The sudden contact between two separate worlds

Steindl, Josef

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Document type:: Works

Collection:: Josef Steindl Collection

Title:: The sudden contact between two separate worlds: Draft with minor corrections

Author:: Steindl, Josef

Scope:: Kopie eines Typoskripts mit handschriftlichen Anmerkungen und Anstreichungen, 4 Blätter

Year of publication:: 1990

Note:: Untertitel fingiert. - Das Paper wurde verfasst anlässlich der sog. Ost-West-Konferenz: New Economic Relations beween East and West - Conference of the Kreisky Commission and the Swedish Embassy in Vienna, May 17-18, 1990.

Topic:: Economic policy

JEL Classification:: P26 [Socialist Systems and Transitional Economies: Political Economy, Property Rights] P27 [Socialist Systems and Transitional Economies: Performance and Prospects]

Shelfmark:: S/M.35.24

DOI:: https://doi.org/10.48671/nls.js.AC14446477

1 THE SUDDEN CONTACT BETWEEN TWO SEPARATE WORLDS The problem of the transformation of the socialist economies into a different system is in its historical reality mixed up with a different problem which arises when two very different worlds touch after they have been separated for a long time. The two problems are certainly very closely linked - you may say that the transformation is achieved not the least by means of the contact yet the problems have to be separated when we analyse them.The difference of the two worlds - call them East Country and West Country - concerns many things but we shall in the first place consider the large gap in productivity and in real wages. Let us consider two scenarios. First. If there is scarcity of labour (or at least of skilled labour) in the "West" then the industry there will have an incentive to move production - additional production at any rate - to the East. The western firms may have other motives too: thus they will probably engage in a race , each wants to be the first even if it is only to prevent the others to be there and not so much to engage himself. I do not mention the motive of low wages because it is by no means clear whether the efficiency wage is or will be in the near future, a low one. The firms moving in from the West will bring with them better management and organisation and better technology (partly embodied in equipment) and they will tend to drive up wages somewhat in relation to the autochtonous industries. In the course of a fairly long series of years productivity and real wages may gradually approach the level of the West.In this scenario the East bears a -jtW rv**

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