Transcript Transition to Market Economy

Transition to Market
Economy
Russia & China
Transition to Market
Economy
“What is Transition?”
Liberalizing Economic Activity
Reforming Business Activity
Establishing Legal and Institutional
Framework
Transition to Market
Economy
The Breakup of the Berlin Wall
 The Overthrow of Eastern
European Communist Dictatorship
in 1989

Transition to Market
Economy
We can classify transition to a market
economy in two groups:
1. Eastern Europe’s Transition:
Poland, Hungary, and Czech Republic
2. China’s Transition
Transition to Market
Economy
Centrally Planned Economy:
Fixed Price
Centrally Planned Investment
Incentive Problem
Transition to Market
Economy
.
Centrally Planned Economy
Market Economy
Russian Transition
The Common Goal:
To gain membership to the European
Union (EU)
Russian Transition
Includes political and economic
transition at the same time.
Initial transition steps resulted in
steep economic declines.
The transition has involved massive,
although not all together effective,
privatization.
Russian Transition
Soft budgets have continued
Hard administrative constraints have
disappeared and are being repleced
with connections and corruption
Debts and deficits are a real
challange
Russian Transition
“The Russian economy
is prepared to fully take
part in the world
economy”
Vladimir Putin
Chinese Transition
China’s Unique Initial Conditions:
Centrally Planned Economy
Large Agricultural Force
Low Subsidies to The Population
Rather Decentralized Economic System
Chinese Transition
•Heavy Industry
Development Strategy
•Low Technical Efficiency
•Capital Scarce Agricultural
Economy
•Planned Allocation
System
•Low Incentives
•Low Interest Rate Policy
•Overvalued Exchange Rate Policy
•Low Wage Rate Policy
•Low Input Price Policy
Chinese Transition
To adopt Heavy Industry Oriented Development Strategy:
Declining the level of Interest Rate
Agricultural Developments
Acquring Living Necessities to the Population
Total Value of Agriculture and Industry
grew from 15% in 1952 to
about 40% in the 1970s.
Chinese Transition
China paid high price for
such achievement:
Low Allocative Efficiency
Low Technical Efficiency
Market Reforms In China
Agricultural & Rural Reform (Household Based System)
Township & Village Entreprises (TVEs)
State Owned Entreprises (SOEs)
Special Economic Zones (SEZs)
Development of Supporting Institutions
Macropolicy Enviromental Reform
Chinese Transition’s
Outcomes and Prospects
Positive Outcomes of Reform
Problems:
Incomplete Property Rights
Macroeconomic Difficulties
Integration into Global Economy
Conclusion
Russian Transition Process:
• A major reason that Russia's transition
has been so wrenching is that the country
is remaking both its Soviet-era political
and economic institutions at once.
•It was impossible to set up a tax
collection system capable of generating
enough public resources as to fund the
reforms.
China’s Transition Process:
• China’s Communist Party
prevented the turmoil. Authorities
had a great control over stages of
reform programs, their timing and
contents.
• The appearance of (criminal) parallel
decentralized organizations that have
taken over some essential state functions.
• Chinese Communist Regime was
not eliminated in one night, on the
contrary, communist party had
made many reforms to make the
transition process easier.
• The incapacity to put forward clear
political priorities for coherent decision
making, as well as the difficulty in living
up to them due to corruption phenomena
• In this period of time there were
no crises in China and reforms
were completed with the support
of the community.
Hazırlayanlar:
Burcu Büyükerkmen
Çağla Öztuna