E-Knjižnica FET "Dr. Mijo Mirković"

Interdependence of political stability and economic growth as a determinant of successful market reforms

Džunić, Marija (2007) Interdependence of political stability and economic growth as a determinant of successful market reforms. In: 4th International Conference "Global Challenges for Competitiveness: Business and Government Perspective", 27-29. 9. 2007., Pula, Croatia.

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Recently reformed countries, especially Balkan states, have been constantly facing all kinds of challenges during the last couple of decades. Economic transformation, political turnover, introducing democracy – these were only initial steps, only preconditions for realizing desirable goals of economic development and social welfare. Related to the problem of promoting competitiveness, there are various factors that contribute to or hamper developing competitive advantages of production sectors in transition countries. However, market economy bases its performance on spontaneous coordination of economic activities, through market mechanisms and price signals, while the role of the state and economic policy is reduced only to those areas where free market cannot provide optimal resource allocation. In order to achieve this ideal of market economy, especially starting from a command economy model as in all the transition countries, it is necessary that market reforms have been introduced and implemented and that all the left-overs from the previous coordination system have been eliminated. If the main objective of the comprehensive economic transformation of the former centrally planned economies was to solve the problem of economic inefficiency, it is still unclear why reforms aimed at affirmation of economic freedom and market economy with state devolution, have not been consistently and completely implemented in all the transition countries. Apparently, economists’ recommendations about adopting efficient policies have not been equally accepted in different countries. There are considerable differences in the reform strategies and choices made by different countries in transformation. Some of the countries have been ranked as big-bang reformers, others as partial ones. The variety of adopted reform policies exerts especially through austerity of stabilization measures, privatization forms and rapidity, as well as the toleration of rentseeking activities. The reason why these differences appear and why recommended efficient policies often don’t get implemented, remains unknown. In searching for the solution, a place to start could be the fact that the transformation of post-socialist countries has been rather specific, in a way that most of the countries, apart from economic reforms, also accepted the imperative of parallel political liberalization and democratization. The most recent democratization wave in Europe has made these countries and their governments responsive to the interests and pressures of the electorate. This change is positive, from the aspect of citizens’ preferences representation, but it also has a dark side – the process of political decision-making about reform strategies allows the government to indulge to the pressures of dissatisfied groups that can lead to reform suspension. Each reform requires certain unpleasant short-term adjustments, for the expected benefits to appear in the long-term, but even then their distribution is not even. This means that each reform produces winners and losers, so that any change that increases the welfare of the society as a whole, but imposes costs to a certain interest group will be resisted by the losers. As a matter of a fact, it often happens that the losers are both economically and politically powerful enough to join their efforts and block the reform that would otherwise enhance the social efficiency. For this reason, it is very useful to understand interest groups, their interests, their gains and losses, as well as their way of behaving, in order to understand the destiny of initiated reforms and the causes that block them.

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Tip objekta: Materijal konferencije ili radionice (Paper)
Dodatne informacije: 4/2007
Ključni pojmovi: market reforms, political support, economic performance, democratization, voter behavior, tržišne reforme, politička podrška, ekonomski učinak, demokratizacija.
Teme: 3 Društvene znanosti > 33 Ekonomija. Ekonomska znanost > 330 Ekonomija općenito
Odjeli: Odjel za ekonomiju i turizam "Dr. Mijo Mirković"
Datum pohrane: 17 Oct 2012 11:39
Zadnja promjena: 19 Nov 2012 13:05
URI: http://eknjiznica.unipu.hr/id/eprint/1640

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