#11
From: "Julie Shaw" <jshaw@ceip.org>
Subject: can you add to JRL?
Date: Mon, 17 Dec 2001
ANDERS ÃSLUND FINDS RADICAL REFORM RESULTS IN
BETTER ECONOMIES, BETTER DEMOCRACIES
Post-Soviet Economies Expert Says Shock Therapy Works
Former Soviet bloc countries that underwent radical, early reform have produced more dynamic market economies and political democracies compared to those in which autocrats held onto power and reform remained sluggish, writes Anders Ã…slund, senior associate at the Carnegie Endowment for International Peace, in a new policy brief, "Building Capitalism: Lessons of the Postcommunist Experience," now available online at: http://www.ceip.org/files/publications/Anders_Capitalism.asp
The 21 countries of the former Soviet Union and Eastern Europe pursued three starkly different policy paths, leading them to different fates, Ã…slund writes. Radical reformers who really wanted democracies and dynamic market economies, such as the Central European countries of the Czech Republic, Slovakia, and Hungary, and the Baltic states of Latvia, Lithuania, and Estonia, succeeded in their goals. Gradual reformers, including Bulgaria, Romania, and most former Soviet republics, only achieved semidemocratic, semiprivatized societies with limited growth. Nonreformers, notably Belarus, Turkmenistan, and Uzbekistan, maintained firm dictatorships with state-controlled economies and dominant public ownership.
Shock therapy works, Ãslund writes, because "financial crises can enforce stringency on both governments and enterprises" and "shocks have broken up rent-seeking societies by discrediting crony capitalism and its advocates." The results, he finds, have been a more rigorous fiscal regime, further liberalization, and privatization. In cases such as Bulgaria, Poland, and Russia, "not one but two severe shocks seem a common prerequisite for successful market reform," he notes, given the depth of communist distortions of both the economy and minds. Based on these findings, Ãslund concludes that "it is virtually always preferable to undertake the most radical and earliest economic reform that is possible."
Ãslund also debunks some widely held beliefs. He explains why official statistics have exaggerated the collapse of output in the region, why privatization is actually good for growth and democracy, and challenges the idea that a country in transition needs a strong ruler.
Anders Ãslund, senior associate at the Carnegie Endowment and an expert on post-Soviet economies, has authored six books and edited nine. His most recent book is "Building Capitalism: The Transformation of the Former Soviet Bloc," which can be ordered from Cambridge University Press by calling 1-800-872-7423.
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