The Economics of Transition.

Steindl, Josef

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Document type:: Works

Collection:: Josef Steindl Collection

Title:: The Economics of Transition.

Author:: Steindl, Josef

Scope:: Typoskript, 11 Seiten, nummeriert

Year of publication:: 1991

Source material date:: [25.09.1991]

Language:: English

Description:: In this article Steindl makes some propositions for the economic transition of the former socialist countries and points out the necessity to avoid unrealistic promises of quick recovery. He suggests a two sector model of transition that will need ten or twenty years - a policy of gradual adjustment to avoid mass unemployment. The model demands that the modern sector should gradually expand to the extent the old sector should gradually shrink. This shift would most naturally be operated by a a wage differential. Therefore it will be imperative to protect the old sector from foreign competition in some form for a certain period of time. Furthermore he argues that there are advantages and disadvantages concerning the question of property and especially the privatisation of state owned concerns, but that it would be irresponsible policy to throw away these assets at this particular time the more so that historical experience had shown that similar large scale dispostion of public property contains the danger of a mire of corruption. The transition requires intense communication with the capitalist world, but unrestricted opening would lead to a one sided stream of products while fuel and raw material reserves will be sold at bargain prices. Therefore Steindl proposes a special form of protectionist policy and a control of capital movements. However, there will be a shift in income distribution and an increase in the inequality of incomes.

Note:: Unveröffentlichtes Typoskript.

Topic:: Economic policy

JEL Classification:: P20 [Socialist Systems and Transitional Economies: General]

Shelfmark:: S/M.58.6

Access:: Free access

1 i THE ECONOMICS OF TRANSITION. The former socialist countries have to effect a transition from one economic regime to another. The distance they have to travel, the difference between the two regimes, can be measured by the production gap between "east" and "west". In comparison to western european countries this gap will for most of them be at the least 1 to 2 if not greater. This still does not take account of the greater environmental damage in the east which is the equivalent of an additional cost, nor of the consumers discomfort ( queues, lack of repair facilities ). The reasons for the productivity gap are broadly speaking 1) Backward technology which is in good part embodied in equipment and plant, so that it requires investment to change it. A special aspect of it is the neglected infrastructure which is overaged and therefore also technically obsolete. 2) Defective organisation, both within the industrial and other concerns, and in the economy at large, as exemplified by the neglect of the distribution system and all services including repairs. 3) Inadequate motivation and bad discipline of workers. This problem has probably increased in the last stages of the old regime and especially in the turmoil of the attempted creation of a new one. Each of these factors accounts for a large part of the gap and each of them takes a long time to remedy. Investment. The task of building up a largely new infrastructure and a modernised industry has been compared to the reconstruction of

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