TRANSITION TO MARKET ECONOMY

 


Ten Years of
Postsocialist Transition:
the Lessons for Policy Reforms  
Grzegorz W. Kolodko
 

 

 

1. Introduction

 

The centrally planned economy has ceased to exist. Even in countries still considered socialist (communist), as China and Vietnam, the mechanism of economic coordination has shifted to a great extent from state interaction to market allocation. Thus, during the 1990s the process of postsocialist transformation has advanced significantly. About 30 countries in Eastern Europe, the former Soviet Union and Asia are involved in vast systemic changes. Undoubtedly, these changes are leading to full-fledged market economies, though the precise outcome of transformation is not going to be the same for all countries involved. Whereas some, leaders in transition and well-placed geopolitically, are bound to join the European Union in the foreseeable future, others, lagging behind in systemic changes, will remain hybrid systems with the remnants of central planning alongside elements of market regulation and a growing private sector. Whereas some countries will expand quickly and catch up with their developed neighbors within a generation, others will experience sluggish economic growth and a relatively low standard of living.

 

Transition to a market economy is a lengthy process comprised of various spheres of economic activities. New institutional arrangements are of key importance for successful transformation. A market economy requires not only liberal regulation and private ownership, but also adequate institutions, For this reason transition can be executed only in a gradual manner, since institution building is a gradual process based upon new organizations, new laws, and the changing behavior of various economic entities, The belief that a market economy can be introduced by “shock therapy” has been wrong, and in several cases, when attempted, has caused more problems than it has solved. Only liberalization and stabilization measures can be introduced in a radical manner, and even this is not a necessity. The need for such method depends on the scope of financial destabilization and is only possible under certain political conditions.

 

The main argument in favor of transition was a desire to put the countries in question on the path of sustainable growth. It was assumed that the shift of property rights from state to private hands and the shift of allocation mechanism from state to free market would soon enhance saving rates and capital formation, as well as allocative efficiency. Thus it ought also to have contributed to high-quality growth. Unfortunately, for a number of reasons this has not occurred. In all transition economies, before any growth has occurred (and in some countries there is no growth yet) there has been severe contraction, ranging from 20 per cent over three years in Poland, to over 60 per cent in nine years in Ukraine (Table 1). These unfavorable results are the consequence of both the legacy of the previous system and the policies exercised during transition, though it is obvious that the latter are of major importance.

 

Table 1:
Recession and Growth in Transition Economies,
1990 -
1997

Countries Years of GDP decline GDP fall after some growth Average rate of growth 1997 GDP index
(1989 100)
Rank
90-93 94-97 90-97
Poland 2 no -3.1 6.3 1.6 111.8 1
Slovenia   3 no -3.9 4.0 0.0 99.3 2
Czech Rep. 3 yes* -4.3   3.6 -0.4 95.8  3
Slovakia 4 no -6.8 6.3 -0.3 95.6 4
Hungary 4 no -4.8 2.5 -1.1 90.4  5
Uzbekistan 5 no -3.1 -0.3  -1.7 86.7 6
Romania 4 yes -6.4  2.1 -2.2 82.4 7
  Albania 4 yes -8.8 4.9 -2.0 79.1 8
Estonia 5 no -9.7  4.1 -2.8 77.9 9
Croatia 4 no -9.9 3.0 -3.4 73.3 10
Belarus 6 no -5.4 -2.6 -4.0 70.8  11
Bulgaria 6 yes -7.4 -3.6 -5.5 62.8 12
Kyrgyzstan 5 no -9.3 -2.4 -5.8 58.7 13
Kazakhstan 6 no -6.7 -6.0 -6.3 58.1 14
Latvia 4 yes -13.8 2.2 -5.8 56.8 15
Macedonia 6 no -12.9 -0.8 -6.9 55.3 16
Russia 7  yes* -10.1 -5.3 -7.7 52.2 17  
Turkmenistan 7 no -4.5 -l2.5 -8.5 48.3  18
Lithuania 5 no -18.3 0.5 -8.9 42.8 19  
Armenia 4 no -21.4 5.4 -8.0 41.1 20
Azerbaijan   6  no  -14.5 -5.7 -10.1 40.5 21  
Tajikistan 7 no -12.2 -8.4 -10.3 40.0 22
Ukraine 8

no
recovery

-10.1 -12.1 -11.1 38.3 23  
Mo1dova 7  yes -12.6 -10.2 -11.4 35.1 24
Georgia 5 no -24.1 2.9 -10.6 34.3 25  

