The Market Shock

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"The collaborative work of a group of distinguished European and American scholars, The Market Shock puts forward a new constructive and more humane approach to reconstructing the formerly communist economies." "The reconstruction of the Central and Eastern European economies seems to resemble the 1920s more than the 1950s: inflation continues, output and employment fall and with them the living conditions of the common people. Is this decline necessary for the construction of the market economy which will bring wealth and well-being? This book argues that not only is the decline not necessary, it even may prevent the creation of a market-based economy." "Current programs based on the abolition of controls and subsidies, tight management of the money supply, and the privatization of state property all work to reduce output and employment and living standards. But these programs lack positive measures to create the market relationships that would generate new production prospects. So far the policies have been ones of uncreative destruction." "It is argued that an emergency program must first stabilize conditions so that people can believe in a better future. Then rather than wholesale privatization, incentive schemes must be used to make management responsible for meeting financial constraints. The other crucial component is the active creation of conditions in which new wealth will begin to be created: the context in which agents take decisions must be changed; economic and financial institutions are needed which encourage individuals to become market-makers; and the developed economies must produce the appropriate international context."--BOOK JACKET