2.1 The Course of Economic Policy
Choice of Strategy
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Three principle tasks lay before post-socialist
economies in the process of their transfer to market principles
of organization.
1. Systemic changes, by which we mean institutional
and structural changes. Institutional transformation is
change in the organization of the entities of economic relations.
Above all, this means property relationships (juridical
ownership, factual instructions), privatization, land reform,
reforms in social spheres (switching the responsibility
of paying for medical care, education and other services
earlier provided by the government over to the population)
and others. Structural transformation is the change to market
principles of economic organization. This includes changes
in the structure of final demand. Related to this is the
necessary underpinning of industry to prepare it
for these new demands. In addition, in order to survive
the change to a more open economy and the liberalization
of external trade, enterprises must become competitive.
2. Liberalization of economic relations,
the reduction and
fundamental change in the role of the government in the
economy. To some extent, measures of this sort can act as
temporary substitutes for long-term systemic changes.
3. Financial stabilization. Of foremost
importance is the
stabilization of the national currency, inasmuch as
practically all post-socialist economies found themselves
at
a point of market transformation with seriously imbalanced
government finances and disordered monetary circulation.
Simultaneously applying all three of the
above elements of
post-socialist economic transformation as instruments of
economic regulation would result in uncoordinated efforts.
The separate measures would also considerably counteract
one
another. Liberalization and financial stabilization can
occur at the same time and during a short time period, but
systemic changes are more disposed toward longer-term
processes and demand a greater freedom in fiscal manoeuvres.
The transformation strategy must, therefore, include
priorities; either the task of liberalization and financial
stabilization or systemic, and above all, institutional
changes.
In the autumn of 1991 the Russian administration
chose the
path along which Eastern European countries have been
traveling for two years. Its priorities are liberalization
and financial stabilization. This goal corresponds with
the
views held by Western economists regarding the paths to
be
taken by post-socialist economies. Such a policy is also
recommended by international financial organizations to
countries requesting economic aid. The main aspects of this
strategy comprise an immediate "big bang" at the
moment of
transition toward new prices, the liberalization of economic
relations and the consequential enforcement of a strict
fiscal policies for a drawn out length of time, which is
necessary for the eventual beginning of an economic
recovery.
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