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Explaining Postcommunist Economic Performance

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  • Lawrence P. King

Abstract

This article critiques neoliberal transition theory from a neoclassical sociological perspective. Neoliberals argue that postcommunist economic failure is the result of inadequate adherence to neoliberal precepts. This paper argues that the neoliberal policy package of ???Shock Therapy??? (consisting of the radical transition to a market economy through rapid and extensive price and trade liberalization, stringent monetary and fiscal stabilization, and the implementation of a mass privatization program) creates severe supply-and-demand shocks for enterprises, inducing firm failure. This leads to a fiscal crisis for the state, and an erosion of its capacity and bureaucratic character. This in turn reacts back on the enterprise sector, since the state can no longer support the institutions necessary for the effective functioning of capitalist economies. The neoliberal theory is tested against a neoclassical sociological theory by examining the experience of 12 postcommunist countries and two reform Asian communist countries.

Suggested Citation

  • Lawrence P. King, 2003. "Explaining Postcommunist Economic Performance," William Davidson Institute Working Papers Series 2003-559, William Davidson Institute at the University of Michigan.
    • Handle: RePEc:wdi:papers:2003-559
    as

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    File URL: http://deepblue.lib.umich.edu/bitstream/2027.42/39944/2/wp559.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    postcommunist performance; state capacity; liberalization; privatization;
    All these keywords.

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O5 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies
    • P2 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies

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