of Labor Statistics, the Census Bureau, and the Department of Agriculture, have been directly engaged in projects to improve the reliability and comparability of official statistics. Panel members expressed their judgment that timely aid could play a vital role in reducing the potential for social and political instability or a reintroduction of authoritarian political and economic policies and programs. They also expressed-their strong support for efforts directed at improving official statistics throughout the region.
Ongoing efforts to improve policy analysis and to offer technical assistance will be greatly enhanced by developing a systematic and coherent research agenda that increases Western understanding of transition processes within HPEs. The panel considers that the most fundamental issue confronting both government analysts and academic researchers over the near term is the need to accurately conceptualize the transition process and to understand its dynamics. Whether the aim is to measure and evaluate current developments in the HPEs in order to inform U.S. government policy makers and other analysts of changes that may affect the political stability of governments there, to monitor the transition, or to collect data to address specific questions about comparison of economies in transition, the panel considers that the need remains the same—to establish an appropriate conceptual framework for the analysis and thereby to promote research that will illuminate and clarify the dynamics of the transition process.
II.
CONCEPTUAL FRAMEWORK
The panel’s a conceptual framework emphasizes that the transition process involves radical changes in fundamental social and economic institutions. Conventional economic analysis is inadequate for the study of economies in transition because it deals with the behaviors and outputs of well-established structures, and operates on the basis of equally well-accepted conventional measures. In contrast, the analysis of an economic system in
transition focuses on change in previously entrenched institutional structures. Rather than having access to a well-established array of generally accepted measures of economic structure and performance, the analyst must develop innovative methods to monitor, and possibly forecast, the nature, magnitude, direction, speed and consequences of the transition.
Having decided that the essence of the transition process is institutional change, the panel agreed that the most appropriate framework for analysis would be one that took as its point of departure the distinction between economic activities that primarily affect the distribution of already existing wealth and those that promote the creation of new wealth. The former activities are motivated by the costs and returns from exchanging existing goods and assets, the latter with the costs and returns associated with the transformation of inputs into final outputs. The panel noted that the two categories are not strictly mutually exclusive. It agreed, however, that a useful way of assessing the extent and progress of the transition process is to examine the degree to which the resources and energies of economic actors are redirected toward the creation of new wealth and income, rather than the appropriation and redistribution of existing wealth. In a sense, the transition could be said to be complete once institutional changes had equilibrated the net returns to economic actors from transaction (exchange) activities and transformation (production) activities.
The panel suggested that one way to monitor and assess the transition in HPEs would be to focus research on key institutional changes and to trace the impact of these changes on the redistribution of wealth and the creation of new wealth. The research should specify how selected institutional changes influence the redistribution or creation of wealth, probe the effect of the change on the efficiency and equity of the operation of the institution, and identify the feedback between the original change and the behavioral responses of economic actors within the system to that change. Does the feedback reinforce the intended movement away from the initial state (i.e. reform), or does it tend to raise obstacles to the intended
change that result in stalemate or regression?
A critical aspect of the transition is the development of a functioning economic information system (reporting and accounting institutions). The quality and content of an economic system’s information has a strong influence on efficiency. But that information is endogenous to the system in that the-extent and kind of information made available depends directly on the incentives within the socio-economic system either for deliberate distortion or objective reporting. One indicator, therefore, of movement toward a new system would be the extent to which incentives for accurate reporting were instituted and found to be operational. Since the economic system from which the new republics are evolving put a premium on distortion and falsification, researchers must scrutinize the baseline data they intend to use and explain either why they consider them reliable, or what modifications they have introduced to compensate for their deficiencies. The panel noted that a premium should be placed on the documentation of data sources and the explication of the methods used in HPE research in order to ensure that researchers can build on each others’ work.
In order to assess movement through the transition process, the panel suggested one focus of research should be on wealth redistribution, using the following as key categories for study:
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Income groups
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Geographic regions
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Economic sectors
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Enterprise ownership structures
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Levels of government
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The republic(s) and the international system
The first of these may seem self-evident, but is potentially complex since much of the wealth to be redistributed was either entirely outside the pricing system (e.g. privileges associated with nomenklatura status, access to opportunities for rent-seeking behavior), or
seriously mispriced (e.g. housing). The second refers to the impact of barriers to or restrictions on trade between regions within republics as well as among them. The third refers to shifts of wealth among economic sectors, e.g. from the military to the civilian, the industrial to the agricultural or the previously underground economy to the official economy. The fourth directs attention to questions of industrial distribution such as between state, cooperative, and private enterprises, while the fifth focuses on fiscal federalism and raises issues of political power. The final category involves such issues as capital flight, foreign investment, and the impact of exchange rates.
Emphasizing the fact that the transition process is not one of development along a straight and predetermined path, the panel noted the critical role played in the transition by complex, interactive, dynamic processes—the end points of which are unknown. Since the outcomes of these dynamic processes are unpredictable, it is essential that researchers avoid preconceptions about linear development or final outcomes. The panel suggested that the transition processes could be conceptualized in terms of stress or dissonance functions. One way of doing this would be to describe the process in terms of the recognition of stress or dissonance created by the disparity between expectations and existing reality. Recognized stress or “cognitive dissonance” creates pressures for its own reduction—either by altering expectations or compelling a change in reality.
The transition process can usefully be assessed in terms of increasing autonomization or empowerment of actors. This way of describing the process would serve to direct attention to the fact that it is not a managed process, but one that is in many ways out of control and unstable. Research could be directed primarily to monitoring the degree of autonomization and the changes in the behavior of economic actors (households, enterprises, governments) in response to that autonomy. The panel agreed that while institutional changes could usefully be taken as the starting point of the analysis, it is critical to assess the changed behaviors of economic actors that result from institutional change.
