ABSTRACT
The general thesis which underlies this chapter is that the analysis of the economic reforms exclus-ively in terms of the market and the plan deflects away from some of the central features of the changes which have taken place in Eastern Europe. The creation of non-governmental organs of management has been one of the principal ways in which the economic reforms have reduced the tiers of economic management. East European countries have set great hopes on conglomerates as the institutional device for eliminating technical inefficiencies and speeding up technical innovation. As in China, in East European economies side by side with the state enterprises, supposedly under the ownership of the whole population, there existed cooperatives in agriculture and in the service sector, supposedly under the ownership of a collective. A number of East European economists, in particular Kornai, have argued that the financial constraint is still not much of a constraint on the be-haviour of enterprises.
