On economic transformation in East - Central Europe : a historical and international perspective

This paper considers two periods: before socialism and after it. The former includes the 1920s, 1930s, and 1940s, and the second includes the late 1980s and early 1990s. The focus is on issues of economic reconstruction, hyperinflation, integration with the global monetary system and the functioning of the gold exchange standards, the impact of the great depression ofthe 1930s and its aftermath, and postwar monetary reforms. The study also compares per capita income and the structure of foreign trade of East-Central Europe with those of Western Europe and Latin America in the late 1930s and the late 1980s. Economic transformation in East-Central Europe probably will be a long and complicated process because the initial conditions for the transition to a market economy are very weak. In fact, the chief characteristics of these economies are macroeconomic imbalances, obsolete and uncompetitive productive capacities, a lack of modern infrastructure, underdeveloped factor markets, and weak institutions. On the political side, the initial euphoria over the end of the old regime is waning and people are less enthusiastic about reform because of the hardships accompanying the transition. Fragile and changing political coalitions and the signs of some surrender to the temptations of populism clearly reflect that tendency.