Making Markets

Authors: Shafiqul Islam, Michael Mandelbaum

Contributors: Shafiqul Islam, Michael Mandelbaum

Publisher: Council on Foreign Relations, 1993

ISBN 087609129X, 9780876091296

238 pages

The collapse of communism in Europe and the former Soviet Union has produced one of the most daunting tasks of the twentieth century: the construction of market economies out of the wreckage of central planning. While there is a lively debate among economists on this transformation, little has reached a non-specialist audience. In Making Markets, Shafiqul Islam and Michael Mandelbaum call on four eminent economists to summarize the state of current thinking. Richard Portes, Centre for Economic Policy Research in London, surveys the process of transition, examining its primary features and the problems that will be faced in light of Western economic theory and international economic practice. Paul Marer, Indiana University, gives a detailed account of the transition already underway in Central Europe. Robert Campbell, Indiana University, discusses the special problems confronting the Soviet Unions successor states, particularly Russia. Jeffrey Sachs, Harvard University and adviser to the Russian and Polish governments, considers the role of the West, citing episodes in economic history in which external support made success possible. Nor would a Central European or Russian authoritarian ruler necessarily carry out liberal economic policies. The alternative is not a return to full-fledged communist planning, but the retention of some communist practices als ofpund in many contries in the Third World.

The long-term prospects for these countries depend on their estabilishing, and keeping, the opposite combination: democratic politics and liberal economics. Success will be slow in coming and modest at first. Thus, tangible Western support also has a political role to play by contributing to public confidence in the prospects for a successful transition. And without confidence, the policies of political authoritarianism and economic populism will have their day.