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20 Years of Economic Transition

• Transition as such has progressed over the past 20 years a slowdown in general is unavoidable and even reversals are likely ,particularly in the areas of finance and trade.All transition countries are facing fiscal difficulties,which are a threa to much needed growth inducing investment in education.Like im mature capitalist countries increased government is unavoidable,although sector specific industrial policy and risky.

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• Original consept of the ‘Washington Consensus’ has failed to fulfil expectations of growth and development, the state of the art seems to be confusion.

• The Washington Consensus approach to the specific combination of shock like transformation and macro economic stabilization.

• The Washington Consensus was a common understanding of the Washington based instititions IMF and World Bank and American think tanks to solve the structural balance of payment problems.

• The policy recommendations were:• Fiscal discipline,implaying the redirection of the

public expentiture priorities toward fields offering both high economic returns and potential to improve income distribution,such as primary care and primary educations.

• The elements were:• Tax reform,interest rate liberalization,a

competitive exchange rate,trade liberalization,privatization,deregulation,secure property rights.

The consept of the ‘Washington Consensus’ was stylised by the so called ‘j-curve’ of economic transformation.Its messag was that after a little dip of ‘transformational recession’growth of income would multiply.

• Country GDP İN 2007

• Czech Republic 130

• Hungary 134

• Poland 158

• Romania 113

• Russia 93

Trends in male life expectancy at birth

• This figure shows that rapid mass privatisation as an economic transition strategy was a crucial determinant of differences in adult mortality trends in post communist.Protagonists of rapid mass privatisation were Russian and some other CIS countries as oppesed to Poland and other European countries

• Rapid mass privatisation leads to high levels of unemployment ,which then encouraged an unhealthy lifestyle including hig levels of alcohol consumption ,which ultimately leads higher mortality rates.

The Impact of The Global Crisis

• The accelerated decline of growth rates

• A dramatic decline of capital inflows

• Changes in the prices of oil, gas and also manufactured goods

• Changes in the export markets for transition economies

• Changes in the Foreign Direct Investment

Figure 7: Effectiveness of antitrust policy between 1999 and 2007

Ranked between 1 and 7, whereas 1 indicates that in the specific country effectivenessis lowest and is highest with 7.Source: Hölscher/Stephan 2009

Figure 8: Intensity of local competition between 1999 and

2007

Ranked between 1 and 7, whereas 1 indicates that in the specific country intensity islowest and highest with 7. The bars for 2001 do not directly compare with other yearsdue to a change in method.Source: Hölscher/Stephan 2009

• The first country European country to approach the IMF for help in the global crisis was Hungary. Hungary was bailed out by the IMF with 12 billion Euros and further

• Latvia followed suit and there are negotiations with the IMF are going on with Belarus and the Ukraine at present

Conclusions• As the nature of the current crisis is of

global character, one should not expect the transition countries to solve the problems by themselves

• Like in mature capitalist countries these countries need to attempt to protect their core financial systems by improving its governance and structure

• A major challenge will be to maintain access to finance for the growth driving Small and Medium size Enterprise

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