From Central Planning to a Market Economy
The current economic transformation of Central and Eastern Europe ( CEE) and the former Soviet Union is qualitatively different from other historical or current examples of major changes in the structure of economic institutions. The initial conditions, the scope and desired speed of the undertaking, the guidance offered by economic analysis, all distinguish this process from economic change elsewhere.
Because of the depth and difficulty of the transformation process, it is imperative to seek lessons from economic theory, from history, and from other countries. Decision makers in both the East and the West need to examine such lessons, because the process is not going well.
There is no question about the objective: it is market capitalism. There is no plausible "third way" to economic progress. We have no blueprint for a coherent, stable, and successful model in between capitalism with markets and communism with central planning. One legacy of the many failed reform programs from the late 1950s onward was to discredit all models of "market socialism." The market is necessary to organize production and exchange, and private ownership is necessary to motivate economic agents.
Market capitalism comes in many versions, however, and we may see a variety of outcomes in Eastern Europe (including CEE and the former Soviet Union), perhaps as different as the United States from Japan. Whichever one a given East European country chooses, there must be a better way of getting there than the current path.