The Economics of Transition.

Bibliographic data

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.

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