Preventive Therapy: The Neoclassical Gradualist Model of Transition from Central Administration to Market Relations

Abstract

The fundamental basis of the neoclassical gradualist approach to transition in Russia and Eastern Europe was to establish economic, institutional, political, and ideological structures before attempting liberalization. Without this minimum foundation, radical reforms would have inhibited the development of a competitive market capitalist system. This was because "privatization, marketization, and the introduction of competition cannot be contemplated in an economy reduced to barter" (Carrington 1992, 24). Also, implementation of the reform program required minimum standards ofliving; otherwise the social fabric of the whole society would have been at risk. The reform had to foster a social consensus that endorsed a system of secure private property rights (Murrell, 1995, 171) and had to be guided by the principles of voluntariness and free choice (Kornai, 1992b, 17).