# **I. Introduction**

In 1989, the former communist countries (FCC) embarked on the transition<sup>from a</sup> command, centrally planned economy to a market economy. At the same time,<sup>they began to</sup> transforn their political systems from repressive dictatorships into Western-style<sup>democratic</sup> regimes. The transition to democracy and the market economy in Central and Eastern<sup>Europe</sup> (CEE) and in the former Soviet Union (FSU) may be the most important<sup>political and</sup> economic event in the world history of the last decade of the 20th century.

This paper deals mainly with the problem of the optimal transformation strategy. The intention is to revisit the controversy of how quickly and radically the new market<sup>rules (and</sup> their individual components) should be adopted in the FCC and the economic and political consequences of different strategies.

The topic and issues presented in this working paper are a continuation of my research and resulting papers from 1990 and 1991 [see Dabrowski, 1992b]. These analyses were<sup>based</sup> primarily on Polish and a few CEE early transition cases. Hence, this study can benefit from the longer transition history in CEE and from the experience of FSU countries which entered the transformation process in 1992. Although some hypotheses and conclusions are less controversial than they were two or three years ago, it is still too early to elaborate any comprehensive and stable theory of post-comrnunist economic transition. This is too difficult a task for one person. Therefore, this paper is a preliminary sketch of specific problems rather than a comprehensive and closed monograph.

# The paper is organized in the following way:

Chapter II gives a short description of the specific features of post-communist economic transition in comparison with policy reforms adopted after World War II in many Western and developing countries. The identification of the real transition strategies is the subject of Chapter III. In the first section of this chapter, I propose a more developed classification<sup>of</sup> the transition strategies adopted in different countries in the period 1989-94. In Sections<sup>2 and</sup> 3, I try to evaluate different strategies from the economic and political points of view. Section 4 analyzes separately the question of output decline under transition. In Chapter IV, I return to the transition strategy debate. Section 1 summarizes the controversy about shock<sup>therapy</sup> versus gradualism. Section 2 tries to demonstrate which specific components of transition must be done quickly and which of them can be done more gradually. Section 3 is<sup>devoted to</sup> the sequencing issue, and Section 4 describes the advantages and disadvantages of<sup>slow</sup> transition. Section 5 analyzes to what extent the different starting conditions influence the transition strategy, and Section 6 discusses the issue of democracy and market reform.<sup>In</sup> Chapter V some practical recommendations are formulated. Finally, in the postscript,<sup>I try to</sup> mention some recent developments during 1995.

The **main** conclusion of this paper is related to the question of speed and sequencing<sup>of</sup> the post-communist transition. Generally, the more fast and comprehensive the economic