regime into a democracy and the impact of trade liberalization on the state's economy to aid understanding of the internal changes happening in each of the Warsaw Pact countries in the post 1990 period. Corruption

Before going into detail, it is important to explain that what corruption is? Corruption is a result of weak state management and exists when individuals or organizations have monopoly power over a good or service, discretion over making decisions, limited or no accountability, and low level of income. The frequently cited World Bank definition of corruption is the abuse of public office for private gain (World Bank 1997). From the point of view of a developing country, the corruption in public sector is more important because public sector is involved in corruption activities. If it is corruption that causes growth to slow down then what causes corruption to be higher in one place than another and which variables are affected by corruption. The benefits from corruption are likely to accumulate by better-connected individuals in society, who belong mostly to high-income groups (Tanzi, 1995). Thus, corruption would affect not only broad...
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