The Politics of Economic Transformation

Abstract

This chapter focuses on the economic dimension of transformation. Its starting point is a brief review of the conomic model – the system of central planning – that shaped economic development in the region in the postwar period to the late 1980s. The intention is not to describe in detail how planning operated nor to dwell on the system’s defects – many excellent works already do that – but rather to identify those features that have a clear bearing on what has happened to, and within, Central and East European economies since 1989. We then review some of the key aspects of economic development in the first phase of transformation in the early 1990s – the debate over economic shock therapy versus gradualism, the impact of policy and circumstance on macroeconomic performance, the beginnings of a microlevel enterprise restructuring and adjustment to the new situation,the tangle of emerging group interests with its new patterns of winners and losers – each considered in turn. Finally, we ask what can be said about the success or otherwise of the variety of economic experiments launched throughout Central and Eastern Europe since the Berlin Wall fell in 1989.