Remonetisation and capital markets in the reform of centrally planned economies

Abstract

Since the mid-1950s there have been repeated attempts at reforming the Centrally Planned Economy (CPE) of the Soviet Union and other Soviet-type economies, i.e. decentralising economic decisions, activating markets to replace plans, using incentives geared to performance at market values. The frequency of these attempts and their reversals indicates both the intense pressure for reform and the difficulty of its successful implementation. The current round of economic reform involves the Soviet Union, with the "perestroika" launched by Gorbachev on his accession to power in March 1985; Hungary, where the process started in 1968 has entered a new phase in the last three years; Poland, in spite of a spell of military rule; Bulgaria and - from a higher achieved degree of marketisation - Yugoslavia. Reform appears to have restarted, more recently and slowly, in Czechoslovakia; in Eastern Europe the only countries without signs of reform are the GDR, where pressure for change is reduced by its privileged relationship with the FRG and by its more flexible vertically integrated structure, and Romania which is regressing towards the Albanian model. However significant reforms are also taking place in socialist countries outside East Europe, notably in China and Algeria.