Building the Knowledge-Based Economy in Countries in Transition—from Concepts to Policies

Conventional transition policies of a predominantly macroeconomic character have done a good deal to create necessary conditions for building the knowledge-based economy in the countries of Eastern Europe and the former Soviet Union. Establishment of sufficient conditions for such an evolution will require a different approach to policy-making, which will range much more widely across the gamut of possible economic policies, but will at the same time seek to bolster state action with the actions of private, voluntary and semi-public organisations. Generalised government failure must be recognised as a serious constraint on policy-making options, especially in the former Soviet Union. Still, there is much that can be done under the rubric of traditional policy areas like competition and regional development. What is absolutely clear is that without rigorous supervision some areas that are crucial for the development of the knowledge-based economy, notably the banking sector, are very likely to fall prey to problems of moral hazard and abuse of market position. By the same token standards of corporate governance will have to be raised. Only in this way will the transition countries be able to develop the institutional diversity and complex collective learning networks required if they are ever to catch up with the advanced industrial countries.