Transition economy

As a transition economy refers to the economies of countries that are in transition from a centrally planned economy to a market system. A distinction is whether the economic transformation process and a political transformation, ie a transition from a totalitarian or authoritarian to a democratic system goes hand in hand, or whether the political system ( almost ) remains unchanged.

• 3.1 The privatization policy of the Trust: colonization by the West German capital?
• 3.2 The social structure of top managers after reunification
• 3.3 Comparison with other Eastern European transition economies

Characteristics of transition economies

Since the political changes in the former influence of the Soviet Union and the dissolution of the Council for Mutual Economic Assistance (CMEA ), the states of East Central Europe (see Visegrád states ) as well as the eastern and south-eastern Europe, but also many countries in Southeast Asia strives with differently pronounced will to reform to overcome the socialist planned economy and build market structures. Some European countries have undergone the transformation process now largely successful. Visible sign of this was their accession to the European Union in 2004 and 2007 respectively.

In terms of economic power, its national income and its infrastructural development, these countries are now comparable to advanced developing countries and therefore to be classified as emerging economies. Other states, such as Slovenia, are now comparable with the industrialized countries of Western and Southern Europe.

Despite similar indicators in terms of economic power and infrastructure facilities, the transition countries still differ significantly from the emerging markets, which is why they are often reported separately. In general, they have a significantly higher level in various social indicators (eg education, health care ) compared to Asian and Latin American emerging markets. A fundamental difference is also active in the causes and the course of the industrialization process. Not the industrialization process itself is the focus, but rather the upgrading of industrial structures. The degree of industrialization of these states corresponded to the beginning of the transformation of the western industrial nations, some even surpassed it. The transformation began first one with a dramatic economic and subsequently also social " transformation shock."

After the economic collapse, there were other setbacks for some states, so that, especially in an economic perspective result indicators for real developing countries. Often this is connected with a politically motivated Reformunwillen ( Belarus, Ukraine). Also as a genuine developing countries are the Central Asian and Transcaucasian CIS countries classified, such as Azerbaijan and Uzbekistan.

In some formerly planned economies developing countries coincide transformation and industrialization, so that they are the transformation process to emerging markets; this applies to the (former) Communist countries of Southeast Asia, especially for Vietnam, the future possibly also Laos and Cambodia ( see also flying geese model).

Economic Transformation measures

Price liberalization

In planned or centrally planned economies are or were many prices fixed by politically motivated decisions, such as the extremely low prices of housing and basic food. To set the market process of price formation in transition, price controls are eliminated as part of the transformation process; because it concerned prices below the market-clearing levels at the prices fixed by a rule, the price liberalization often led to a significant price increase. In the initial stage of the transformation process, this led in many countries to hyperinflation, with inflation rates of several hundred percent in some cases, eg:

• In Poland: 585 % ( 1990)
• In Bulgaria: 334 % ( 1991)
• In Romania: 210% (1992 )

Economic decentralization

This allows companies to base their decisions on market and achievable gains, they must be exempt from planned targets and their economic autonomy be strengthened.

Stabilization

In addition to inflation as a result of price liberalization also ensured currency substitution and the decline in the external value of the currencies of many transition countries for monetary policy imbalances, which was countered by measures such as the establishment of an independent central bank or a currency board.

Another problem of stability outlined the rapidly rising public debt, because the same tax revenues slumped and led the transformation of social problems to increased government spending.

Privatization

To set a market-driven competitive allocation process in motion, state monopolies were broken up and start-ups allowed or encouraged. Most state-owned enterprises were privatized, with different forms of privatization were applied:

• The sale to (mostly foreign) investors
• The issue of share certificates to the population ( " voucher privatization " ), for example, to a greater extent in the Czech Republic
• The sale to former manager

External liberalization

In addition to trade liberalization, such as the abolition of a state monopoly of foreign trade, also the capital was facilitated by capital controls abolished, introduced a convertible currency and foreign direct investment were permitted.

Deregulation and competition policy

In addition to fixed prices and plan targets a variety of regulations impeded the emergence of markets for goods, services, labor and capital; However, at the same time lacked a competition policy instrument to prevent the re- emergence of monopolies.

The task of a former employment guarantee and the deregulation of labor markets meant that the existing in many planned economies hidden underemployment turned into open unemployment. This made the introduction of market- compatible labor market policy instruments, such as unemployment insurance, job placement, required.

