tions, without delay. A corollary is that the greater the structural imbalances, the greater the intensity of the necessary shock. Thus, it is frequently stated, Poland needed a colder shower than did Hungary or Czechoslovakia. Accepting these nostrums, some Polish economists predicted that the Polish economy would be stabilized in six months or so, but after five years, measured employment and real living standards were still falling. German economists likewise were overly optimistic about the speed of the transformation and upturn of the economy of the former GDR.
Once the need for structural changes in physical plants and personnel is recognized and the role of competition in obtaining meaningful relative prices is conceded, the answers to these questions change. This author has contended that the most prudent course would be to encourage mixed forms of ownership in a competitive environment, to consider a sequence that will encourage growth and political support, and to accept a slower pace than was originally hoped. People who are close to subsistence--as are many in the less accessible parts of the region--cannot accept the risks of waiting for revolutionary improvements. Eastern Europeans still believe in the right to employment--and, some would say, even to work. Thus, it is no wonder that many Eastern European intellectuals, unfamiliar with and suspicious of the claims that market capitalism is self- regulating, oppose rapid privatization. Although they may not fully share the fear of foreign ownership expressed by many ordinary citizens, they believe there is the danger that rapid sales of state-owned enterprises will transfer control of the national patrimony to those who held political privilege under communism or who accumulated wealth by speculation and illicit schemes. Rapid privatization also threatens jobs and hence social and political stability. Judging from the populist governments that have arisen in democratic Hungary, Slovakia, and Poland, a gradual, mixed strategy would appear to be more acceptable to more people than would doctrinaire shock therapy.
Blinder A. ( 1990). Paying for Productivity Washington, DC: Brookings Institution.
Charap J., and A. Zemplinerova. ( 1993). Restructuring in the Czech Economy (Working Paper No. 2). London: European Bank for Reconstruction and Development.
"Concrete Heads: Central Europe (Central European Free Trade Agreement)". ( 1995, September 16). The Economist, p. 60.
Ebhardt H. ( 1994). Development of the Law on Economic Competition in the Czech Republic. Unpublished manuscript, Prague.
Hare P. G. ( 1990). "From Central Planning to Market Economy: Some Microeconomic Issues". Economic Journal, 100, 588.
Ireland N. J., and P. J. Law. ( 1982). The Economics of Labour-Managed Enterprises. London: Croom Helm.