The Political Economy of Transition: Coming to Grips with History and Methodology

By Jozef M.Van Brabant | Go to book overview

10

TRANSFORMATION AND INTEGRATION INTO THE WORLD ECONOMY

“Full integration into the world economy” has been one of the insistent mantras purveyed since mid-1989 throughout the transition economies. Its meaning is not always clear, if only because of the notion’s multiple dimensions and policies have often diverged from enunciated intentions. One aspect pertains to opening the domestic economy to external competition for goods, services, and production factors (certainly capital inflows) facilitated through various domestic institutional arrangements and possibly positive policy measures (see Chapter 5). A second is joining global economic organizations and subscribing to their underlying regimes. A third one uppermost on the minds of policy makers, especially in the more western of the transition economies, is joining the EU. One may well ask whether such forceful meshing with the world economy is the best course to pursue, given the state of affairs in these economies. The controversy over short-term foreign economic policies I highlighted in Chapter 5. Here I consider the question from the perspective of the core task of the transformation: Engineering rapid catch-up with average levels of development typical of the advanced “western” countries, such as in western Europe.

This chapter focuses on dimensions of opening up seen largely from the point of view of autonomous decisions by transition managers. The “views” of other countries and the organizations themselves are dealt with in the context of Chapter 11. After inquiring into the meaning of “integrating into the world economy,” I debate the desirability in principle of the transition economies’ joining the multilateral organizations in light of the latter’s universal ambitions. Next I examine the role of the transition economies in the global economic organizations and the desirability of subscribing to their underlying regimes. Thereafter I look more closely at the advantages and drawbacks of attracting foreign investment, FDI in the first place. But I focus on the realism of utilizing FDI as a substitute for or complement to domestic savings, and on the implications of subscribing to the implicit “international regime” of TNCs. Before concluding I clarify the central questions of the relations between the transition economies and the EU. External assistance for the transitions I deal with in Chapter 11.

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