Poland's Economic Reform

Courtesy Reuters

The leaders of Eastern Europe's democratic revolution describe their goal as a "Return to Europe." They seek to overcome the Cold War divisions of Europe as rapidly as possible by adopting the institutions of parliamentary democracy and a market economy and by joining the economic and political organizations of Western Europe. The new democratic governments of Poland, Hungary and Czechoslovakia have explicitly rejected the idea of experimenting with a "third way" between capitalism and state socialism, aiming instead to replicate the economic institutions of Western Europe. The basic economic questions facing East European governments are therefore not mainly about the desired ends of reform, but rather about the strategy for making the transition from state socialism to a market economy.

The transition is fraught with danger. The East European economies are not starting from a stable situation but from a deep and prolonged economic crisis. Moreover there are no comparable success stories to serve as clear road maps for reform. Previous reforms conducted under communist rule have backfired. Attempts to decentralize planned economies have tended to worsen financial instability, a pattern now evident in the Soviet Union and one that also occurred in the 1980s in Hungary, Poland and Yugoslavia.

Of course, the new democratic governments in the region have profound advantages over previous regimes in attempting the necessary reforms. Not only do the new governments command popular trust and support, but they also are not hampered by the ideological baggage and vested interests that weighed down the reform attempts of earlier years. Nonetheless the political situation in Eastern Europe remains fragile. If the reform programs of the new democratic governments fail, the meager living conditions in Eastern Europe will fall further, which could in turn provoke serious social conflict and even a breakdown of the new democratic institutions. But there are also profound possibilities for rapid improvements in living standards, if the East European countries can successfully make the transition from central planning to the market economy.

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