Phillip J. Bryson

The economics of German reunification: A review of the literature

Abstract This is a review, largely of German sources, of the literature on the establishment of a social market economy in the federal states formerly constituting the German Democratic Republic. It includes an investigation of progress already achieved in the attempt to meet the requirements of transformation, including privatization, marketization, the establishment of competitive conditions, the achievement of monetary and financial reorganization, the securing of sufficient public and private investments, etc. Some of the main obstacles to change are addressed, and aspects of German transformation of interest to other reconstructing economies are presented.

Public sector transition in post‐communist economies: the struggle for fiscal decentralisation in the Czech and Slovak Republics

Studies of economic transition often focus on the private sector, but successful transition also requires devolution in the public sector. This study compares fiscal decentralisation in the Czech and Slovak Republics, whose institutions began to diverge only after their 1993 ‘velvet divorce’. This article reviews challenges confronted in this fiscal decentralisation. Local finance problems are related to revenue generation, the use of the property tax and the transfer of funds to municipalities. Local political autonomy includes the ability to exercise some autonomy in resource use. Little can be expected where sub‐national governments generate little revenue independently. Potential moral hazard problems are associated with central generation of property tax revenues, as occurs in the Czech case. The EU has not promoted fiscal decentralisation in these republics, although it has encouraged ‘reforms of public administration’ to devolve power. But fiscal decentralisation and public administration reform are complementary strategies rather than strategy substitutes.

Fiscal Decentralization in the Czech and Slovak Republics: A Comparative Study of Moral Hazard

Fiscal decentralization has provided neither the benefits of decentralization nor an independent revenue source for subnational governments in the Czech and Slovak Republics. In Slovakia political conditions early in the transition led to the relative neglect of revenue transfers from the center. This produced financial stress but also encouraged greater fiscal independence for local governments. It also forced them to seek maximal property tax revenues. The Czech Republic made more substantial transfers to local governments, but the development of fiscal autonomy was stifled as transfers reduced the need for own-source local revenues. The Czech real estate tax has remained nominal, as it was under central planning, and its administration is fraught with moral hazard problems. Thus, the property tax never became a vehicle for generating independent funds, but the prospects for the tax are much brighter in the Slovak Republic. This paper offers several views on why the property tax has been more successful in the Slovak Republic.

Slovakia's Surge: The New System's Impact on Fiscal Decentralisation

Slovakias transition history long paralleled that of the Czech Republic, but the former adopted bold new reforms early in this decade. This article is a comparative treatment of fiscal decentralisation since 1993 and more recent reforms of public administration, the two efforts representing the foundation of the New System. Czech experience is invoked simply to provide an appropriate benchmark for the evaluation of Slovakias New System introduced in 2004, including the 19% ‘flat tax’ and other striking measures in local public finance. The second focus of the article is on the macroeconomic impact of the New System. It is too early to perceive what its long-term effects will be, so this treatment is more tentative. But because one would like to know whether Slovakias return to an economic growth path is actually a result of the New System and whether this recent growth will persist, these issues are given some consideration.

East German Traditional Centralism: An Alternative Route to Economic Reconstruction

This article is a response to the question of why the German Democratic Republic (GDR) has not demonstrated any inclination to adopt economic reforms, although most socialist countries have. Since the early 1980s, the GDR has made extensive efforts to refine its planning organization and techniques. Continual changes, less dramatic than those announced by the Soviet Union and some other socialist countries, were long considered plan perfecting rather than economic reform. This article reviews some highlights of the East German plan amelioration effort and attempts to show how the success achieved by Planvervollkommnung has been at least partially responsible for the GDRs reluctance to embrace glasnost and perestroika. The prospects for change in the current GDR position are discussed. The East German determination to avoid fundamental, systemic change persists, and there is as yet no acknowledged willingness to adopt market-oriented economic reform or pursue dramatic changes in property rights. One should observe, however, that the GDR has since the beginning retained a private handicrafts sector and private ownership of land.

Corruption and Development: The Armenian Case

The relationship between corruption and economic growth is investigated with 39 countries over an 11 year period. Since corruption data are insufficient for econometric analysis, a case study is undertaken for Armenia. Corruption hinders economic performance (strong negative correlation between corruption and real per capita GDP), but no evidence is found that extensive corruption limits international trade, since imports of goods and services increase as corruption does. Since 2000, Armenia has experienced worsening corruption but FDI has continued to increase and economic growth has been strong. Other performance indicators demonstrate a healthy macro economy not apparently troubled with corruption.

The New Economy Is Dead, Long Live the Information Economy

The arrival of the 2001–2003 recession caused many to suppose that the so-called “New Economy” was now defunct. This article addresses a number of related issues, including the question of the durability and viability of business cycles in the face of the technological developments of the information age. It asks what went wrong with the New Economy and examines its characteristics as well as its remaining possibilities and prospects for the future. Finally, it considers the spread of the Information Economy to Europe, especially to Germany, the country that one might expect to be the leading European player, but which is not at present actually a strong competitor for that role.

Economy and “New Economy” in the United States and Germany

The expression “New Economy” is used inconsistently. This article reviews the driving forces of the US boom of the 1990s, examining the changes introduced in the period and before, focusing on the IT sector and new technologies. The “New Economy” is not just the new sectors, but changes in the overall economy emanating from them. These changes will not evaporate in an economic slowdown. Comparisons of the USA with Germany and Europe illustrate that the “New Economy” will also continue to develop there on the foundations already laid.

User Fees in Local Finance: Performance and Potential in the Czech Republic and Slovakia

>p>The Czech Republic and Slovakia, like other transition countries in Central and Eastern Europe, have given significant lip service to fiscal decentralization and engaged in public administration reforms. But the subnational governments of their public finance systems still lack relative autonomy, which could be addressed partly through developing independent revenue sources for their municipalities and regions. Currently, such independent revenue sources include the proceeds of a strictly nominal property tax as well as those of a small set of local user fees and taxes designed and approved by the central governments. Together they represent only about 5 percent of total municipal budget revenues.>/p>>p>A number of market democracies have used user fees dramatically to generate revenues for local governments, a possibility that remains undiscovered in the Czech Republic and Slovakia. User fees could potentially generate badly needed revenue for the municipal and regional governments of the twin republics. The user fees and taxes currently available to the local governments of the two republics are reviewed, primarily to demonstrate their current, very limited use. The revenue implications of current fees are also addressed, revealing them as little more than nuisance fees. A discussion on the growing significance of user fees globally and their potential for the Czech Republic and Slovakia suggests the possibility for heavier use. Particular attention is paid to the question of charging user fees not only for cost recovery, but to provide some budgetary relief for hard-pressed local authorities in economic transition. A basic theory of optimal, revenue-enhancing user fees is presented.>/p>

Provincial Development in China: Lessons from EU Regional Policy Experience

Abstract This article evaluates and compares regional development in the Chinese provinces and in the regions of the European Union (EU) countries. Development efforts in southern Italy, northeast England and eastern Germany are reviewed along with EU, Community-wide regional development programmes. Equity concerns suggest promotion of regional policy, but the pursuit of maximum national economic growth would avoid it, since it sacrifices some economic growth. The impact of foreign direct investment (FDI) and domestic investments on individual Chinese provinces is compared with their impact in Europe. There is an implicit contrast between public sector regional development programs and more effective private foreign direct investments.