Stanislaw Gomulka

Whence reform? A critique of the stiglitz perspective

This paper discusses the key hypotheses which Joseph Stiglitz proposed, in his wide-ranging critique of the “Washington Consensus”, with regard to transition reforms and economic policies in China and Russia. The primary purpose is to evaluate the Stiglitz perspective in the light of empirical evidence, including the experience of countries outside China and Russia. Although some of the points Stiglitz makes are important for understanding what has happened in the transition, this paper argues that his perspective mis-interprets the key facts of the Chinese transition, mis-describes the facts of the Russian transition and fails to consider the theoretical and policy implications of the success of a “third model”, which is represented by some Central European and Baltic transitions.

The IMF-Supported Programs of Poland and Russia, 1990-1994: Principles, Errors, and Results

Abstract The paper discusses four IMF-supported adjustment programs in Poland, 1990-1995, and two in Russia, 1992-1994, in terms of the underlying theory, policy objectives, assumptions, policies, errors, and results. The paper suggests that the role of the IMF and the World Bank has been helpful and significant but, compared to the influence of domestic factors and local reformers, relatively modest. Transition-related features of the programs are the focus of the analysis. The specific topics include the choice of nominal anchors, the speed of disinflation, the choice of performance criteria, and the role of foreign economic assistance. J. Comp. Econom. June 1995, 20 (3), pp. 316-346. London School of Economics and Political Science, London, WC2A 2AE, United Kingdom.

Economic and political constraints during transition

FOLLOWING THE COLLAPSE of the old political (communist) system, the overall strategy of transition and initial reform policies appear to be influenced above all by the inherited economic and institutional constraints and the long-term political and economic aims of the reforms, rather than by the usual short-term concern to gain and preserve political power. Many of the constraints are systemic and therefore common to all countries undergoing the transition. This article primarily discusses the influence of these constraints, both common and country-specific, on the choice of reform strategy, as well as on the choice of specific economic policies. Economic, institutional and political reforms during transition have a feedback effect on the inherited constraints. They also activate or modify current political constraints. The article notes positive outcomes of reforms, which tend to relax some of the constraints, and discusses the effect of negative outcomes, such as severe recessions and grave fiscal problems, which tend to produce new economic and political constraints. The second aim is therefore to discuss how these changes of constraints may lead to modifications of initial reform policies in the course of transition.

An international comparison of material intensity

Abstract Various measures of material intensity are estimated, using input-output tables for eleven capitalist and four socialist countries. The socialist countries studied proved to be considerably more material intensive. However, it was found that the adoption by these countries of a capitalist structure of final demand would, in the mid 1970s, not have affected material intensity significantly. In the case of Czechoslovakia, the adoption of a mid-1980s capitalist structure had the same result. Paradoxically, dominant eigenvalues of input-output tables, the standard measures of technology productiveness, vary little between socialist and capitalist countries. An interpretation is suggested. The “energy efficiency gap” in industry between West and East has been growing since 1975, and an interpretation of this is attempted.

The Puzzles of Fairly Fast Growth and Rapid Collapse Under Socialism

The national statistics and international comparisons based on purchasing power parities suggest that the Former Soviet Union (FSU) in the years 1925-75 and Central and Eastern Europe in the years 1945-80 experienced economic growth comparable to that of many market-based economies of similar levels of development. This must be considered a puzzle given the incentive problems, the absence of proper prices, limited competition and resistance to innovation in economies dominated by a state sector. However, this fairly fast growth came suddenly to a halt in the 1980s. This phase of stagnation and limited reform is now followed not by a recovery, but by a phase of surprisingly deep collapse, indeed in some countries a near disintegration. The paper discusses the three phases with the intention of establishing relationships between them and, in this way, of providing a better understanding of each of the two puzzles.The analysis of development is conducted in terms of standard models of international technology transfer, capital accumulation and catching up. This analysis is informed by the consideration of the distinct characteristics of development under socialism. These characteristics relate in part to preferences of the central authorities, embodied in the so-called communist strategy of industrialization, and in part to the implications for innovation and development of the socialist economic system. The standard view of the socialist development was that the short-term interests were sacrificed for the benefit of future generations. The paper aruges that this was true only in the initial phase of development. In the later phase the authorities had switched to an opposite policy, one of sustaining a reasonable pace of improvement for the current generation under an inefficient system at the expense of future generations. The collapse phase came with the exhaustion of the growth reserves offered by the policy. The intergeneration terms of exchange have switched once more, again to work against the interests of the current generation. The paper also discusses the particular causes of the collapse and the prospects of a revival after the transition to a market-based system is advanced.

