Balcerowicz: rapid and radical reformers done best

findings from ex-communist countries

Market reforms have worked well in central and eastern Europe and the former Soviet Union, argues Professor Leszek Balcerowicz, President of the National Bank of Poland in a new IEA paper. The countries which have performed best are those with the most wholehearted commitment to market reform.

'...more extensive structural reforms produce better growth performance as well as lower inflation, more favourable ecological and health developments, and less growth in earnings inequality' (page 53).

Professor Balcerowicz has been Deputy Prime Minister of Poland, Minister of Finance and President of the Economic Committee of the Council of Ministers. He implemented a major economic reform plan in Poland (the 'Balcerowicz plan) and is one of eastern Europe's leading economic reformers.

The scale of change in the post-communist transtion was exceptionally large, says Balcerowicz. Radical restructuring was required, extending liberties, reducing taxes and building the institutions of a free economy. Different countries have achieved strikingly different outcomes which can be explained partly by varying initial conditions - but differences in policies were more important, according to Balcerowicz. The larger the scope of market-oriented reforms, the better the performance. The presence of competent and determined reformers was another crucial ingredient in successful transition.

Professor Balcerowicz concludes by warning against a slow pace of reform.

'Even the most successful reforms inevitably produce considerable discontent. However, slow reforms, or no reforms at all, are bound to produce even greater dissatisfaction.' (page 53)