The example of the transformation process in East Germany: exchange of the old nomenklatura

Compared to other transition economies, the market economy in eastern Germany has been introduced particularly quickly. While the Eastern European countries experienced a transition and experimentation phase in the form of the shadow economy, prevailed in Germany before a political objective that drove the adaptation to West German standards and a comprehensive privatization of former state-owned enterprises without regard to the old economic elites ahead. However, these enhanced modernization and competition did not lead to the hoped- structure alignment. In retrospect, it is clear that the East German economy has come neither faster nor better in motion compared to other transition economies, but is appreciably affected by an industrial crisis.

The privatization policy of the Trust: colonization by the West German capital?

The privatization policy of the THA, the privatized about 15,000 establishments in a period of five years and finally offered 10,000 business units in the market for corporate control, set the course for a comprehensive exchange of the old nomenklatura. Only about one out of four business units went into the possession of East German individuals or companies. No owners become - from socialist managers are therefore in most cases - and in contrast to the transformation process in other Eastern European countries.

The fact that it's still not come to the much-vaunted " colonization " of the East German economy by West German capital, can be attributed to a variety of regional start-up of East German entrepreneurs. Incorporating the small enterprises in the Invoice, so In 1999, only 11% of East German companies in West German possession. The greatly reduced number of positions in middle management could continue to be largely occupied by East German leaders. In the large corporations and major shareholders of East Germans, however, are strongly underrepresented.

The social structure of top managers after reunification

The social origins of the new East German elites reveals trends that can be seen as the result of a selection process that helped the rise in leadership positions. The new top managers had achieved before the reunification of the most senior positions in middle management of the combines and could after the turn partly considerable position ascents. In the industrial sector, these sites are occupied by male academics, for example, the average age of between 45 and 50 years and have scientific or technical qualifications. In this respect, East Germany does not differ particularly from other transition economies.

Compared with other Eastern European transition economies

As for age, education and gender, so you can not see any East German " exceptionalism " in the recruitment economic position elites. However, while in Eastern Europe the old elites often depicting the new elites, there was - due to reunification - such continuity in East Germany not:

" 1993 came from Russia 51 percent of the new elite of the old nomenclature, in Poland there were 40 per cent, in Hungary after all, still 33 percent. The main impact of this shows continuity in the business sector, where 1993 in Russia 53 percent, 51 percent in Poland and in Hungary at least 35 percent of the new economic elites from the old business elite came. The reunification prevented such an elite continuity for Germany. The new or vacant positions went to members of the former Subeliten [ ≈ middle management ] or West Manager, but not to the old elites. "

The example of the transformation process in Poland: The Balcerowicz Plan

The beginning of economic reform in Poland by the Polish Minister of Finance and marked a Deputy Prime Minister, Leszek Balcerowicz Dr., developed plan. The aim was to make a quick change from a planned to a market economy. Economic output location to the turn of the decade 1989/90 were in short supply, buyers snakes, a double standard, a thriving black market and hyperinflation. The latter was in the fourth quarter of 1989 even 149 % compared to the previous quarter. The process development was thus not in the short term and can be described as extremely complex and uneven.

The economic problem reduction should take place in two phases beyond. In the first phase would be achieved by stabilization measures such as the reduction of state subsidies and minimizing the budget deficit, a weakening of hyperinflation. In the second phase of regulatory action should follow. These were free pricing, privatization of state enterprises, active anti- monopoly policy, simplification of the tax and financial system, modified budget law and reforms in the banking sector.

Then, a stabilization package with the help of the International Monetary Fund and the World Bank was created, which consisted of five parts. Firstly, the 7% state budget deficit in 1989 should be reduced to 1%. Secondly, a price liberalization should reduce by eliminating government price regulations which are in circulation exploiting dividend money supply and the inflation rate. Furthermore, we wanted to rise more slowly than consumer prices, wages and salaries in the incomes policy. The fourth part was the monetary policy by the high inflation rate should be brought by skillfully fixed interest rates under control. The last point represents the exchange rate policy, in which a uniform and constant exchange rate of 9500 zloty was set to a dollar.

Social and political problems as consequences of economic transformation

The start of the transition phase was in most transition countries from a surge in unemployment and, accompanied as consequences of inflation, the devaluation of savings and significant real income losses. This can be partially, but not completely, due to existing failures of the centrally planned economy.

In the further course of the transformation process, the income gap between " winners " and " losers " of the transformation increased greatly. The feeling of not being able to profit over a longer period of the reform efforts resulted in parts of the population to resistance to the market-oriented reforms. This was reflected in part in election victories in post-communist parties, partly in success of right- wing populist politician.