CONSTRAINTS ON SYSTEMIC TRANSFORMATION AND THEIR POLICY IMPLICATIONS

Abstract

The purpose of this paper is to provide a general framework for more detailed presentations of the microand macro-economics of the transition of former centrally planned economies under commu nist party states to political democracies and mar ket-oriented economies. Section II describes the problem of the generally disappointing pace and course of transition. Some possible sources of the problem are that sectoral policies might have been decided in too narrow an analytical framework or might have overlooked some significant structural and system constraints on the societies under tran sition. Section III enumerates the main subsets of a structural system which is the target of specific policies formulated for the transition. These sub sets refer to the different ways in which actors in societies interact and for the most part correspond to different areas of expertise, each with its own specialists often making recommendations in isola tion. Section IV describes the typical state of the general structural system of a country in Central or Eastern Europe as a consequence of the last years of communist government and the first year of transi tion. This condition is described as a collection of interacting disequilibria, which are set into motion by the withdrawal of communist authority. Section V describes the main elements of economic policies in the transition, as well as the evidence of the problems of implementing them. Section VI con siders the specific political and moral or value circumstances in which economic policies of tran sition are being decided and executed. Additional constraints on economic policies are identified here. In section VII, the conclusion, consideration is given to the possibility of viewing the political constraints on economic policies as part of an optimum policy design. This appears to be a diffi cult task indeed, yet what now seem to be impeding the transformation of economic institutions are increasingly constraining political conditions.