   *   GDP contracted again in 1998
Source:  
National statistics, international organizations and author’s own calculations  

 

 

  These policies were based to a large extent on the so-called Washington consensus. The set of policies designed along this line has been stressing the importance of liberalization, privatization, and opening of postsocialist economies as well as the necessity of sustaining financial discipline. However, being developed for another set of conditions, initially this approach was missing crucial elements necessary for systemic overhaul, stabilization, and growth. These elements included institution building, improvement of corporate governance of the state sector prior to privatization, and the redesign of the role of the state, instead of its urgent withdrawal from economic activities. The incorrect assumption that emerging market forces can quickly substitute the government in its role toward new institutional set up, investment in human capital, and development of infrastructure, have caused severe contraction and growing social stress.

 

The need to manage the institutional aspects of transition have been recognized and addressed only in later stages. The technical assistance of the International Monetary Fund and the World Bank with dealing with these issues may have an even more important positive influence on the course of transition and growth than their financial involvement. Lending by these organizations is often called ‘assistance’, despite the fact that these are just commercial credits with tough accompanying terms. They are having the consequence of enforcing far reaching structural reforms and pushing towards policies that suppose to bring durable growth.

 

Hence, there is the need to search for a new consensus about policy reforms necessary for sustained growth. The east Asian contagion, cast European transition and Brazilian crisis do suggest that for recovery and durable growth healthy financial fundamentals and liberal, transparent deregulation are not the only decisive factors. Sound institutional arrangements, deregulation of financial markets and wise policy of the governments are also essential. Against the recent experience with the crises of several emerging markets (including the ones in transition countries) the outline of a new consensus—a post-Washington consensus—can be drawn. It points not only to the need for liberal markets and open economies, but stresses the new role of the state, the fundamental meaning of market organizations and the institutional links between them, and the need for more equitable growth....

 

2. Policy Without Growth: Missing Elements

 

  From the beginning of this decade the so-called Washington consensus has been accepted as common wisdom on policies for movement from stabilization to growth. It was assumed that tough financial policy accompanied by deregulation and trade liberalization would be sufficient to conquer stagnation and launch economic growth, ….

A summary of the 1989 Washington consensus was given by John Williamson (1990), which named the proposed set of policies, stressing the importance of the organizations involved. He enumerated 10 points that at the time seemed to be agreed upon by influential financial organizations, political bodies, and professional economists:

  • Fiscal Discipline. Budget deficit, should be small enough to be financed without recourse to the Inflation tax...

  • Public Expenditure Priorities. Expenditure should be redirected from politically sensitive areas ... toward neglected fields with high economic returns and the potential to improve income distribution....

  • Tax Reform. Tax reform involves broadening the tax base and cutting marginal tax rates. The aim is to sharpen incentives and improve horizontal equity without lowering realized progressivity.

  • Financial Liberalization. The ultimate objective of financial liberalization is market determined interest rates, but experience has shown that, under conditions of a chronic lack of confidence, market-determined rates can be so high as to threaten the financial solvency of productive enterprise and government.

  • Exchange Rates. Countries need a unified (a: least for trade transactions) exchange rate set at a level sufficiently competitive to induce a rapid growth In nontraditional exports and managed so as to ensure exporters that this competitiveness will be maintained in the future.

  • Trade Liberalization. Quantitative trade restrictions should be rapidly replaced by tariffs, and these should be progressively reduced until a uniform low tariff in the range of 10 percent (or at most around 20 percent) is achieved.

  • Foreign Direct Investment. Barriers impeding the entry of foreign firms should be abolished; foreign and domestic firms should be allowed to compete on equal terms.

  • Privatization. State enterprises should be privatized.

  • Deregulation. Governments should abolish regulations that impede the entry of new firms or that restrict competition, and then should ensure that all regulations are justified by such criteria as safety, environmental protection, or prudential supervision of financial institutions.

  • Property Rights. The legal system should provide secure property rights without excessive costs and should make such rights available to the informal sector.

