Evolving Socio-economic Conditions in Central and Eastern Europe: A Myrdalian View

The debate about the effects of transformation policies will continue, given the impossibility of isolating their impact while holding constant other factors responsible for performance. However, one conclusion that can be drawn is that, using comparable performance indicators, trends in China, except for inflation and political democracy, are either similar to or more positive than corresponding results in CEE (Chai, 1992; Field, 1992; Harrold, 1993; Yeh, 1992). In nearly every year since 1978 China's actual performance has exceeded that planned, while in CEE the decline in economic activity following the implementation of transformation measures has consistently exceeded the most pessimistic forecasts of policy-makers and their foreign advisers. In consequence, the social and economic costs borne by the Chinese during their transformation have been much less than in CEE. Based upon his own goals and assessment of CEE policies and their expected and actual consequences (see Tables 1 and 2). Myrdal would evaluate the performance of CEE economies as relatively poor⁶ Negative assessments would be accorded to social and economic equalisation, rise in productivity, rise in living standards, and social discipline and rational planning. He would find both positive and negative aspects for each of the other four criteria.⁷ Overall, he would evaluate the ‘tendencies’ as unfavourable because of the absence of any clear positive trends throughout the region. This evaluation, combined with the comparison with China, calls into question the efficacy of CEE policies based upon the assumption that transformation requires rapid privatisation, elimination of subsidies to state-owned enterprises, and stabilisation measures prior to institutional reforms, or that the state ought to adopt a passive role concerning supply-side responses during the transformation process. As the consummate political economist, Myrdal would criticise CEE goals and policies and suggest alternatives consistent with his value premises and his theory of development.