viernes, 11 de marzo de 2016

7 lessons on the transition from Comunim to Capitalism (original en inglés)


Andrei Shleifer 05 February 2012


First, in all countries in Eastern Europe and the former Soviet
Union, economic activity shrunk at the beginning of transition, in some
very sharply.  In many countries, economic decline started earlier, but
still continued. In Russia, the steepness and the length of the decline
(almost a decade) was a big surprise. Countries with the biggest trade
shocks (such as Poland and Czechoslovakia) experienced the mildest
declines. To be sure, the true declines were considerably milder than
what was officially recorded – unofficial economies expanded, communist
countries exaggerated their GDPs, defence cuts, and so on – but this
does not take away from the basic fact that declines occurred and were
surprising. These declines contradicted at least the simple economic
theory that a move to free prices should immediately improve resource
allocation. The main lesson of this experience is for reformers not to
count on an immediate return to growth. Economic transformation takes
time.


Second, the decline was not permanent. Following these declines,
recovery and rapid growth occurred nearly everywhere. Over 20 years,
living standards in most transition countries have increased
substantially for most people, although the official GDP numbers show
much milder improvements and are inconsistent with just about any direct
measure of the quality of life (again raising questions about communist
GDP calculations). As predicted, capitalism worked and living standards
improved enormously. One must say, however, that for a time things
looked glum. So lesson learned: have faith – capitalism really does
work.


Third, the declines in output nowhere led to populist revolts – as
many economists had feared. Surely reform governments were thrown out in
some countries, but not by populists. Instead of populism, politics in
many countries came to be dominated by new economic elites, the
so-called oligarchs, who combined wealth with substantial political
influence. From the perspective of 1992, this came as a huge surprise.
Ironically, in some countries in Eastern Europe populism appeared 20
years after transition started, after huge improvements in living
standards were absolutely obvious. Indeed, people in all transition
countries were unhappy with transition: they were unhappy even in
countries with rapidly improving quality of life (and this itself is
another surprise and major puzzle – something for future reformers to
keep in mind). But the lesson is clear: a reformer should fear not
populism but capture of politics by the new elites.


Fourth, economists and reformers overstated both their ability to
sequence reforms, and the importance of particular tactical choices, eg,
in privatisation. In retrospect, many of the theories that animated the
discussion of reform – whether institutions should be built first,
whether companies should be prepared for privatisation by the
government, whether voucher privatisation or mutual fund privatisation
is better, whether case by case privatisations might work – look quaint.
Reformers nearly everywhere, including in Russia, had a vastly
overstated sense of control. Politics and competence frequently
intervened and dictated to a large extent most of the tactical choices.
Still, most countries, despite different choices, ended up with largely
similar outcomes (notable and sad exceptions are Belarus, Uzbekistan,
and Turkmenistan). In various forms, all had privatisation and
macroeconomic stabilisation as well as legal and institutional reform to
support a market economy. Lesson learned: do not over-plan the move to
markets, but, more importantly, do not delay in the hope of having a
tidier reform later.


Fifth, economists have greatly exaggerated the benefits of incentives
by themselves, without changes in people. Economic theory of socialism
has put way too much weight on incentives, and way too little on human
capital. Winners in the communist system turned out not to be so good in
a market economy. Transition to markets is accomplished by new people,
not by old people with better incentives. I realised this and wrote
about it in the mid-1990s, but the lesson both in firms and in politics
in profound: you cannot teach an old dog new tricks, even with
incentives.


Sixth, it is important not to overestimate the long-run consequences
of macroeconomic crises and even debt defaults. Russia experienced a
major crisis in 1997–98, which some extremely knowledgeable observers
said would set it back by 20 years, yet it began growing rapidly in
1999–2000. Similar stories apply elsewhere, from East Asia to Argentina.
Debt restructurings do not necessarily make permanent scars. This
experience bears a profound lesson for reformers, who are always
intimidated by the international financial community: do not panic about
crises; they blow over fast.

Seventh, it is much easier to forecast economic than political
evolution. Although nearly all transition countries have eventually
converged to some form of capitalism, there has been a broader range of
political experiences, from full democracies, to primitive
dictatorships, to just about everything in between. There appears a
strong geographic pattern in this, with countries further West,
especially those involved with the European Union, becoming clearly
democratic, and countries further East remaining generally more
authoritarian. For countries in the middle, including Russia and
Ukraine, the political paths over the 20 years have wiggled around.
Lesson learned: middle-income countries eventually slouch toward
democracy, but not nearly in as direct or consistent a way as they move
toward capitalism.

The International Institute for Applied Systems Analysis, based in Austria.

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