Williamson 1997, p. 60-61

 

Later, mainly under the influence of experience with overhauling the Latin American economies over the first half of 1990s and taking into consideration the lessons learned from Eastern Europe and the former Soviet Union, the new agenda was presented. Whereas it includes obvious points from earlier thoughts, there are certain new concerns and accents. Again, 10 points were raised:

  • Increase saving by (inter alia) maintaining fiscal discipline

  • Reorient public expenditure toward (inter alia) well-directed social expenditure

  • Reform the tax system by (inter alia) introducing an eco-sensitive land tax

  • Strengthen banking supervision

  • Maintain a competitive exchange rate, abounding both floating and the use of the exchange rate as a nominal anchor

  • Pursue intra-regional trade liberalization

  • Build a competitive market economy by (inter alia) privatizing and deregulating (including the labor market)

  • Make well-defined properly rights available to all

  • Build key institutions such as independent central banks, strong budget offices, independent and incorruptible judiciaries, and agencies to sponsor productivity missions

  • increase educational spending and redirect It toward primary and secondary school.

Willimason 1997, p. 58

 

  The new items on this agenda correctly address the issues of institution building, environmental protection, and investment in education, yet they are still missing some points of great importance which are especially pertinent to transition economies. First of all, dealing with corporate governance reform in the state sector before privatization is not mentioned, nor is the behavioral aspect of institution building. Also the necessity of equitable growth is still overlooked. The shortest point on the agenda of the early Washington consensus, i.e. “Privatization. State enterprises should be privatized,” is in reality a long-term policy challenge. Even if there is a sound commitment to privatize quickly and extensively—which is not always the case—it is not feasible, for both technical and political reasons. There are also the issues of sequencing, pace, distribution of costs and benefits, and the efficient exercise of corporate governance.

 

As for the institutional aspect of reform, in postsocialist transition economies, unlike in distorted developing market economies, it is not enough merely to establish organizations, for instance, an independent central bank or comprehensive tax administration. Cultural changes are also necessary to facilitate efficiency and growth, changes in behavior within organizations and changes in the interactions between them.

The early Washington consensus was actually aiming at countries that had already market economy, and were not just in a transition to such a system. Joseph Stiglitz (1998a), while stressing the importance of governments as a complement to markets points out that the consensus achieved in the late 1980s and early 1990s between the United States Treasury, the IMF, and the World Bank, as well as some influential think tanks, was catalyzed by the experience of Latin America in the 1980s, He claims that for this reason countries facing different challenges have never found satisfactory answers to their most pressing questions in the Washington consensus. Its simplified interpretation vis-â-vis the postsocialist economies implied that it would be sufficient to fix the appropriate financial fundamentals and privatize the bulk of state assets. Subsequently, growth should begin and continue for the long term. Because this has not happened as presumed, the Washington consensus must be reconsidered.

 

There has always been a question as to the actual existence of a Washington consensus. Was a consensus achieved, or was the effort just an intention and well-motivated attempt? In fact, the latter is the case. There is no standard terminology for these sets of doctrines, and various practitioners advocated these doctrines with varying degrees of subtlety and emphasis. The set of views is often summarized as the “Washington consensus  though to be sure, there never was a consensus even in Washington (let alone outside of Washington) on the appropriateness of these policies. (Stiglitz 1998b, p. 58)

The partial failure of the Washington consensus with regard to transition economies must be linked with the neglect of the significance of institution building for the beginning of growth, even if economic fundamentals are by and large in order. Such oversight explains why so many Western scholars initially did not properly understand the real problem. Institutions change very slowly, but they have a strong influence on economic performance. As the 1993 Nobel Laureate in economics states, since

 

…Western neo-classical economic theory is devoid of institutions, it is of little help in analyzing the underlying sources of economic performance. It would be little exaggeration to say that, while neoclassical theory is focused on the operation of efficient factor and product markets, few Western economists understand the institutional requirements essential to the creation of such markets since they simply take them for granted. A set of political and economic institutions that provides low-cost transacting and credible commitment makes possible the efficient factor and product markets underlying economic growth,

                                                                                                            North 1997,
p. 2

  Expectations of growth were based on the assumption that market institutions, if they had not yet appeared automatically, would somehow rise up soon after liberalization and stabilization measures were executed. It was believed that if policies were put in place to secure the progress of stabilization and enhance sound fundamentals, the economy should regain momentum and start to develop quickly. However, what actually happened was much more depressing. Because of a vacuum with neither plan nor market system, productive capacity was utilized even less than previously, savings and investments began to decline, and instead of fast growth there was deep recession. A lack of institutional development turned out to be the missing element in transition policies based on the Washington consensus. Instead of sustained growth, liberalization and privatization without a well—organized market structure led to extended contraction. This was not only the legacy of a socialist past, but also the result of current policies. ...

