ABSTRACT
The 15 sovereign states that replaced the Soviet Union in December 1991 are in the midst of an attempted societal transformation that is unprecedented in nature and scope. In the economic realm, these states begin the transition from socialist central planning to capitalist market economies with formidable legacies from failed communism. The legacies are found in the remnants of the institutions through which the economy was managed for many decades and in the mindsets and habits of the people whose behavior was molded by those institutions. Other legacies stem from the development strategies that were pursued and are physically embodied in the land use patterns, capital stocks, environment, and skills of the labor force. Past policies of extreme protectionism and Moscow-dictated approaches to regional development have produced large economic interdependencies among the new states. By their very nature, these legacies will take many years to overcome. Nonetheless, the old system, despite its manifest flaws, did generate economic growth, secular improvements in living standards, and an extraordinary degree of personal economic security. The failure to understand the nature of these legacies generates both good and 58bad results in unrealistic expectations about what is possible and biases evaluations of the pace of transition in each new state.
For several decades, the former Soviet republics experienced a treadmill of attempts to reform socialism. This futile process was ended in 1990 and 1991 as the unintended result of Gorbachev-initiated policies of glasnost and perestroika. In those years, reform programs were adopted that, if implemented, eventually would have eradicated the venerable institutions of socialism and replaced them with those of capitalism. The republics enacted a number of laws appropriate to that end and gained experience in managing their own affairs. Moreover, amidst the amounting disarray in the economy, governments, business firms, and individuals were beginning to alter their behavior and attitudes in ways essential for a market economy.
Given the revolutionary nature of the many-faceted transformation from subservience to independence, the speed with which it occurred, and the excessive burden on the new governments, the progress on economic reform made thus far is remarkable. The fledgling states in varying ways and degrees have been able to build on prior accomplishments. Most prices have been decontrolled, new fiscal systems have been instituted, the privatization process is in motion, and market processes are continuing to arise from below. There is much diversity among the states. That the reform programs are the subjects of intense political controversy, that implementation of some aspects is proceeding slowly, and that large elements of the old system are still in place are only to be expected in this brief period of independence. The ability of the new states to stay the course will depend primarily on whether they can maintain reasonably stable governments committed to reform and avoid consuming their energies in ethnic strife. Appropriate international support is essential. It would be a great tragedy if any of the Soviet Union’s successor states were to become mired in a new treadmill of failed attempts to lay the foundations for a successful market economy. In contrast to the past, post-Soviet economic reforms do not aim to square the circle.
