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

4 imports of higher quality are available the preference of consumers for them may be so strong that the wage required to keep the old sector competitive would be unacceptably low. It will therefore be imperative to protect the old sector from foreign competition in some form or other, perhaps by quotas, for as long as the new sector is not ready to replace it as an employer of labour and provider of goods. This may be necessary also for considerations of balance of payments, especially in view of the strong need for imports of new technology. The protection of the old sector implies also that subsidies hitherto given to it to keep it viable should not be quickly removed. The policy of protection must of course be selective, for example, subsidies for fuel and power should generally be withdrawn fairly soon in view of the great importance of saving fuel. An essential requirement for the protection of the old sector is that it should be limited in scope and in time. One has to find a middle way between the policy of closing down a whole industry practically overnight and the perpetuation of obsolete structures without end. An old industry should never be protected against the competition of newly emerging facilities within the country. The time limit for the protection should not only be roughly defined but it should also be perfectly clearly known to the people concerned - the managers and workers of the old industry. One method - although a rather rigid one - is to set up a definite time schedule for the termination of the protection which would be individualised according to industries. This requires, of course, - horribile dictu - an industrial policy. In other words, it is

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