The previous chapter discussed the influence of legacies from the Soviet period on the political and economic processes of transformation. One way in which legacies may be overcome is through the transfer or imposition of models of development from outside. Another factor in the process of transformation in Eastern Europe and Russia has been the transfer of a neo-liberal model of economic stabilization and development from the West and most especially by the IFI. The principal financial institutions are the International Monetary Fund ( IMF) and the World Bank and it is these institutions which form the core of the analysis in this chapter. However, there are other institutions including the European Bank for Reconstruction and Development (EBRD) and the Organization for Economic Cooperation and Development ( OECD), the Paris Club, and those of the EU which operate to promote the development of market economies in Eastern Europe ( Poland and Hungary Assistance for the Reconstruction of the Economy (PHARE) and Technical Assistance for the Commonwealth of Independent States (TACIS)). The functions of this chapter are fivefold: to consider the role of the international financial institutions in Eastern Europe; to analyse the transference of the neo-liberal model and the mechanisms by which it is imposed; to investigate the strategic choices of governments and the role of international financial institutions as shadow partner; to look at the economic alternatives to neoliberalism; and to examine the implication for labour relations.
The IMF and the World Bank were founded to promote post-war recovery and economic development and to prevent the recurrence of the depression of the 1930s through the regulation of international economic and financial relations, especially in periods of crisis. Institutionally they are joint stock companies and their strategic shareholders are the G7 countries. They were originally important for the management of the monetary systems of the First World, but the privatization of this process in the 1970s reduced this role. The debt crisis of the Third World made it the primary recipient of IMF lending in the 1980s and contributed to the development of its programmes and of the model. The effectiveness of these programmes and the relevance of the model in relation to the Third World have been extensively criticized (see, e.g., Bird 1993: 166-80), and its relationship to the World Bank and other financial