Transition Economy 2

Topics: Economies, Economics, Planned economy Pages: 3 (951 words) Published: February 28, 2015
A transition economy or transitional economy is an economy which is changing from a centrally planned economy to a market economy.[1] Transition economies undergo a set of structural transformations intended to develop market-based institutions. These include economic liberalization, where prices are set by market forces rather than by a central planning organization. there is a push to privatize state-owned enterprises and resources, state and collectively run enterprises are restructured as businesses, and a financial sector is created to facilitate macroeconomic stabilization and the movement of private capital.[2] The transition process is usually characterized by the changing and creating of institutions, particularly private enterprises; changes in the role of the state, thereby, the creation of fundamentally different governmental institutions and the promotion of private-owned enterprises, markets and independent financial institutions.[3] In essence, one transition mode is the functional restructuring of state institutions from being a provider of growth to an enabler, with the private sector its engine. One of the most dramatic restructuring remains the countries of the former Soviet Union, and its satellite states, including Poland, Hungary, and Bulgaria ,which sought to embrace market capitalism and abandon central planning since the collapse of communism in the late 1980s.

However ,Establishing a system of market capitalism in a command socialist economy is a daunting task. The transition process can be bewildering to state officials where most of the transition economies can faced severe short-term difficulties, and longer-term constraints on development and the economy as a whole.The nations making the attempt must invent the process as they go along.

Firstly Many transition economies experienced rising unemployment as newly privatised firms tried to become more efficient. Under communism, state owned industries tended to employ more...
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