Western Aid Conditionality and the Post-Communist Transition

Abstract

The political and economic collapse of communism in the Eastern Europe and the former Soviet Union has created enormous challenge for Western democracies. The challenge has been not that of providing financial developmental aid although it is very important for countries facing the double challenge of transition and development. Its most important dimension has been to provide active policy support to implement reforms dismantling central planning. This in turn includes designing and providing a stimulus to implement a viable transition strategies and establishing market friendly institutions. Thus, the question is the extent to which Western assistance has made a difference in the course of transition from economic systems based on central planning to those based on competitive markets.This paper examines links between the economic transition in the former Soviet bloc countries (including states that emerged from the dissolution of the Soviet Union) and Western assistance. Its main focus is on addressing two specific questions: (i) have the Western governments and international institutions supported the most effective strategy of transition in Eastern Europe and FSU?; and (ii) what kind of aid policy can give the best results in terms of recipient countries commitment to effective transition strategy?