Revolutions of 1989 - Economic Reforms

Economic Reforms

Enterprises in Socialist countries had little or no interest in producing what customers wanted because of prevailing shortages of goods and services. In the early 1990s, a popular refrain stated that "there is no precedent for moving from Socialism to capitalism." Only the over-60-year-old people remembered how a market economy worked. It was not hard to imagine Central, South-East and Eastern Europe staying poor for decades.

There was a temporary fall of output in official economy and increase in unofficial economy. Countries implemented different reform programs such as the Balcerowicz Plan in Poland. Eventually the official economy began to grow.

In 2004 Polish Nobel Peace Prize winner and President Lech Wałęsa described a transition from capitalism to Communism as "heating up an aquarium with fish" to get fish soup. He said that reversing Communism to capitalism was challenging, but "We can already see some little fish swimming in our aquarium."

In a 2007 paper Oleh Havrylyshyn categorized the speed of reforms in the Soviet Bloc:

• Sustained Big-Bang (fastest): Estonia, Latvia, Lithuania, Czech Republic, Poland, Slovakia
• Advance Start/Steady Progress: Croatia, Hungary, Slovenia
• Aborted Big-Bang: Albania, Bulgaria, Macedonia, Kyrgyzstan, Russia
• Gradual Reforms: Azerbaijan, Armenia, Georgia, Kazakhstan, Ukraine, Tajikistan, Romania
• Limited Reforms (slowest): Belarus, Uzbekistan, Turkmenistan

It was concluded that gradual reformers suffered more social pain, not less. The countries with fastest transition to market economy performed much better on the Human Development Index.

The 2004 enlargement of the European Union included Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, and Slovenia. The 2007 enlargement of the European Union included Romania and Bulgaria. The same countries have also become NATO members.

Chinese economic liberalization started since 1978 have helped lift millions of people out of poverty, bringing the poverty rate down from 53% of the population in the Mao era to 12% in 1981. Deng's economic reforms are still being followed by the CPC today and by 2001 the poverty rate became only 6% of the population.

Economic liberalization in Vietnam was initiated in 1986, following Chinese example.

Economic liberalization in India was initiated in 1991.

Harvard University Professor Richard B. Freeman has called the effect of reforms "The Great Doubling". He calculated that the size of global workforce doubled from 1.46 billion workers to 2.93 billion workers. An immediate effect was a reduced ratio of capital to labor. In the long term China, India, and the former Soviet bloc will save and invest and contribute to the expansion of the world capital stock.

China's rapid growth has led some people to predict a "Chinese Century".