A better red: The transition from communism to coca-cola in Romania

Abstract

The transition from central planning to market-oriented economies in Eastern and Central Europe provides a fascinating laboratory for research in economic theory and business practice. With the collapse of communism, the inefficiencies of centralized planning have been laid bare. The classic debates between Mises and Lange on the viability of planning, although long resolved in the minds of free-market advocates, have been settled. Poznanski (1992), in an aptly titled book, Constructing Capitalism, makes the following observation: “The experience of state socialist economies also validates the hypothesis that efficient production is not only impossible without market competition but also without private property as a principle form of resource ownership and use control.” Austrian economists and others recognize that privatization of state-owned enterprises and the establishment of a system of property rights are the most important issues in the transition process. Svejnar (1991), for example, states that the absence of property rights is “the Achilles heel of the transition.” Although economists such as Jeffrey Sachs and others, who have served as advisors to various governments in the transition, recognize that privatization is important, they, however, also add other issues such as fiscal reform (i.e., taxes), monetary stability, and so on. Rothbard (1992) has provided some insight into an Austrian perspective dealing with these issues. Problems dealing with privatization, monetary reforms, and so forth are macro issues. Our research has focused more on what we call the micro issues; that is, managerial and entrepreneurial problems in the transition. Among the many challenges confronting economies in transition is the promotion of entrepreneurs hip and successful business practices. Entrepreneurship involves the ability to predict how consumer demand will change and to find cost-efficient ways of supplying new products that govern business success. Exercising this ability and developing the talent necessary for successful market ventures was foreign to Romanians under the old regime. Responding to consumer demand was impossible in the planned economies. To some extent, the mind-set that existed during the communist era remained intact after the collapse of the dictatorship and the liberalization of the economy. Arzeni (1996) contends