Transforming Post-Communist Political Economies (1998) / Chapter Skim
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18 Possible Future Directions for Economies in Transition
18 Possible Future Directions for Economies in Transition
Pages 453-470
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From page 453... ...
The focus of this chapter is the whole of Central and Eastern Europe and the New Independent States, with the exception of the former Yugoslavia, that is, 22 countries.) Thus the scope of the discussion is those countries that previously had a Soviet type of economic and political system.
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From page 454... ...
As of 1995, 4 of the countries Poland, Slovakia, Romania, and Albaniahad reached growth rates of 7 percent (Stockholm Institute of Eastern European Economies, 1997~. Yet only Poland, having recorded several years of considerable growth, appears to have entered a stage of sustained growth.
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From page 455... ...
Croatia had a budget surplus of 0.7 of GDP and a deflation rate of 3 percent in 1994; the Czech Republic has a steady surplus of 0-1 percent of GDP and had an inflation rate of 8 percent in 1995; Slovenia balances its budgets almost perfectly, although its inflation rate was 9 percent in 1995; and Estonia maintains a budget surplus of 0.5-1 percent of GDP, while it recorded an inflation rate of 29 percent in 1995 (Stockholm Institute of East European Economies, 1997~. Presumably, some of these countries harbor hidden semifiscal budget deficits, but that is an additional argument for eliminating the official budget deficit.
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From page 456... ...
The World Bank liberalization index shows a clear correlation between liberalization and financial stabilization (de Melo et al., 1996~. In an international context, most of the post-communist countries do not rank very high on the rather varied liberalization indices.
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From page 457... ...
By 1996, all of the Central European countries, apart from Bulgaria and Romania, appear to have approached that level, and only the three Baltic states, Russia, and Kazakstan in the New Independent States. There is a remarkable correlation among the above three criteria for capitalism.
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From page 458... ...
On the whole, unemployment is greater in Central Europe than in the New Independent States, but within Central Europe the radical Czech Republic maintains a very low unemployment rate of around 3 percent of GDP (Aslund et al., 1996:237-243; Stockholm Institute of East European Economies, 1997~. Although social suffering has been great, it is remarkable that these widely expected problems did not result in social upheaval although ethnic strife has erupted in several countries.
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From page 459... ...
The rate of unemployment has risen, but on the whole has been lower in Eastern and Central Europe than in Western Europe, where it lingers at around 11 percent of the work force. This is the only respect in which the New Independent States has done better than Western Europe.
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From page 460... ...
Considering the domestic and world market prices and the volume of exports of these commodities, it is easy to conclude that total rents arising from the export of oil, gas, and metals amounted to about 30 percent of Russia's GDP in 1992.2 These rents went to state enterprise managers and commodity traders dealing in oil, gas, and metals; various middlemen; and corrupt officials. A second, similar source of rents was import subsidies.
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From page 461... ...
Real estate might generate substantial rents, but otherwise these forms of rent are likely to be less significant than those discussed above. Racketeering seems heavily focused on the retail sector, and total retail trade amounts to one-third of GDP.
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From page 462... ...
There was far less rent seeking in Central and Eastern Europe than in the NIS, and the degree of rent seeking can explain much of the difference in the results of post-communist transformation between these two regions. Central and Eastern Europe benefited from fewer economic distortions, more economic and legal norms, a better-functioning state, and a stronger civil society than existed the former Soviet Union, where the old elite had been and remained amazingly free of social controls.
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From page 463... ...
Bulgaria and Russia attempted radical reforms, but their governments were too politically weak to be able to sustain these efforts for even a year. In short, the capable nonsocialist regimes opted for radical reform, while all the lingering socialist regimes preferred gradual reform.
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From page 464... ...
Rather than imposing strict legislation, the state inspectors tend to require bribes. The situation appears to be similar all over the New Independent States, in sharp contrast with Central Europe.
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From page 465... ...
Countries in the New Independent States, however, are not very likely to fall into the entitlement trap because of their limited state revenues. Hence, the former Soviet republics have the possibility and challenge to opt for a much more liberal model than Central Europe has adopted.
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From page 466... ...
They have reflected the set of views that Williamson (1993) has labeled "the Washington consensus." It implies limited fiscal deficits, strict monetary policies, price liberalization, deregulation of foreign trade, and privatization, and is being embraced by the International Monetary Fund (IMF)
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From page 467... ...
Central and Eastern Europe has assumed many features characteristic of Western Europe a similar degree of liberalization, state ownership, taxation, social transfers, and income differentiation. The region is increasingly characterized by a party spectrum resembling Western European political views, ranging from conservatives, to liberals and peasant parties, to social democrats, with the occasional hard nationalists.
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From page 468... ...
Tajikistan is currently in such a condition. Because of the combination of excessive state intervention and poorly functioning governments and markets, neither an East Asian model nor a well-functioning Western European model appears to be a plausible option for these countries.
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From page 469... ...
1995 Policy Experiences and Issues in the Baltics, Russia, and Other Countries of the New Independent States, IMF, Occasional Paper No. 133, Washington, DC.
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From page 470... ...
:1-118. Stockholm Institute of East European Economies 1997 Key Economic Indicators 4(4)
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