Development experiences in economic-transition countries: background and issues.

• Author: Liou, Kuotsai Tom

Abstract

This symposium examines the development experience and critical issues in several economic-transition countries. The current symposium introduction paper first offers a review of some problems of the centrally-planning economic system that were implemented in many communist countries before the transition period. Next, the paper examines important research topics on economic transition such as reform strategies, institutional arrangements, social and political challenges. Finally, the paper introduces research issues and findings of five papers included in this symposium, which include development experience in Hungary, Mongolia, Ukraine, Cuba, and China.

Introduction

Economic transaction has been one of the major public policies emphasized by policymakers in many post-socialist countries for the last two decades. Governments in more than 30 countries are currently developing policies and programs to transform their economies from a centrally-planned to a market-based economic system. The countries involved in economic transformation consist of industrialized countries such as Russia and countries of Central and Eastern Europe, as well as developing countries such as Angola, Ethiopia and Mozambique in Africa, and Vietnam, Mongolia, and China in Asia.

The development experience in these economic-transforming countries has resulted in many studies of transitional topics from different disciplines and areas. The topics of these studies include, for example, the examination of the role of government management in the process of transition (e.g., Liou, 1998a, 1998b), the study of bureaucracy and administration development (e.g., Gabrielian and Holzer, 1999; Liou, 1998c), the comparison of transition experience strategies (e.g., Lee and Reisen, 1994), and the analysis of intergovernmental finance (e.g., Bird, Ebel and Wallich, 1995). In general, researchers of these studies not only attempt to test new concepts and ideas in selected individual countries but also try to compare the development experience among many countries.

The purpose of this symposium examines development issues in individual transforming countries and compares the transitional experience among these countries. This introduction paper consists of two sections: (1) an evaluation of general background of economic transaction and (2) a brief summary of research findings of five symposium papers. The background section will examine major problems of the centrally-planned system and address critical issues in the study of economic transition. The summary section introduces major topics and findings of the five symposium papers addressing development experience in five economic-transition countries: Hungary, Mongolia, Ukraine, Cuba, and China.

Background of Economic-Transaction

To examine the development experience in economic-transition countries, this section provides a general overview of two important areas that are related to the background: (1) problems of the centrally-planned economic system in past communist countries, and (2) issues in the study of economic transitions. The first area of concern refers to both general system problems of the planned economy and specific policy mistakes of individual communist countries. Closely related to the first topic, the second area of concern addresses critical reform policy issues such as development strategies and sequence, legal and financial institutional arrangements, as well as social and political challenges.

1. Problems of the Centrally-Planned System

   While the sudden demise of Communism was unexpected, the problems associated with the centrally-planned economic system in the former socialist countries have been well recognized by researchers of economic development (Cohen, 1970, Desai, 1983, Treadgold, 1967). In the centrally-planned system, resources allocation decisions are made in response to commands from planners in the administrative hierarchy, rather than in response to prices form the market. The Soviet development model especially emphasized a high rate of investment, collectivization of agriculture, priority to heavy industry and military, reliance on large-scale and capital-intensive technology in industry, and the relative neglect of investment in agriculture and consumer goods industries (Tsao, 1987, Yeh, 1967)

   The problem of the centrally-planned system was that planning did not eliminate the shortcomings of the capitalist system (e.g., anarchy) but generated problems of its own (e.g., the built-in, permanent imbalance between supply and demand) because of the complexity involved in constructing a material plan. It did not abolish waste but generated it on a grand scale. It abolished production for profit, but failed to replace it with production for use. Especially, it produced economic activities in...