Economies in Transition

Economies in Transition

Developing and comparing of two economic profiles: Poland/Hungary (for
the 1990s)


This paper will describe and evaluate the problems of economy in
transition in countries of Eastern Europe, namely Poland, Hungary, all
of which are attempting to make the transition under a democratic form
of government.

The last 15-20 years have witnessed very unusual events in the former
communist societies. After USSR went to pieces, communist's principles
of planned economy have been widely rejected and replaced by
willingness to admit democratic principles and market economy.

There are several reasons why the task of designing this transition is
interesting, especially to economists.

First, the problem is new: no country prior to 1989 had ever rejected
the communist political and economic system.

Second, the experience until now indicates that countries attempting
transition face a number of common problems and difficulties. While
there are important differences in the inherited situations and the
choices made by governments of these countries, the common things in
the problems they face and the difficulties they are encountering
suggest that it could be a good way to learn about the transition
process and development of future transition scenarios.

Finally, the problems these countries face are not waiting for
analyst`s solutions, decisions currently being made may lead to an
evolution with unchangeable results.

1. Meaning of Market Economy

"An economy that allocates resources through the decentralized
decisions of many firms and households as they interact in market for
goods and services and where government has to some extent been
involved in regulating and guiding, has been referred to as ´Market
Economy´ (Mankiw, Principles of economics,3rd.ed.2004)

Despite the events of government intervention, people in particular
country have always been able to choose for whom they will work...