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Discussion: Transition Economies for IB HL and SL Yr 1
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joehauet |
Transition Economies for IB HL and SL Yr 1
Sep 6 2008, 12:02 PM EDT
The International Monetary Fund lists the following four ingredients, necessary for a successful transition from a command to a market economy:" * Liberalization: the process of allowing most prices to be determined in free markets and lowering trade barriers that had shut off contact with the price structure of the world's market economies. * Macroeconomic stabilization: primarily the process through which inflation is brought under control and lowered over time * Restructuring and privatization: the processes of creating a viable financial sector and reforming the enterprises in these economies to render them capable of producing goods that could be sold in free markets and of transferring their ownership into private hands. * Legal and institutional reforms: These are needed to redefine the role of the state in these economies, establish the rule of law, and introduce appropriate competition policies. " (http://www.imf.org/external/np/exr/ib/2000/110300.htm Using information from the transition economy you researched explain which ingredient you believe to be the most important and why. Please feel free to comment on other peoples entries. Do you find this valuable?
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MarenRackebrandt |
1. RE: Transition Economies for IB HL and SL Yr 1
Sep 7 2008, 2:31 PM EDT
Theresa and I did our research on Kazakhstan. Most important for this country is the liberalization and the privatization, because after Kazakhstan became an independent country it now had to do what the Russians did before, they had to control and rule themselves. It was important to become a part of the world's trade and for that determine the right prices. Privatization is important because then the production of goods would transfer to private companys which could make new trading possible. In both areas Kazakhstan developed over the time. What Kazakhstan needs to work on though is foreign investment, because it struggled like its Asian neighbors to attract forgein investment. Do you find this valuable? |
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lperez2 |
2. RE: Transition Economies for IB HL and SL Yr 1
Sep 7 2008, 3:06 PM EDT
Georgia was the transition economy I researched and found that the greatest problem they faced and continue to face is corruption. With the arrival of the market economy came new opportunities for those few who took risks, however the business they dealt with was half illegal. This is because there were too many restrictions set by the government which still remained from their planned economy, making legal business very hard to carry out. That is why I would choose libaralization as the most vital ingredient, with legal and instituional reforms in second place. I believe economies need a healthy balance from both of these ingredients to be able to start succesful businesses.
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Rocioperez |
3. RE: Transition Economies for IB HL and SL Yr 1
Sep 7 2008, 3:50 PM EDT
I believe legal and institutional reforms have contributed and improved the Vietnamese economy the most. The removal of many business licensing restrictions and the introduced Enterprise Law (which gave people the right to form their own enterprises) brought about a dramatic growth of private enterprises, which contributed to the overall economic growth. A specific example in which the Enterprise law made a difference was in the car industry, in which car sales boomed by increased 28.3% from 2000 to 2001. Three years after the introduction of the Enterprise Law, one million new jobs had been created. Although it is not enough to employ the 80 million inhabitants in Vietnam, it increases the employment rate and positively affects the country's economy.
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GavinSteinhubl |
4. RE: Transition Economies for IB HL and SL Yr 1
Sep 8 2008, 3:27 AM EDT
I as well researched Kazakhstan and I agree that liberalization was the most importants ingredient. Kazakhstan began transitioning in 1992 when it was liberized from the Soviet Union. After that Kazakhstan has been growing in GDP by 8-10% annualy for the last 5 years. That is why I think liberalization is the most important.
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JonathanRanstrand |
5. RE: Transition Economies for IB HL and SL Yr 1
Sep 8 2008, 6:02 AM EDT
* Macroeconomic stabilization: primarily the process through which inflation is brought under control and lowered over timeIn my opinion, macroeconomic stabilization was a key factor in the transition period - this was certainly true for Laos. After 1975, the communist government implemented communist policies, which remained in place until 1986. Even though the government did make a change in direction, encouraging private businesses, these policies were not successful until the mid-1990s. This was due to the tough macroeconomic conditions; for instance, inflation was at 52% in 1989. However, once the government began implementing tighter monetary policies, inflation began decreasing. Once the macroeconomic factors were stabilized, the economy finally began to prosper. This is confirmed by the growth rate of about 5-6% in the last decade, by low unemployment (2%) and the low inflation in Laos today. Do you find this valuable? |
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ChristianClausen |
6. RE: Transition Economies for IB HL and SL Yr 1
Sep 8 2008, 7:54 AM EDT
The research I did with Daniel on Serbia showed us that Serbia hasn't really had a hard transition. They're still facing a few minor issues, but all in all their transition has been pretty smooth. Their unemployment rates are pretty high, though, which is odd since their literacy rate is almost a 100%. Their improvement has been steady and safe, and something tells me that it's going to continue to be that way. And much of their economy has also been shifted into industrial work.
