LESSONS OF THE 1ST 4 YEARS OF SYSTEMIC CHANGE IN EASTERN-EUROPE

The writer takes an overview.of four years of systemic change in the w hole of Eastern Europe and the former Soviet Union and asks what the 1 0 main lessons are. He sees a sharp dividing line between failure and success, primarily distinguished by whether inflation has been brought under control. Inflation is caused by a rent-seeking old elite that e xploits the weakness of the state. The cure to check the old elite is democratization that reinforces state institutions. The falls in natio nal incomes are big but varied, while unemployment has been less than anticipated and little social unrest has occurred. Exports to the West have been dynamic and the entrepreneurial spirit is impressive. (C) 1 994 Academic Press, Inc.