In the former Soviet Union and much of Eastern Europe, the collapse of communism has not meant an equitable distribution of the rewards of economic growth. When this happens, powerful monopolies or oligopolies that concentrate profits among a few replace government autocracy. A result is that the newly privatized firms seek higher returns, and shed employees formerly protected by the state. If market entry and competition is also constrained by these powerful individuals, the economy is not really free. Citizens acquire a vote and the economy may grow, but the majority does not gain much in the way of prosperity.
Corruption is another problem in transitioning economies.
Corruption is not unique to developing countries, but when an autocratic government is replaced, frequently the entire bureaucracy that supported it is also thrown out of power. The rule of law is an important element in creating the stability that encourages individuals to risk making investments in new business ventures. However, in a transition to democracy, the vacuum of power that is created increases the opportunity for corruptive practices. Lack of education also causes problems. Understanding of democratic and market principles is not an inherited trait.