| The Vienna Institute for International Economic Studies - WIIW |
SUMMARY
The transition strategies used by the Central European countries reflect
the 'financial market'-based economic orthodoxy of the last 20 years that
assume a balanced budget, low inflation and a stable exchange rate will
provide all the context necessary for satisfactory growth. The 'Marshall
Plan' principles of the previous generation come from a different perspective:
That of the need to put productive resources to use, with the use of government
guidance and planning that did not assume that spontaneous market forces
alone would accomplish the necessary reconstruction and create enough jobs.
The main lessons are three: that the strategies have ignored the role of
aggregate demand; that the persistent inflation in the transforming economies
has been wrongly diagnosed as demand-pull, rather than cost-push, with
different policy implications; the importance of the role of the state
in guiding the transformation has been underestimated.
SUMMARY
In 1990, it was hard to find anyone who did not believe in privatization
as the key to the rapid transition to market economies in Central Europe.
But five years later, the very policies designed to speed the process along
-- mass privatization, bankruptcy and rearranging of company operations
on many levels -- have proved to be more time-consuming and cumbersome
that originally envisioned by the creative minds behind them. Policies
have instead reflected the changing compromises of various economic and
political power and pressure groups and the impossibility of applying a
master plan to an evolutionary process. In this paper, Hunya examines the
speed and results of restructuring as reflected by labour productivity
in industry and the commodity structure of imports and the varying effects
of privatization policies and the activities of foreign investors throughout
the region, particularly in the Visegrád four.