 

There seems to be a growing agreement that the early Washington consensus must be revised and adjusted toward actual challenges and new circumstances. If it is going to work, elements so far missing must be included. These elements are linked with institutional arrangements, though they are not universal… in fighting the Eastern European transitional depression… eight elements are of key importance:

  • The lack of organizational infrastructure for a liberal market economy.

  • Weak financial intermediaries unable to allocate efficiently privatized assets.

  • A lack of commercialization of state enterprises prior to privatization,

  • Unqualified management unable to execute sound corporate governance under the

  • conditions of a deregulated economy.

  •  A lack of institutional infrastructure for competition policy.

  • A weak legal framework and judiciary system, and a consequent inability to enforce tax code and business contracts.

  • Poor local government unprepared to tackle the issues of regional development.

  • A lack of non-governmental organizations (NGOs) supporting the functioning of the

  • emerging market economy and civil society.

  Hence, policies that under other conditions may have worked, were not effective in overcoming the crisis in the postsocialist economies. Even if the targets and instruments as such were well defined, they could not be reached and used as envisaged, since they were put into use within a systemic vacuum.

 

  3. Toward a New Consensus

 

….This time, psychological and political rather than economic and financial arguments are given as decisive factors favoring the radical set of policies undertaken at the beginning of the 1990s. Nonetheless, it seems that we still differ as for the evaluation of the scope and costs of that overkill. Was it only ‘a little bit’ of otherwise necessary measures, as one may still believe, or was it a serious excess of unnecessary radicalism, as it seems to be proved elsewhere (Kolodko 1991, Nuti 1992, Rosati 1994, Poznanski 1996, Hausner 1997)?

When ideas and strategies involving more gradual change and the active involvement of the state in institutional redesign in postsocialist transition economies were expounded first time (Kolodko 1989 and 1992, Laski 1990, Nuti 1990, Poznanski 1993), and when they were later implemented in Poland (Kolodko 1993, 1996 and 1999), they were unorthodox and controversial, with respect to the Washington consensus. In fact, these new ideas did not so much endorse more gradual change, but recognized that the necessary changes would be time-consuming by their very nature. In 1997 and 1998, however, even in official international circles, there have been widespread signs that a new consensus is emerging, and that it is, to a certain extent, based on the ideas implemented in Poland in 1994-97 (Kolodko and Nuti 1997).

 

Thanks to its multi-track approach, Poland is now recognized to have avoided the adverse experience of other transition economies. The new ideas and policies, developed under ‘Strategy for Poland’, were to some extent elaborated against the mainstream of the early Washington consensus and now have contributed importantly to its revision….

The importance of a change in corporate governance—as opposed to a sheer transfer of property titles—is now being recognized even by early keen supporters of rapid, mass privatization. There is no clear evidence that the privatized enterprises perform better than state enterprises just in the aftermath of privatization. Nicholas Stern (1996, p. 8) points to the process of restructuring, which ...itself will be a major and fundamental task involving investment, hard decisions and dislocation. It will be much less painful If economic growth, effective corporate governance and well-functioning safety nets are established. Thus good corporate governance of the public enterprises and sound competition policy are at least as essential for recovery as privatization and liberalization.

After the laissez-faire of the early transition, values of co-operation and solidarity are being rediscovered. Even billionaire financier George Soros has not hesitated to admit that, “Although I have made a fortune in the financial markets, I now fear that the untrammeled intensification of laissez-faire capitalism and the spread of market values into all areas of life is endangering our open and democratic society... Too much competition and too little cooperation can cause intolerable inequities and instability.” (Soros 1997) ….

 

  5. Transition as a Process of Systemic Redesign

 

  The only chance for the ultimate success of transformation is to design suitable institutions, which often must be developed from the beginning. This design is more difficult in post-Soviet republics than in Eastern Europe, because in the former there was a lack of even such basic institutions as a sovereign central bank or national currency, and private property of the means of production was virtually non existing. In Asian reformed socialist economies the process is going at much slower pace and yet it also is directed at further liberalization and opening up.

