Shock Therapy as a Bridge Between the Socialist and Capitalist Systems

Paper Summary:

This essay argues that rapid economic reforms implement only initial stages of economic reorganization for Central and Eastern European countries. The region of post-socialist societies has specific constraints for the development of the market economy model and capitalist system. Therefore, in order to develop market relations in these countries governments should implement more sensitive and systematic rather than drastic reforms.

From the Paper:

"For post-socialist countries a market economy first implies a higher life standards and better life quality. However, such an economic model has certain rules that control the economic performance of the actors. Although in practice the model of the market economy is a set of complex relations, the market itself could be defined as social institution, necessarily supported by a network of other institutions and social norms (Hausner, Nielsen, 1992: 134). The model of Central and Eastern European economies under the socialist regime was determined by a hierarchical bureaucratic structure and central planning. All countries were bound into one market, where competition " the main driving force of the capitalist system and the market economy- was eliminated. Therefore, these two types of economic systems rest upon different mechanisms " "rules of the game". Although the reorganization of economic system with an aim to reach the economic model of the capitalist society did take place in post-socialist economies, in the majority of post-socialist countries economic transformation lowered the living standards of the country. Therefore, one could raise the question is it possible and beneficial to replace socialist system with capitalist one? "

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