The Transformation of Socialist Economies: Alternative Approaches and Early Lessons of Experience

Abstract

The paper describes three approaches to the strategy of the transition from socialism to a market economy: the rapid privatization strategy, the evolutionary school, and the government planning approach. These approaches rely on different underlying assumptions about the nature of the formerly socialist societies and the tasks confronting them in making the transition to a market economy, and the paper draws out these different assumptions. A number of policy issues are discussed in light of these three approaches, such as the speed of price liberalization and currency convertibility, the pace of privatization of large state enterprises, and the role of property rights and legal infrastructure reform. The consensus view of Western advisers as of about 1991 is confronted with the events of the first few years of transition experiences.