As for postsocialist countries, some have taken a course of gradual, perhaps even too slow liberalization and privatization. Though that was followed by relatively milder contraction, it caused a delay of crucial structural reforms as well. … Some countries follow a path of rapid change. Although under these circumstances contraction was more severe in early stages, later, institution building is often more advanced…

The government involvement in the process of comprehensive institution building is of vital importance. Truly, this, as much as the liberalization, is the essence of transition in other words, without taking adequate care of institutional arrangements, solely liberalization and privatization is unable to deliver what the nations expect from their economies. Thus, if the state fails to design a proper institutional set up, then market failures prevail and informal institutionalization takes over. Instead of a sound market, in the words of the chief economists of the World Bank and the European Bank of Reconstruction and Development, a ‘bandit capitalism’ does emerge.

  “It is easy to identify institutional arrangements that work well: each partner does what it is supposed to do, there is good coordination, little conflict and the economy grows smoothly and rapidly. We can also recognise ill-functioning institutional arrangements:    change is inhibited by bureaucratic requirements or there is “bandit capitalism” with pervasive corruption and deceit.”  

Stern and Stiglitz 1997, p.20

 

  7 Institution Building

 

  We speak of building institutions, but in reality, they must be learned. This is the process. After the failure of shock therapy — since it did failed -- due to the systemic vacuum and deep recession, the process of postsocialist change has been managed in a more reasonable way, by deliberate measures at a somehow slower pace. By the very nature of this long-term and complex process, it can not be carried forward in a radical way. It takes time and is costly in both financial and economic senses. It is risky and can expose the country to social and political tensions. ...

Later, there were better-orchestrated attempts aimed at gradual, but steady institution building. By institutions we mean not only organizations and the links between them, but also proper behavior of actors on the economic stage. Thus, with much better coordinated international assistance, transition policies have shifted in a number of countries in the right direction. Market organizations have been created, new law has been drafted and adopted, and new skills have been taught. Indeed in the late 1990s Eastern Europe, and to a lesser degree the former Soviet Union, look differently than they did in the early 1990s. Yet there is still long road to travel. ...

 

Table 2:
Forecast of economic growth in transition economies,

1998-2002  

 

GDP
ndex
1997

Rate of growth 

A
v
e
r
a
g
e

R
a
n
k
*

GDP
Index
2002

 

1989
=l00

1998
**

1999

2000

2001

2002

1998
2002

 

1997
=100

1989
=100

Poland

111.8

4.8

4.5

5.0

5.4

5.7

5.6

9

128.4

143.2

Slovenia

99.3

4.3

3.7

4.3

4.4

4.8

4.7

15

123.4

122.6

Slovakia

95.6

5.3

2.2

4.0

5.6

6.9

5.3

10

126.3

120.8

Hungary 

90.4

5.2

4.3

4.1

4.0

4.1

4.7

13

123.7

111.8

Albania 

79.1

4.3

6.2

8.9

8.0

4.4

7.2

4

136.0

107.6

Uzbekist. 

86.7

4.5

4.5

4.3

3.8

4.2

4.6

16

123.2

106.8

Czech R.

95.8

-2.5

 0.5 

3.3

3.9

5.2

2.1

23

110.6

106.0

Estonia 

77.9

6.4

6.1 

5.9

6.9 

5.9

7.1

5

135.3

105.4

Romania

82.4

-4.7

 2.2 

4.9

4.8

5.1

2.5

22

112.5

92.7

Croatia

73.3

4.2

2.9

4.3

4.1

4.3

4.3

19

121.4

89.0

Bulgaria

62.8

3.5 

2.7

4.6

5.2

5.2

4.6

17

123.0

77.3

Yugoslav.

62.7

5.4

1.3

3.9

4.7

5.5

4.5

18

122.5

76.8

Latvia

56.8

 6.6

5.4

4.4

3.9

5.4

5.7

8

128.5

73.0

Kyrgyzst.

58.7

3.0

3.0

4.7

5.2

5.7

4.7

14

123.5

72.5

Turkmen.

48.3

4.7 

12.1

16.0

3.5

4.2

9.4

2

146.8

70.9

Kazakhst.

58.1

1.4

0.6

3.0

5.5

8.3

4.0

20

120.0

69.7

 Macedon.

55.3

5.3

4.7

4.6

4.1

4.1

5.0

12

125.0

69.1

Belarus

70.8

4.2

-9.3

-5.8

1.5

2.9

-1.4

26

93.0

65.8

Azerbaij.

40.5

7.9

7.9

9.0

9.9

10.7

10.9

1

154.4

62.5

Lithuan.

42.8

 7.4 

4.5

3.7

3.8

4.1

5.2

11

125.8

53.8

Armenia

41.1

5.7 

4.4

5.0

5.7

6.1

6.0

6

129.9

53.4

Tajikist.

