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  • Author or Editor: Paul Hare x
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This paper starts with some definitions and concepts to clarify what we have in mind when we talk about economic institutions and the political economy of transition. Much discussion of the area is characterised by ambiguity and confusion, and while there are many partial theories of institutions covering specific cases, we still lack an all encompassing theory. The institutions important for transition are introduced next, this discussion helping to make clear the critical distinction between institutions per se, and the concrete organisational and legal forms through which they are implemented in particular country settings. For those transition economies that have already joined, or wish to join the EU, this includes some remarks on the acquis communautaire. Some empirical evidence on the role of institutions in facilitating transition and fostering post-socialist economic growth is then reviewed, finding support for the rule of law, secure property rights (ownership and business contracts) and liberal trade. As an aside to the main argument, a brief account of possible directions of institutional reform in North Korea is presented. Finally, the concluding section outlines what transition has taught us about the roles of institutions in economic life, and highlights some important unsettled issues, including the problem of embedding new institutions in different cultural settings.

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Economists think they know a great deal about economic growth, both about why countries differ so much in their growth experience, and what needs to be done to get a country on track for faster growth, raising living standards. However, while there are many important theories about growth, and numerous country case studies of outstanding and sustained performance, there are also still too many countries that grow slowly if at all, where economic performance has somehow become ‘stuck’ at a low level. In the development context, a major policy concern is often to create enough jobs in a given period to employ all or most of those entering the labour force, preferably productively. Thus growth is not just about expanding aggregate output (GDP) but also about large-scale job creation. In the transition economy context, there was not only the complex matter of switching to a market-type economy in quite a short time, but generating growth and employment to catch up with more prosperous neighbours to the West. This has proved harder than many expected.

Kolodko himself has written much about many aspects of economic growth, and has also contributed in important ways to concrete policy formation in Poland (especially when he served as Minister of Finance). In this paper I shall explore the ideas and challenges indicated above, drawing on Kolodko’s work as appropriate, but also developing some new ideas that seem to be needed to understand better both growth successes and growth failures around the world.

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