Comparative Notes on Pension Developments and Reforms in the Czech Republic, Hungary, Poland and Romania

Pension systems and pension expenditures show large variations among countries worldwide. This variation appears to reflect mainly demographic factors and differences in the level of insurance protection, the latter tending to increase with the level of development. The focus of this paper is pension developments and reforms in the four transition countries: the Czech Republic, Hungary, Poland and Romania during the 1990s. Our major factual finding is that Poland and Romania are clear outliers among the FOUR in terms of key pensions statistics. The paper concludes that the greater pension expenditures in Hungary and Poland are in part inherited (especially in Poland) and in part caused by the more radical restructuring reforms, and that these greater expenditures have in turn prompted these two countries to start replacing gradually their PAYG-DB system with a three-pillar mixed system, with private pension funds constituting a large component of the reformed system.

The IMF-Supported Programs of Poland and Russia, 1990-1994: Principles, Errors and Results

The paper discusses four IMF-supported adjustment programs of Poland, 1990-1995, and two of Russia, 1992-1994, in terms of the underlying theory, policy objectives, assumptions, policies, errors and results. The paper suggests that the roles of the IMF and the World Bank have been helpful but, compared to the influence of domestic factors and local refomers, relatively modest. Transition-related features of the programs are the focus of the analysis. The specific topics include the choice of nominal anchors, the speed of disinflation, the choice of performance criteria, and the role of foreign economic assistance. The primary objective of this paper is to discuss the IMF-supported adjustment programs of Poland and Russia in terms of the underlying theory, policy objectives, explicit and implicit assumptions, proposed policies, major errors in assumptions and policies, and actual results. Throughout this discussion, the intention is to identify the influence of systemic features and transition circumstances. The analysis suggests that the roles of the IMF and the World Bank have been helpful but, compared to the influence of domestic factors and local reforms, relatively modest.Part I of the paper provides a discussion of the broad policy objectives, common and separate, of the authorities of Poland, Russia and the two Bretton Woods Institutions, the IMF and the World Bank. Part II outlines the theory underlying the standard IMF adjustment programs. Part III collects and discusses what according to this author have been the major errors in assumptions and policies. The aim is to identify the origins and the implications of those errors. Part IV provides an analysis of the actual adjustment programs. The major feature of this analysis is the discussion of aims and results of the various programs. Finally, Part V addresses the issue of the role of foreign financial assistance in transition economies.

Lessons from economic transformation and the road forward

Primary purpose of this parer is to comment on the experiences so far by the formerly communist countries in transforming their economies with a view to propose lessons for policy-making. Although my familiarity is greatest with the Polish experience, makes use of the empirical evidence, both economic and political, from the whole area of Central and Eastern Europe and the Former Soviet Union (FSU), particularly Russia. It begins with a few general observations about the choice of reform strategy. This I follow with a discussion of the output collapse and the conduct of macroeconomic policies. The Ten Commandments of Mr Klaus provided further opportunity to comment on policies. Finally, it takes a closer look at Russia and comment briefly on developments in Poland.

Technological condition for balanced growth: A criticism and restatement

Abstract According to prevailing opinion, only the neutral form of technological progress in the Harrod sense is consistent with balanced growth in a one-sector constant returns-to-scale economy. Though various definitions of balanced growth are in use in the literature, the above highly restrictive technological condition is believed to hold for all of them. The paper demonstrates that this belief is not correct. The condition is shown to be false if the definition of balanced growth (i) does not require the constancy of the marginal product of capital (or the interest rate), and (ii) permits the time semiinfinite or indeed any finite balanced growth path. More specifically, under (i) and (ii) there exists a balanced growth path consistent with a significantly wide class of technological changes of the capital-using (labour-saving) form in the Harrod sense. Alternatively, this condition is correct if either (i) the interest rate is required to be constant or (ii) growth is balanced if it is such for all time—that is, for both past and future. The condition is also correct if the socioeconomic institutions are such that the constancy of the savings ratio implies the constancy of the capital share.

Technical Progress and Long-Run Growth

The types of technical progress referred to in the theory of economic growth are passed in review and their relations studied in detail. Light is also shed on the dependence of the long-run rate of growth, in the presence of a constant rate of saving, on the type of technical progress taking place in the economy, both in the most general case and in that of an aggregate C.E.S. production function; what happens in this respect in the case when technical progress is Harrod neutral is well known, the same cannot be said of the case when technical progress is not Harrod neutral.