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Transforming Post-Communist Political Economies
that fact may reflect liberalized exchange rates and dramatically appreciated currencies.5
Direct data and indirect clues on the subjective impacts of transformation are also emerging. For many, especially older, less educated, and rural people, the tremendous changes have imposed overwhelming psychological costs in terms of insecurity and uncertainty, the devaluing of lifetime contributions to now-crumbled systems, and (for Russians) the collapse of national prestige along with empire. These impacts may be indirectly but dramatically signaled by the accelerated increase in mortality rates among adult men, particularly in Russia, in the early 1990s.6 For others, particularly the younger and better educated, the transformation is quite literally liberating, with respect to both economic opportunities and political freedom.7
From a policy perspective, however, the key questions do not hinge on understanding of the recent past, but on prospects for the near-term future. In particular, in those post-communist countries that have turned the corner, will price stability and economic growth erase the social costs of the initial shocks?
By 1994, most of Eastern Europe had stopped its economic slide. Polish GDP increased steadily from 1992. Most Eastern European countries had brought inflation to or below 30 percent by 1995; six of ten grew 5 percent or more in that year (World Bank, 1996a:173, Table A.2). Growth remains fragile in some Eastern European and several Soviet successor states, and a few, including Bulgaria, Belarus, Serbia, and Bosnia, show little progress. Unemployment has responded fairly rapidly to improved economic conditions: in most Eastern European countries, unemployment peaked in 1993 or 1994 and has since declined.8 Measured poverty levels have been slower to respond. In Poland, with the longest record of growth, different measures of
I am indebted to Branko Milanovic for this point. He offers the following example. In 1989, a Polish worker's average monthly wage in zlotys could be converted at the parallel exchange rate for roughly $20. (The official exchange rate was available only to state companies.) A simple imported VCR would cost the equivalent of 10 months' salary. In 1995, that worker's real zloty salary was about the same, but could be converted at the liberalized legal foreign exchange rate for $200; a VCR could be purchased with 1 month's salary. Currency appreciation was particularly dramatic in Russia.
However, mortality rates among men had been increasing in the Soviet Union from the late 1970s. See National Research Council (1997).
For survey data regarding attitudes toward transformation, see the reports based on successive rounds of the New Democracies Barometer, available through the Centre for the Study of Public Policy, University of Strathclyde, Glasgow.
See Allison and Ringold (1996:23). Irena Topinska of the University of Warsaw notes that legislation concerning unemployment, taking effect in January 1995, may have affected the actual unemployment rate in Poland, but she confirms that unemployment has been decreasing somewhat (personal communication).