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TheresaMehl |
7. RE: Transition Economies for IB HL and SL Yr 1
Sep 8 2008, 9:47 AM EDT
As Maren and me researched about the change of Kazakhstan from a command market economy to a free market economy the first and most important step was the liberalization from the USSR. Even though they were facing an economic decline shortly after their liberalization in 1991 due to the missing assistance of Russia, they have independently gained macroeconomic stability now. Through working together successfully with the west, successfull reforms, liberal trade policies they have managed to create a stable free market economy.The first and most importand step to this was liberalization! Do you find this valuable? |
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dedmonds |
8. RE: Transition Economies for IB HL and SL Yr 1
Sep 8 2008, 12:50 PM EDT
I think that Serbia might be different to the other transition economies. At the beginning of its economic transition in 1989, the economic prospect actually looked quite good for the region. However, in the 1990s there seemed to have been several wars and conflicts in the area. The problem for the Serbia economy were UN economic sanctions as well as infastructure and industry damage. In the past three years the economic growth rate averaged about 7% and had a lot of foreign direct investments. In that sense maybe restructuring and privatization were crucial for its success.
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ChristianEvertz |
9. RE: Transition Economies for IB HL and SL Yr 1
Sep 8 2008, 2:13 PM EDT
I did my research on Croatia and was really impressed by how well this country disengaged itself from Soviet rule. According to figures from 1995-2008, the GDP per capita jumped from being 7615 $ in 1995 to 16758 $ in 2007. In addition, the inflation rate in 2007 only amounted to 3.4 %. These figures are really impressive for a transition economy, although I think that Croatia has almost ended this process of transitioning from a planned economy to a free market economy.In my opinion, the key to this smooth transition is the change from a socialist government to a democratic republic. The role of the government in the first years of transition is really important, because it has to guarantee a stable political situation in order for the economy to grow. When there is a stable political situation in a country, foreign companies are encouraged to invest money in the local economy which again provides labour for the people and leads to people spending more money on other products. So all together, a stable political environment is one of the main ingredients for economic growth and thus for the transition to a free market economy. Do you find this valuable? |
Jabbobb |
10. RE: Transition Economies for IB HL and SL Yr 1
Sep 8 2008, 3:50 PM EDT
Me and Fabienne picked Thailand as the country to do our research on. I think the "ingredient" that applies to Thailand the most is: "Restructuring and privatization". From 1986 on Thailand's government slowly started to shift from a government-controlled market to a free market. Domestic entrepreneurship now must compete against foreign competitors and due to educational deficits in English and managerial sectors there is a lack of entrepreneurial spirit among Thai people.
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DominicMcNamee |
11. RE: Transition Economies for IB HL and SL Yr 1
Sep 8 2008, 4:00 PM EDT
After studying Mongolia I found that liberalization was the most important factor in a successful transition economy. A large amount of Mongolia's growth can be attributed to being able to sell its metals and minerals to a greater market at market prices. Copper was particularly important in that as it is considered the main cause of the 6% GDP rise in 1995 as the market price for it rose.
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marc_lemann |
12. RE: Transition Economies for IB HL and SL Yr 1
Sep 8 2008, 5:09 PM EDT
I also researched Georgia, and I agree with Laura that legal and institutional reforms were needed to have more appropriate new laws when they transitioned to a market economy after becoming independent of the Soviet Union in 1991. I believe that liberalization did not play such an important role in Georgia because the prices determined by the free market were probably not substantially different to those during the command economy. I believe that in any transition to a market economy, the most important "ingredient" is the restructuring and privatization. By creating a viable financial sector and reforming the enterprises in the economy of that country so that they can produce goods for the free markets would attract investors which might privatize these companies wich would also fuel the country's economy. In the case of Georgia, who's literacy rate is 100%, it is probably the infrastructure present, and the location of the country, as we discussed in class, that may make them not appeal to foreign investors. Do you find this valuable? |
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Basti23 |
13. RE: Transition Economies for IB HL and SL Yr 1
Sep 9 2008, 4:22 AM EDT
I think that the most important ingridient needed to tranform from a command market are legal and institutional reforms. After hearing a few presentations i found that legal reforms are the byuilding blocks to a free market economy. Of course the other "ingridients" are vital but I feel that none of them give the same amount of base that legal and institutional reforms do. Before a country's economy can leave the command market system the must have a defined rule of state, the rule of law must be established. If not chao swould arise and people would be claiming land and capital without being controlled by he law (government). Finally I believe that a country needs a semi-stable government to make policies and regulations of the new free market economy.
