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Putting the success stories in the post-communist world into a broader perspective

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  • Vladimir Popov

    () (New Economic School, Moscow, Russia)

Abstract

There are at least three reasons why many transition economies succeeded by pursuing policies that are very different from radical economic liberalization (shock therapy), which is normally credited for the economic success of Central European countries. First, optimal policies are context dependent, specific for each stage of development, so what worked in Slovenia cannot be expected to work in Mongolia. Second, even for countries at the same level of development, reforms needed to stimulate growth are different; they depend on the previous history and on the path chosen. The reduction of government expenditure as a share of GDP did not undermine significantly the institutional capacity of the state in China, but in Russia and other CIS states it turned out to be ruinous. It is the growth diagnostics that should reveal the missing ingredient of economic growth. Introducing this “missing ingredient” should not, however, result in the destruction of other pre-conditions for growth. The art of the policymaker is to create markets without causing government failure, like it happened in many CIS countries. Third and most importantly, there are long-term trajectories of development that are path dependent: once the country gets on a particular trajectory, it is sometimes better to stay on track because the costs of a transition to a seemingly superior trajectory may be prohibitively high.

Suggested Citation

  • Vladimir Popov, 2010. "Putting the success stories in the post-communist world into a broader perspective," Society and Economy, Akadémiai Kiadó, Hungary, vol. 32(1), pages 83-102, June.
  • Handle: RePEc:aka:soceco:v:32:y:2010:i:1:p:83-102
    Note: This article is partly based on Popov (2009a). Aversion of this paper also appeared in the Brazilian journal The Perspective of the World Review, No. 1, 2009.
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    More about this item

    Keywords

    transition; growth diagnostics; path dependency;

    JEL classification:

    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
    • P27 - Economic Systems - - Socialist Systems and Transition Economies - - - Performance and Prospects
    • P52 - Economic Systems - - Comparative Economic Systems - - - Comparative Studies of Particular Economies

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