Economic and political constraints during transition

Abstract

FOLLOWING THE COLLAPSE of the old political (communist) system, the overall strategy of transition and initial reform policies appear to be influenced above all by the inherited economic and institutional constraints and the long-term political and economic aims of the reforms, rather than by the usual short-term concern to gain and preserve political power. Many of the constraints are systemic and therefore common to all countries undergoing the transition. This article primarily discusses the influence of these constraints, both common and country-specific, on the choice of reform strategy, as well as on the choice of specific economic policies. Economic, institutional and political reforms during transition have a feedback effect on the inherited constraints. They also activate or modify current political constraints. The article notes positive outcomes of reforms, which tend to relax some of the constraints, and discusses the effect of negative outcomes, such as severe recessions and grave fiscal problems, which tend to produce new economic and political constraints. The second aim is therefore to discuss how these changes of constraints may lead to modifications of initial reform policies in the course of transition.