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alexsvensson |
14. RE: Transition Economies for IB HL and SL Yr 1
Sep 9 2008, 7:07 AM EDT
Liberalization: the process of allowing most prices to be determined in free markets and lowering trade barriers that had shut off contact with the price structure of the world's market economies.After being a communist state, due to the aftermath of the Vietnam War (1959 - 1975), Vietnam's citizens have suffered from an authoritarian and controlled economy. Because Vietnam is an agrarian economy, meaning that it relies mainly on agriculture and farming, it has great export opportunities. But for Vietnam, which was highly controlled, there was little opportunity for the economy to grow and develop when most export was prohibited. However, when the government imposed economical renovations, called Doi Moi, the Vietnamese economy immediately experienced a rapid lift. Today Vietnam exports products with a worth of around $ 50 billion annually. With this huge export, money can flow more fluently through the economy, and hopefully the government will use the opportunity to improve the infrastructure, health-care and education in the country. As with any economy in transition, it is vital to improve the economic development, not just the economic growth. Since Vietnam still receives a large foreign aid, $2.8 billion in 2007, it is considered a transition economy. But due to the reforms and "renovations" of the state, things have gotten better. Once problems such as the managing of the nation's water supplies have been resolved, Vietnam may turn into a developed economy much sooner than predicted. In the world of transition economies, nothing should be considered impossible, and once the economy has been liberalized the citizens too have the opportunity to help the economy change, grow and eventually prosper. Do you find this valuable? |
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SimonStrong |
15. RE: Transition Economies for IB HL and SL Yr 1
Sep 9 2008, 7:51 AM EDT
After studying the economy of Russia, pre and post transition, I found and have come to the conclusion that restructuring and privatization bode best for the said country. Russia, coming from a Soviet background has grown to $365billion in exports alone. Through privatization oil companies have flourished and now bring billions into the russian economy. In this specific case, privatization has helped Russia most.
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Benji-Bucket |
16. RE: Transition Economies for IB HL and SL Yr 1
Sep 9 2008, 8:44 AM EDT
I agree completely with you alex, but you've missed a big step. When vietnam went from a command economy to a free economy, because their inflation rate was over 700% and their debt levels were above 350 billion, even up untill 1990. Their whole system had collapsed, and then they got themselves out of this situation, with what you mentioned, the doi moi reform. With this in place, liberalization took place as well as restructuring and privitisation. That way, the companies became privatized, and so the prices get fixed by supply and demand. This leads to more production and more money ocming into the country, because it becomes an attractive place for foreign companies to invest. Macro stabilization could then also take place, as the intrest rates went down to somewhere areound five percent. vietnam is a great success story, because of its liberalization, Macro stability and restructuring and privitization. Do you find this valuable? |
MaxHuijgen |
17. RE: Transition Economies for IB HL and SL Yr 1
Sep 9 2008, 11:31 AM EDT
So I agree with both Alex, and Benji; Liberalization is the most important factor for Vietnam in order for their economy to work again. I have another little nugget of information to add to our ever-growing list of reasons why this is though. After the Vietnam War, the U.N., after the urging of the U.S.A. and a few other countries, had placed a trade embargo on the already suffering Vietnamese economy. As you can figure out, this dealt another crippling blow, partially being responsible for the extreme inflation rate, and the lack of foreign investment. It wasn't until after the economic reforms were made that the embargo was lifted, finally allowing Vietnam the chance of truly rebuilding their economy. After all, even a command economy needs to be able to trade with other countries in order to survive.
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Max.Spielbichler |
18. RE: Transition Economies for IB HL and SL Yr 1
Sep 9 2008, 11:40 AM EDT
I believe that for the new state of Montenegro, all of these are very important, as their process of moving from one economy to the other is very, very slow. There is one aspect of the four which applies the most to the Montenegrin economy. Restructuring and privatization is very important, because of the Montenegrin past. Milosevic was the one who had integrated the idea of a command economy, and had used it in its full extent. Today, although there are foreign investors in some parts of the economy like metallurgy. The real problem is that due to the war, and the failing of privatization of ex-government companies, there is a brain drain in the entire country. There are all the educated people who leave the country to find better opportunities elsewhere, which really, does not help when it comes to restructuring and privatizing the economy. Do you find this valuable? |
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VirginiaHasenmeyer |
19. RE: Transition Economies for IB HL and SL Yr 1
Sep 9 2008, 11:44 AM EDT
I did my research on Georgia and I found out that not only the economics has to be stable but also the politcal structure of the country. For example Georgia was part of the USSR until 1991 where it seperated and that is when the country decided to go to a market economy. The president at that time decided to lower the prices and force people to only buy from local shops which would be the privatization of the goods in the country. Also it is important to have a second or third money income for your country. In the case of Georgia it would be oil because of the pipelines that run through the country and to the Black Sea and also tourisme. As Laura Perez stated the difficulty is corruption because a lot of businesses are done in the black market, therefore are not legal. I belive the most important ingredients for a good run business and transition is: restructing and privatization follow by the marcoeconomics of the country.
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