down

Reforms

CZECHOSLOVAK  ECONOMIC REFORM OF 1960'S

up

 

   IV.  Social, Political and Economic Background  

 

1. The Reform Strategy 

(e) Concluding Remarks on Reform Strategy

 

down

up


The preceding sections described the main features of the reform strategy as it was developed in Czechoslovakia. It rejected partial experimentation and gradual progress of reform in favour of a relatively quick and simultaneous application of the most crucial reform measures into the whole economy. This choice of strategy depended on the reformers' specific perception of the market mechanism and command economy as mutually incompatible
coordinative mechanisms.58 Unlike some Western economists who regard the pure market or decentralized system and command economy or centralized system as two idealized limiting cases with a continuous linear spectrum of real mixed systems in between, the Czechoslovak economists believed that the market and command principles are two radically different forms of economic organization which do not easily mix together.

Their view of this dichotomy was derived partly from their own historical experience and partly from Wlodzimierz Brus' 59 influential book which gives an excellent analysis of the differences between centralized (i.e. command) and decentralized (i.e. market) models of socialism. Turek suggests that there exist three rather than two distinct economic systems and he calls them: directive model, transitory model and economic model. His characterization of these models is instructive:60

 

Directive
model

Transitory
model

Economic
model

Basic criteria for decision-making

physical

 physical

 value

Share of centralized and decentralized decision-making 

80:20 

70:30

 30:70

Form of implementation of central decisions

direct order

 economic instrument

 regulated market mechanism

 

downThe transitory 'model is apparently the system which was aimed at in the Czechoslovak reform of 1958 and in allup other East European reforms including the Soviet Union but excluding Hungary. Turek, however, adds that the transitory 'model' is not really a true model or economic system because it is organizationally unstable and sooner o later 'will degenerate back to a directive system.' 61

This opinion was also shared by other economists who believed the both a command economy and a market economy were, in a certain sense, 'stable' organizations, while the intermediate forms contain mixtures of command and market elements were unstable, and would tend to move either toward a command system or toward a complete market system. To use an analogy from physics, it looked as if command and market systems each had its own 'gravitational pull which could cause a return to the original system when only a small deviation from it was made. Once, however, steps in the direction the other system reach a certain border line, the gravitational pull of the other system prevails and the transformation could be accomplished. 

The mechanism of the 'gravitational pull' can be described follows: Suppose that there exists a system with only a small number elements alien to it. The operation of such a system would not smooth, as the alien elements would cause friction, conflict, disequilibrium, etc. Naturally the tendency would be to improve the operation the system by replacing the alien elements with those that conform the system. Imagine, for example, a decentralization of investment decisions while preserving all other features of the command system Sooner or later difficulties would appear, as the coordinative role of t plan would be paralyzed without being substituted by a new coordinative mechanism. The recentrahzation of investment decisions in such a situation would seem to be an easy and effective way out. On t other hand, if a major part of the transformation into the market economy was already completed, the remaining elements of the command economy would likely be sooner or later eliminated.

Nobody could determine exactly where the borderline between t two systems was. Some of the Czechoslovak reformers believed that the 'minimum consistent set of measures' the economy would moved close to it if not already across it. A speedy achievement of t 'minimum set' was therefore regarded as a crucial part of the reformup

up

down

 

 

 

 

 

 

OK Economics was designed and it is maintained by Oldrich Kyn.
To send me a message, please use one of the following addresses:

okyn@bu.edu --- okyn@verizon.net

This website contains the following sections:

General  Economics:

http://econc10.bu.edu/GENEC/Default.htm

Economic Systems:  

http://econc10.bu.edu/economic_systems/economics_system_frame.htm

Money and Banking:

http://econc10.bu.edu/Ec341_money/ec341_frame.htm

Past students:

http://econc10.bu.edu/okyn/OKpers/okyn_pub_frame.htm

Czech Republic

http://econc10.bu.edu/Czech_rep/czech_rep.htm

Kyn’s Publications

http://econc10.bu.edu/okyn/OKpers/okyn_pub_frame.htm

 American education

http://econc10.bu.edu/DECAMEDU/Decline/decline.htm

free hit counters
Nutrisystem Diet Coupons