ABSTRACT
This paper evaluates the costs and benefits that have accompanied the transition from centrally planned systems to market 26economies in Eastern and Central Europe. Costs and benefits are evaluated by assessing typical market economy indicators: changes in output, per capita consumption, inflation, unemployment, foreign trade, and improved consumer choice. All the inhabitants of the region have benefited greatly from the disappearance of shortage, greater consumer choice, opportunities for the creation of businesses, and transfers of wealth to the private sector through privatization. Ownership of consumer durables such as automobiles has greatly increased. Very large numbers of people have set up their own businesses. Those countries that have liberalized most aggressively have benefited from improved export performance. However, the transition has also been accompanied by high rates of unemployment, higher rates of inflation, and declines in real incomes and consumption. Frequently, those who are relatively less advantaged have borne the majority of these costs. GDP has fallen sharply, although in most countries declines in consumption have been much less severe. As aggregate output expands in 1994 and beyond, these costs should diminish and the benefits of transition should increase. Furthermore, although many of the costs appear unavoidable, the experience of Eastern Europe suggests that they can be minimized by implementing transition policies as quickly as possible.