40.0

4.3

4.3

5.8

5.5

5.9 

5.7

7

128.6 

51.4

Russia

52.2

-4.7

-5.3

-2.6

3.9

4.1

-1.0

25

95.1

49.6

Georgia

34.3

 7.2

 5.1

7.9

9.4

8.0

8.7

3

143.6

49.3

Moldova

35.1

-2.2

0.7

4.1

5.2

6.2

2.9

21

114.5

40.2

Ukraine 

38.3

-2.0

-5.2

-1.1

4.0

4.6

0.0

24

100.0

38.3

 Sources: PlanEcon l998a and 1998b, and author’s calculations based on Table 1.
* Ranking is according to the 2002 GDP index (1997=100) and 1998-2002 average rate of
growth.
** Preliminary evaluation

 

  8. Policy Conclusions

 

  It is true that the course of events in postsocialist economies has been under great influence from policies based upon the Washington consensus. But it is also true that the transformation to a market economy and occurrences accompanying this process have had significant impact upon the revision of these policies. On the one hand, the line of thought typical for the Washington consensus has had important meaning for the directions of systemic reform and policy attempts in Eastern Europe and the former Soviet Union. On the other hand, the fact that suggested and executed policies did not bring the expected results led to a search for alternative policy means. Actually, the range of issues upon which there is consensus among the major partners on the global financial, economic, and political scene has expanded over the years.

The postsocialist transformation has contributed to this evolution of attitudes. New issues and problems have emerged together with the emerging postsocialist markets, and hence there are new concerns, toward which views differ and are far from being agreed upon. Nevertheless, there are numerous symptoms of an urgent need for a new consensus. Additionally several new elements must be emphasized in what has been agreed upon in the past.

 

  There are twelve major policy conclusions:

 1.The main policy conclusion -- and the key implication of the post-Washington consensus -- is that the institutional arrangements are the most important factor for progress toward durable growth….

2. The size of the government is less important than the quality of its policy and the manner of the changes of government size. In transition economies the issue is not just downsizing the government, but a deep restructuring of the public finance system and change of the policy targets and means….

3.Unlike certain liberalization measures, institution building by its nature must be a gradual process. Thus feedback between specific ‘inputs’ to this process and its ‘output’ must be monitored constantly and the policies must be adjusted and corrected….

4. If institutional arrangement is neglected and left to the spontaneous processes and unleashed forces of liberalized markets, then informal institutionalization fills the systemic vacuum. The negligence of government in organizing market infrastructure with active policy is causing a situation in which informal organizations and institutional links among them are taking over. Extreme cases here are vast corruption and organized crime. ….

5. In transition economies the policies must transform and streamline the judiciary system to serve the needs of market economy. This is a great challenge, since the old system of contract execution under planned allocation has ceased to exist, but a new system of contract implementation under market rules and culture has not yet matured. …

6. A shift of competence and power from the central government to local governments is necessary for deregulation of the postsocialist economy. Such a shift means moving the public finance system toward decentralization, and streamlining local governments by giving them larger fiscal autonomy. …

7. There is an urgent necessity to accelerate the development of non-government organizations. Next to the private sector and the state, this is the third indispensable pillar of a contemporary market economy and civic society.

8.During transition income policy and government concern for equitable growth has great meaning. Whereas increasing inequity is unavoidable during the initial years of transition, the state must play an active role, through fiscal and social policies, in controlling income dispersion.

9. Postsocialist transition to the market is taking place at a time of worldwide globalization, hence opening and integration with the world economy is an indispensable part of the whole endeavor. Yet these processes must be managed carefully with special attention to short-term capital flow liberalization. It must be monitored and controlled by the countries’ fiscal and monetary …

10. International organizations should not only support, but also insist on further regional integration and co-operation. ..

11. The Bretton Woods organizations should reconsider their policies toward transition economies. If the IMF mainly takes care of financial liquidity, currency convertibility, fiscal prudence and monetary stabilization, the World Bank should further focus attention mainly on conditions for equitable growth and sustainable development. For obvious reasons these two kinds of economic policy anus—or rather the means in the former case and the ends in the latter—are often contradictory. …

12. These interactive processes of learning-by-monitoring and learning-by-doing continue and will last for several years. After all, even if there is -- as indeed it seems to be — a growing chance for some kind of the post-Washington consensus, this must be seen as a process, and not as an act, …

 

 

 

 

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