How to Catch Up with the Industrial World—Achieving Rapid Growth in Europe's Transition Economies
By Jeffrey D. Sachs and Andrew M. Warner
The preeminent economic challenge for the Central European Economies in transition (CEEs) is to grow rapidly over a sustained period in order to narrow the economic gap with Western Europe. If the CEEs grow only slightly faster than the EU, convergence will take several decades (see Transition, vol.7, no.1, January-February 1996, p. 6). Poland's income level today is 36 percent of average income in the EU. Assuming that per capita income grows an average of 1 percent a year in the EU and 3 percent a year in Poland, it would take forty-six years for Poland to reach 90 percent of the average per capita income of the EU. But if Poland manages to boost growth to 5 percent per capita a year, the time it takes Poland to reach 90 percent of EU per capita income would be cut in half, to twenty-three years. The key issue for Poland and the other CEEs, therefore, is how to achieve high rates of economic growth in the next decades.