PROSPECTS FOR ECONOMIC-REFORM IN EASTERN-EUROPE

Against the background of uncertainty in Eastern Europe, predicting the prospects for economic reform, even in the near term, is a risky proposition. Even the most prescient observers acknowledge that a number of unknowns-the effect of domestic economic policies, the scale of Western financial support, and the state of the world economy-figure prominently in the forecast. After some thought, therefore, I have decided to address some of the problems that have occurred in the course of transforming the East European countries into semi-market economies. I have two reasons for this shift in focus. First, unless reformers learn from their mistakes-and there is no guarantee that will be the case-the outlook for economic reform is fairly bleak. I would not discount the possibility that many reformers at present are more concerned about their political positions than about the principles of reform. Second, and most important, we are beginning to find out that we have vastly underestimated the difficulties involved in this complex task. The paper is written from the viewpoint of an observer indirectly involved in the process. Because a considerable amount of insight was obtained through informal personal conversations and interviews with policymakers in the region, I have presented the issues in a generic sense, homing in on the need to deal with the broader issues of reform rather than presenting an academic paper in the context of the theoretical and empirical literature.