Eastern Europe's Economies
To clean up the shambles left by communist mismanagement, Eastern Europe must take a swift, dramatic leap to private ownership and a market system. West Europeans must help it do so, welcoming it as partner in a unified European market. So says Jeffrey Sachs, Harvard professor and economic adviser to the governments of Poland and Yugoslavia
THE first, basic steps to the transformation of Eastern Europe's centrally planned economies are two. One, the eastern countries must reject any lingering ideas about a “third way”, such as a chimerical “market socialism” based on public ownership or worker self-management, and go straight for a western-style market economy. Two, Western Europe, for its part, must be ready and eager to work with them, providing debt relief and finance for restructuring, to bring their reformed economies in as part of a unified European market.
The main debate in economic reform should therefore be about the means of transition, not the ends. Eastern Europe will still argue over the ends: for example, whether to aim for Swedish-style social democracy or Thatcherite liberalism. But that can wait. Sweden and Britain alike have nearly complete private ownership, private financial markets and active labour markets. Eastern Europe today has none of these institutions; for it, the alternative models of Western Europe are almost identical.