Macroeconomic surveillance and the transition

Abstract

Now that the unrealistically optimistic expectations about the revolutions in Eastern Europe have subsided, there is no doubt that the process of marketizing the region will be exceedingly painful and protracted. There are many reasons for this. Surely one important bundle stems from the fact that markets have to be created from first principles in an environment burdened by a great deal of economic, political, and social uncertainty, which in turn is aggravated by institutional instability. In several countries of the group, admittedly, these first principles are at least available in some rudimentary form. Past experiments with administrative reform and economic devolution have contributed measurably to this environment. They could, therefore, at this juncture lessen somewhat the uncertainty besetting decision making. Elsewhere, including in the Soviet Union, even the fundamental principles have yet to be hammered out and agreed upon at the purely conceptual level. This generates unease on the part of economic agents, to say the least, and creates more uncertainty than is already embedded in the fluid situation. These disconcerting expectations are furthermore burdened by other instances of profound irresolution that pervade the economies of Eastern Europe.