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Economic Transition in Central Europe and the Commonwealth of Independent States.

Economic Transition in Central Europe and the Commonwealth of Independent States

Tomasz Mickiewicz

Palgrave MacMillan: London and New York, 2006, xviii + 214 pp., index. $90.

Tomasz Mickiewicz is an economist of Polish origin working as an academic in London. This book is intended as an empirical study of post-communist transition in 27 countries. The first part describes the old regime and the essence of transition--the programme, stabilisation, and privatisation. A separate chapter deals with unemployment.

The second part of the book presents new empirical results in five regression analyses of a major issue in transition including a review of the relevant literature. I regard this part as the book's main contribution. Here Mickiewicz establishes the main causes of post-communist recession as the timing of liberalisation and stabilisation, debunking the famous disorganisation paper by Olivier Blanchard and Michael Kremer from 1997.

Liberalisation initially reduces public expenditures, but eventually boosts them. Ronald McKinnon's thesis from his book The Order of Economic Liberalization (1993) is tested and found correct.

The relationship between democracy and reform is explored in considerable detail. Democracy promotes external liberalisation, internal price liberalisation, freedom of entry and small-scale privatisation, governance and enterprise restructuring, and bank reform. Democracy, however, is insignificant for competition policy and large-scale privatisation. To my mind, this regression analysis is the book's most substantial contribution and should be widely cited.

On the well-studied topic of growth and transition, Mickiewicz finds that reform is positively associated with growth, although he emphasises the significance of macroeconomic stabilisation.

What Mickiewicz does, he does competently. He is well read in the literature on both the old command economy and the transition, and writes lucidly. His views are largely mainstream and cautious, avoiding controversies. My objections are confined to his omissions. In such a limited volume, the narrative of the transition becomes by necessity rather brief, and many aspects are not discussed. His discussion on stabilisation focuses excessively on exchange rate regime, paying little attention to fiscal adjustment. The chapter on privatisation focuses on the best methods of privatisation and enterprise restructuring rather than on the impact of privatisation on the economy and society as a whole. Policymaking and political economy are essentially outside of the book's framework.

Although the regression analyses contain data from 27 countries, Mickiewicz's narrative is largely limited to Central Europe, especially his native Poland. Therefore, he ignores the specific problems of the former Soviet Union, such as extraordinary rent seeking, the moral hazard of the ruble zone, irresponsible central banks, barter, and the Russian financial crash of 1998. His analysis of unemployment contains no data from the former Soviet republics, which actually have more flexible labour markets than the overregulated Central European countries.

doi:10.1057/ces.2008.17

Anders Aslund

Peterson Institute for International Economics, Washington, DC, USA
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Author:Aslund, Anders
Publication:Comparative Economic Studies
Article Type:Book review
Date:Mar 1, 2009
Words:463
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