In late 1989 the world witnessed the stunning and unexpected collapse of communism in Eastern Europe. The Soviet president, Mikhail Gorbachev, was unwilling to use force to preserve Soviet control over the East European Comecon countries. Indeed, towards the end of 1991 the Soviet Union itself ceased to exist. Gorbachev did not intend this to happen but, again, he did not try to preserve it by force.
Not surprisingly, the question of how to handle the transition from 'communism' to 'capitalism' has led to immense controversy and problems. There is even controversy about how unique the economic process is. Sachs, for example, argues that the conversion of a socialist into a capitalist economy is
In many ways … a well-trodden path … Although parts of the transformation represent uncharted territory (such as massive privatization of industry), many other aspects of Eastern Europe's reform tasks are quite familiar. Many other countries that were once cut off from the rest of the world by inward-looking, authoritarian regimes have successfully opened up and become integrated into the global mainstream.
Sachs surely understates, to a marked degree, the differences in jettisoning a command economy. But while there are major areas of dispute as to how to handle the economic transition, it may be argued that the virulence of the debate often hides substantial areas of agreement.
Only the main aspects of the theoretical debate can be given here, while the ways in which the transition has actually been tackled are best dealt with in the country chapters. There are two broad approaches to transition, 'big bang'/'shock therapy' and 'gradualism', although even definitions are not as clear as one might wish for. Thus 'large' privatization is a relatively lengthy process even in the former, while China's 'gradualism' includes relatively rapid agricultural reform. Vietnam has clearly been influenced by China, but the bundle of reforms in 1989-91 has a 'big bang'/'shock therapy' look about it.