The end of the Cold War reshaped the international political and socio-economic framework. Appurtenant to the fall of the Soviet Union's stronghold and control in Eastern European states was the move from planned economies to transition economies. However, whilst a central aim of these states was to move towards accession to the EU and mutual free trade flow agreements; it is evident that certain states have been more successful in making the transition in implementing a free market model.
This paper critically evaluates the transition from planned economy to free market economy with a contextual comparative analysis of Poland, Hungary and Ukraine. It is submitted in this paper that a crucial factor in successfully moving towards a market economy is the interrelationship between the state's political and institutional framework and stabilization; which in turn is fundamental to securing foreign direct investment to minimize output losses. To this end, this paper argues that the liberalization and regular reformative moves of Poland and Hungary have been instrumental in their development towards a market economy in comparison to Ukraine's infrastructure, which requires significant market reform to effect a genuine transition.
[...] Therefore in considering the transition to free market economies, I shall comparatively analyze the approach of Poland, Hungary and the Ukraine. To this end, I will firstly consider Poland in section followed by a consideration of Ukraine and Hungary in sections 3 and 4 respectively. In section 5 I shall present a conclusion POLAND The OECD cites Poland as one of the most successful transitional economies in Europe and that years after launching an ambitious programme of economic transformation, Poland has established itself as one of the most successful transition economies” (www.oecd.org). [...]
[...] Nevertheless similar to other transition countries, Hungary began transition in the 1990s as a heavily indebted country and the debt burden was the most difficult financial constraint it faced compounded by the collapse of the Council for Mutual Economic Assistance that contributed a serious output losses (2001, p.152). As a result, the debt situation became critical forcing radical legislative action such as bankruptcy laws, reform, privatization and elimination of price distortion ( Skreb et al p.155). Skreb et al further argue that Hungary's example provides important lessons for other transition economies and that “Hungary's economic transition offers quite a rich history of the development of macrolevel and microlevel policy issues” (2001, p.154). [...]
[...] The burdens of the tax system further undermined Ukraine transition efforts and Banaian posits that the IMF focus on macroeconomic stabilization had several consequences for economic performance in Ukraine as a free market model (2001, p.10). Firstly whilst the immediate impact was to stabilize inflation; on the other hand the growth declined due to the tax system and lower wages. Moreover, this reduction in growth was compounded by failure to implement significant and timely liberalization measures (Skreb et al, 2001). [...]
[...] (2003). Disinflation in Transition economies. Central European University Press. Goncharuk, G. A. (2006). Economic efficiency during the transition: the case of Ukraine. Retrieved from www.ideas.repec.org/g/ukraine accessed October 2009 Robert Grant (2007). Contemporary Strategy Analysis: Concepts and Techniques. Wiley-Blackwell. Grigoriadis (2001). Security and Transition in East Central Europe: Hungary and Ukraine in the Regional Epicenter. Retrieved from www.eliamep.gr accessed October 2009. Gros, D., & Steinherr, A. (2004). Economic Transition in Central and Eastern Europe: planting the seeds. Cambridge University Press. Kerr, [...]
[...] However, the CEPS study highlights the point that suitable economic conditions are required and cites the following indicators as evidence that Ukraine has still not moved to free market transition: EU involvement in Ukraine trade is seen as less important from Ukraine's policy agenda and difference between the current and potential share of the EU market is much greater for exports than imports” (2007); Imports from Ukraine are focused in small product lines due to the restrictive consumer market; and The current foreign direct investment flows are small compared to other transition economies and “substantial increases in FDI are predicted if Ukraine were to implement the same degrees of liberalization as for example, Poland” (2007). [...]
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