Full text: The Economics of Transition.

normal channels. It must be warned, however, that in the present 
conditions in some of the socialist countries (especially in the 
Soviet Union ) a currency reform in itself may not be sufficient 
to end inflation, simply because the break down of the 
distribution system ( which anyhow never functioned very well )in 
contrast to the case of Germany and Austria where there was not a 
similar degree of dislocation and where, in addition there was the 
inflow of supplies under the Marshall plan while there is nothing 
comparable in Russia today. 
The distribution of products and the distribution of income. 
One might visualise the private market for agricultural products 
as a generalisation and development of a form of grey market which 
has been practised in Russia and other socialist countries for 
many years as a concession to reformist demands: Markets where 
fruit,vegetables etc were offered at higher than official 
prices,but generally in better quality and at any rate more 
readily available. The policy was based on the idea that at these 
prices an additional supply would be forthcoming which would be 
satisfied by this market which would presumably be fed by the 
purchasing power which could not be spent in the official channels 
for want of supply. It appears that in the more recent 
developments an increasing part of the controlled supply has been 
deflected from the official channels into the grey (or black?) 
markets or into bilateral barter arrangements between collectives 
and factory workers. This at any rate seems to be a very plausible 
explanation of the drastic reduction of official supplies in the 
Soviet Union. The consequence of this shift must be an increase of 
the average price paid by the consumer, the difference going to 
the producers and the traders of the products.

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