Authors such as AGHION, FALCETI, KRKOSKA and DANIEL GROS studied the transition of Eastern European economies from Central Management Systems to Market Economies at the end of the last century.
They prepared several studies, at the request of the European Bank for Reconstruction and Development, on multiple topics, from the relevance of starting infrastructures, to the initial conditions of development (from a socio-economic perspective), through macroeconomic stabilization policies, structural reforms, the relevance of FDI – Foreign Direct Investment and the consideration of groups of countries with particularizing characteristics, studies that help to understand the problems existing in a relevant part of the European Continent.
For AGHION, investment in infrastructure was essential for the transition process of these economies, which were highly conditioned by a certain weight of heavy industry (largely linked to the defense sector), while for FALCETI the initial conditions of development were characterized by the absence of a strong business class (which was replaced, in a hasty and therefore inconvenient manner, by the “single party nomenclature”, unprepared for the challenges of new management), with responsible macroeconomic stabilization policies not always being adopted (in order to avoid poor management of Public Finances and External Debt).
FALCETI also speaks of a certain obsession on the part of multilateral financial institutions in wanting to push for reforms towards an accelerated privatization of the economies of Eastern Europe, an acceleration that turned out to be counterproductive (since, as was said, they did not have a business class, which would only contribute to its replacement by a “political nomenclature”, contributing to the absence of regulatory rules of efficient markets and the emergence of corruption, of which, in fact, the phase of Boris Yeltsin’s governance was an example and is an example, today, of the Russian oligarchic model and the “Sicilian system of powers” that emanates from it).
The transition process to the market economy, in many of these countries, should have been more gradual and, therefore, more consolidated, in addition to being accompanied by a genuine change towards truly democratic structures for exercising power.
DANIEL GROS speaks, above all, of the significant weight of heavy industry – highlighting that, for a long time, the services sector was neglected – as well as the relative underdevelopment of the financial sector.
The latter would result, according to the author, from the very fact that, over several decades, it had not become necessary to have a system for allocating private savings to investment in accordance with profitability criteria.
GROS, at the beginning of the current century, considered that all Eastern European countries should be divided into three distinct groups in terms of their level of development, namely:
– a more advanced group, made up of the CEECs-Countries of Central and Eastern Europe (the first to join the EU), such as Slovenia, Estonia, Latvia, Poland and the Czech Republic;
– a less advanced group, which he called Southeast Europe, comprising, in particular, Bulgaria, Macedonia, Albania and Romania;
– a last group (the least advanced), which formed part of the Commonwealth of Independent States, led by Russia, which comprised, among other countries, Armenia, Azerbaijan, Belarus, Tajikistan, Kazakhstan and Turkmenistan.
In the end, it is a group of countries in Eastern Europe and Asia itself that, during the transition of the 90s, were conditioned, from the outset, by serious flaws in socio-economic infrastructures, by a productive apparatus very oriented towards heavy industry and, finally, towards the “war industry”, by the absence of a strong services sector, by a weak financial system, by the absence of a business class with experience. of management and the absence of periods of democratic experience throughout their Existential Histories, that is, the absence of democratic cultures, perhaps with one or another circumstantial exception.
And managing to transform these countries into evolved market economies, with a consolidated democratic system, in line with the EU and, in general, with the Free and Democratic World does not seem simple at all, and there is no indisputable “Transition Manual” to be adopted.
That’s partly why we are where we are in Eastern Europe.
Hence, in part, the difficulties Europe faces.
Hence, in part, the difficulties the world will face.
No more, no less…
Economist and university professor
Write without applying the new Spelling Agreement
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