Policy: Post-Communism

Demolition of the Berlin Wall and take-down of the Iron Curtain hasn't significantly improved the situation in what are optimistically and euphemistically called 'economies in transition' [from socialism to capitalism which is]. Figuring out how to move from a stagnant, ex-Communist economy to a dynamic and growing one is very difficult and no one has ever done it before.

A few of the "economies in transition" appear on the path to rapid convergence to Western Europe: Slovenia, Hungary, Czech Republic and Poland have already clearly and successfully maneuvered through enough of 'transition' to have advanced their economies beyond the point reached before 1989. It seems clear that their economic destiny is about to become effectively part of Western Europe. Lithuania, Slovakia, Latvia and Estonia appear to have good prospects of following their example.

Somewhere else, though, the news is bad. Whether reforms have been step-by-step or all-at-once or whether ex-communists have been excluded from or have dominated the government or whether governments have been internationalist or nationalist, results have been similar. Output has fallen, corruption has been rife and growth hasn't resumed. Material standards of living in the Ukraine today are less than half of what they were when General Secretary Gorbachev ruled from Moscow.

Economists debate ferociously the appropriate economic strategy for unwinding the inefficient centrally-planned Soviet-style economy. The fact that this 'transition' has never been undertaken before should make advice-givers cautious. And there is one other observation that must make advice-givers depressed: the best predictor of whether an eastern European country's transition would be rapid and successful or not appears to be its distance from western European political and financial capitals such as Frankfurt, Vienna and Stockholm