Among the most far-reaching factors for the Balkan states’ economic development before World War I was their decisive turn to Europe after decades of Ottoman rule. By the time most Southeastern European countries emerged as newly independent states in 1878, a core and a periphery had formed on the European continent.1 The periphery comprised the Scandinavian countries, the Iberian peninsula, Italy, the Balkans, the eastern part of the Habsburg Monarchy and the Russian empire. Its most significant feature was the “lack of spontaneous domestic forces, adequate for a transition along the lines of the industrial revolution” (Berend and Ránki 1980a: 61-2, 1982:113). The powerful and expanding Northwestern European core produced an unprecedented challenge for the rest of Europe. Despite its relative backwardness and weakness, the periphery began to change as a result of complex interactions between domestic factors and external influences emanating from the innovative European core. This chapter explores the role of Austro-Hungarian trade in the economic development of the pre-1914 Balkan states and traces the implications for the current economic transformation of the region


The interaction of internal and external factors affected economic development on the periphery differently, depending on geopolitics, resource endowment, and historical and economic legacies (Gerschenkron 1962: 31-51, 353-64; Lampe 1975:56-85). Also important was the legislative framework of economic development. In the newly independent Balkan states this framework was based more or less on Western European models, as was usually the case with developing countries before 1914

(Galanter 1966, 153). The Balkan countries oriented themselves toward the advanced European states, which embodied prosperity and potential sources of aid for the lagging periphery (Stokes 1980:63). The interaction between internal and external forces in the Balkans (Black 1966; Crampton 1989) was extremely complicated and painful. In general, it reflected a striving to catch up to the more advanced and usually industrialized countries (Janos 1989:337 ff.). An exception in this respect was the Ottoman empire, which introduced only isolated elements from Western Europe, chiefly the military organization and technology it needed to postpone its dissolution (Sugar 1976; Petrosian 1976).