The first question which comes to my mind is 'Why did communism collapse?' This question was rarely asked, perhaps because the collapse and its abrupt arrival appeared ex post inevitable. The answer to this question may hold important clues for the understanding of the bewildering developments in today's Eastern Europe.
Let me state three - not necessarily exclusive - hypotheses about the possible reasons for collapse.
The unsoundness of central planning hypothesis:
The insufficient dynamism hypothesis:
Bad implementation hypothesis:
The improved allocative efficiency hypothesis:
The misdiagnosis hypothesis:
The vacuum or discoordination hypothesis:
The cost of transition hypothesis:
The fragmentation hypothesis:
The demand 'pull-down' hypothesis:
The wrong transition strategy hypothesis:
Several if not all of the B hypotheses may actually be valid at the same time. The point is not to accept or reject any of them but rather to show how much and in what time frame each of them contributed to the perils of transition. This knowledge is relevant especially for judging the appropriateness of various transformation strategies. The problem is, of course, that it might be impossible to separate the effect of the factors mentioned from the effect of the strategy itself. The hypothesis B7 states that wrongly chosen strategies may have been a significant cause of the economic decline during transition. This could also explain why different countries did not suffer equally.
It is quite obvious that no country escaped a significant decline in GDP and industrial production, increase of unemployment and at least a temporary surge of inflation. It is, however, equally clear that the extent of these setbacks was quite different in different countries. For example the estimated fall in GDP amounted only to 20-25 per cent in Visegrad countries (Poland, the Czech Republic, Slovakia, Hungary) and Slovenia, while it reached 40-60 per cent in other East European countries and the successor states of the former Soviet Union. Even larger differences have been observed in rates of inflation and unemployment. Are these disparities owing primarily to different strategies used or do they have some other causes? Three additional hypotheses can be formulated to explain the differences mentioned.
Geographic location hypothesis:
Level of economic development hypothesis:
Historical and cultural traditions hypothesis: