CSS 320
Economies in Transition
Friday: 2:00 p.m. - 4:00 p.m.
John P. Bonin
Spring 2011
Course Information
Description
The transition of the formerly centrally planned and bureaucratically managed economies of the
now-defunct Soviet bloc to market economies based on private property and individual initiative
is an event unparalleled in history. The tutorial begins by examining the early period of transition
with consideration of the impact legacies and initial conditions on the speed and sequencing of
policies. Policy issues are considered by focusing on the so-called trinity of liberalization,
stabilization, and privatization. The prospects for sustainable growth are analyzed by tracing the
progress of transitioning countries over the last two decades. After constructing a framework for
understanding transition as a concept based on the varied experiences of transitioning countries,
we turn attention to China as a country that is both transitioning to a market-oriented economy
and developing rapidly into a global economic power.
Each student will become an expert advisor to one transition country by researching its pretransition background and learning about its transition experiences throughout the tutorial. The
chosen country’s experiences with the relevant topic will be woven into the writing assignments
for the first three weeks. At the end of the tutorial, each student will submit a country expert
report dealing with a policy issue of current concern in the chosen country.
Texts (available for purchase at Broad Street Books)
Aslund, Anders, How Capitalism Was Built: The Transformation of Central and Eastern
Europe, Russia, and Central Asia, Cambridge University Press, 2007 (hereafter:
Aslund)
Naughton, Barry, The Chinese Economy: Transitions and Growth, MIT Press, 2007
(hereafter; Naughton)
Other Readings
Several articles published in (The) Journal of Economic Perspectives (hereafter: JEP)
appear on the course outline that follows. Other journal articles may be added to the list
of required readings at the instructor’s discretion as the course progresses.
All journal articles will be accessible electronically in JSTOR. Go to Indexes on the
Wesleyan library page and type JSTOR in the search box. From the JSTOR page, browse
by Title to find the journal and use the citation in course outline to find the article.
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(5 – 7 pages)
Four Tutorial Papers
Four standard five-to-seven-page tutorial papers are assigned to be completed before the
relevant tutorial discussions during the first three weeks and in the sixth week. The writing
assignment for the fourth week is described in the next section. The fifth week is devoted to
readings and a tutorial discussion about the reforms in China but the writing assignment on
China is due only in the sixth week. This policy is designed to allow time for experts to
continue their research and work on the country paper, which is due in the seventh week.
Writing tips are provided at the end of this syllabus; these may be useful in preparing the
tutorial papers and the final country report.
The Country Expert’s Research Report
(12 – 15 pages)
Each student will become an expert advisor on one transitioning country. A background
paper will be prepared for week #1 discussing your chosen country’s approach to transition.
Brief descriptions of your chosen country’s experiences with the relevant topics are
included in the papers for weeks #2 and #3. A research prospectus for the final country
report, which treats in depth some policy issue of current concern in your country and a
preliminary annotated bibliography are due in week #4. When relevant, revisions of the
earlier country work may be incorporated in the final report, which is due in week #7.
Choosing Your Country: From a List of Twenty Nine
Aslund considers 21 transitioning countries: the 3 Baltic countries, 4 Central European
countries, 2 Southeast European countries and 12 Commonwealth of Independent States
(CIS) countries. Transitioning countries missing from his list are the following 8 countries:
Slovenia, Albania, Bosnia and Herzegovinia, Croatia, FYR Macedonia, Montenegro,
Serbia, and Mongolia. Taken together, these 29 countries (and Turkey) make up the set of
countries for which the European Bank for Reconstruction and Development (EBRD) was
constituted to provide support in the transition to a market economy. The EBRD website
provides some background information about each country: http://www.ebrd.com/index.htm
You may find it useful to consult this source to help you make a country choice from the list
of 29 countries, i.e., the current EBRD 29 with Turkey excluded but the (now-graduated)
Czech Republic included.
Choose your country judiciously. Policy advisors who switch countries lose credibility!
Instructor Office Hours: PAC 305
Wednesday:
Thursday:
Other Times:
2:00 p.m. – 4:00 p.m.
10:30 a.m. – noon.
Possible but by prior arrangement
Contact Information: jbonin@wesleyan.edu or x2353
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Week 1 Getting to Know Your Country: Legacies & Transition Strategy
Aslund: Introduction and Chapters 1 & 2
Naughton: Chapters 1 & 2 & 3
Murrell, Peter, "Symposium on Economic Transition in the Soviet Union and Eastern
Europe," JEP, 5:4, 1991, pp. 3 - 9.
Tutorial Paper #1
Getting Acquainted
From the list given on the previous page, choose the transition country for which you wish
to become an expert advisor and on which you will write your country expert research report. If
you choose one of the countries considered by Aslund, justify his choice of start date for the
transition by providing the relevant details. If you chose one of the nine available countries that
are NOT considered by Aslund, provide a date for the beginning of the transition and provide
details to explain why this is the relevant start date.
Describe the salient economic features of your country at the beginning of its transition.
Identify the most important economic problems facing the policymakers in your country at the
beginning of its transition. Discuss the options and tools available to policymakers to deal with
these problems. Consider interactions between legacies and policy options; discuss the
implications of legacies for the speed of implementation of policies in your chosen country.
Conclude by classifying your chosen country’s transition strategy as “shock therapy” or
“gradualism” based on the policies pursued during the beginning few years (no more than five)
of its transition and defend (explain thoroughly the reasons for) your classification.
N.B.
Your classification should be informed only by your research into the economic
situation of your country at the beginning of the transition and the initial policies
pursued for no more than the first five years of transition. You should not use the
actual experiences of your country as its transition progressed after that time.
References:
Provide a short bibliography in which you list all the sources that you
consulted to obtain information on your country using the standard format
as illustrated in the reading assignment. Electronic sources should be
identified by URL.
N.B.
The references should be put on a separate page that does NOT count
toward the following page limits.
Expected Length:
No more than five (5) but at least four (4) double-spaced typewritten
pages in standard font of normal size, e.g., this assignment is typed in
Times New Roman, size 12, with standard page margins.
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Week 2 Transition as a “Process”: Liberalization and Privatization
Aslund: Chapters 4 & 6 & 10
Naughton: Chapter 4
Fischer, Stanley and Gelb, Alan, "The Process of Socialist Economic Transformation,"
JEP, 5:4, 1991, pp. 91 - 105.
Murrell, Peter, "How Far Has Transition Progressed?” JEP, 10:2, 1996, pp. 25 - 44.
Brada, Josef C., “Privatization is Transition - or Is It?” JEP, 10:2, 1996, pp. 67 - 86.
Tutorial Paper #2 Transition as a Process: Speed and Sequencing
Using the readings in this module, explain your understanding of transition as a“process”.
Discuss the interrelationships among problems and policy options and the implications of such
interrelationships for the sequencing of policies and the speed of implementation. Would Fischer
and Gelb agree with Aslund’s characterization of trade and price liberalization as the essential
first step in transition? Discuss how your analysis of transition as process leads you to change or
to affirm your previous characterization of your chosen country’s transition strategy.
In 1996, Brada claimed that privatization may not be such a crucial component of transition.
On the contrary, Aslund (p. 308) asserts retrospectively: “The earlier and faster privatization
was, the better its quality and economic performance.” The objective of privatization is to
provide the microeconomic foundations to promote a competitive, efficient market economy.
Using the information in the readings, compare (and contrast) the early experiences of the
transition countries (on which Brada’s claim is based) with their more recent experiences
presented in Aslund focusing on the role that the method (type) of privatization played in
achieving the stated objective. The following questions may be useful prompts in developing
your argument. Do you think that privatization is “much ado about nothing” in retrospect? What
implications can you draw from Aslund’s account of the Russian oligarchs for privatization in
general? Characterize and evaluate your chosen country’s experiences with its own privatization
policy based on this analysis by adding details from your own research.
References:
As before, provide a short bibliography listing any the sources that you
consulted to obtain information about your country using the standard
formats. The references should be put on a separate page that does NOT
count toward the following page limits. Please follow this practice for the
all future writing assignments.
Expected Length:
No more than seven (7) but at least five (5) double-spaced typewritten
pages in standard font of normal size, e.g., this assignment is typed in
Times New Roman, size 12, with standard page margins.
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Week 3 Transition as Outcomes: Stabilization and Sustainable Growth
Aslund: Chapters 3 & 5 and Conclusion
Naughton: Chapter 6
Fischer, Stanley, Sahay, Ratna, and Végh, Carlos A., “Stabilization and Growth in
Transition Economies: The Early Experience,” JEP, 10:2, 1996, pp. 45 - 66.
Tutorial Paper #3 Stabilization and Sustainable Growth: Partners in Transition?
Country experiences with the (un)Holy Trinity of liberalization, stabilization, and
privatization capture the essence of interdependencies of economic policies and the difficulties
with the sequencing and speed of transition. Fischer et al. assert that only price and trade
liberalization coupled with macrostabilization could be achieved quickly while other elements of
the reform process would inherently take time. The objective of stabilization policy is to provide
the macroeconomic foundations for the resumption of growth after the “transitional recession”.
According to Aslund, the main problem with the output slump (transitional recession) was not its
depth (or proper measurement) but the long delay in economic recovery (growth resumption) in
many countries. Compare (and contrast) the early (before 1998) experiences of the non-CIS
countries and the CIS countries with respect to the output slump paying attention to the
determinants of growth identified by Aslund and by Naughton. Using the post-1998 experiences
of the CIS countries and the analysis by Fischer et al., discuss thoroughly the interdependencies
between stabilization and growth. The following questions may be useful prompts in developing
your argument. What policies do these authors find to be crucial for achieving stabilization?
What role does an exchange rate anchor play in stabilization? What does Aslund identify as the
main factor in a successful stabilization? Does Aslund agree with Fischer and his colleagues that
stabilization is both a necessary and a sufficient condition for the resumption of sustainable
growth? In what sense are stabilization and growth partners? Evaluate your chosen country’s
experiences with its own stabilization policy and growth outcomes by adding details from your
own research.
References:
As before, provide a short bibliography listing any the sources that you
consulted to obtain information about your country using the standard
formats. The references should be put on a separate page that does NOT
count toward the following page limits. Please follow this practice for the
all future writing assignments.
Expected Length:
No more than seven (7) but at least five (5) double-spaced typewritten
pages in standard font of normal size, e.g., this assignment is typed in
Times New Roman, size 12, with standard page margins.
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Week 4 Précis of Work in Progress
A précis of work in progress contains three essential components.
1. The motivation for the research and a statement of the research question. A clear statement
of the focus of your research with a specification of the research question should be provided.
2.
A statement of the research approach to be taken and the progress made should be
provided. The following questions may provide useful prompts for presenting and
developing the research approach. However, they are not intended to be a list of exam
questions to be answered individually.
Please use judiciously!
 How do you intend to answer the research question?
 What evidence will you seek?
 What supportive argumentation will you use?
 What are your anticipated results?
 How do you expect to support your policy advice?
In addition, a brief statement of the work you have accomplished to date should be
included. This statement should identify any difficulties that you foresee in dealing with
your research question so that the instructor can provide help in a timely manner.
3. An annotated bibliography. This consists of a list of sources that you have found to date for
your research project. Each citation is accompanied by two or three sentences that link the
material in the source directly to your research question. You must explain why you think
that this source will be useful in dealing with your research question. The references should
be arranged alphabetically by the author’s last name. Be sure to include full information in
your citations. See the bibliography in Aslund for examples of proper citations
Expected Length:
Sections 1 and 2 combined should be at least two (2) but no more than four (4) pages.
Section 3 should be at least two (2) but no more than three (3) pages.
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Reading Assignments
Week 5 China (Rapidly) Developing Economy: Without Historical Precedent!
Institutional Background: Naughton: Chapters 5 & 8 & 9 & 19
Review: Naughton: Chapters 4 & 6
Main Readings
Naughton: 16 & 18
Perkins, Dwight, “Completing China’s Move to the Market,” Journal of Economic
Perspectives (hereafter, JEP), 8:2, (Spring) 1994, pp. 23 - 46.
Yusuf, Shahid, “China’s Macroeconomic Performance and Management During
Transition,” JEP, 8:2, (Spring) 1994, pp. 71 - 92.
Discussion Questions for Tutorial
1. What are the development aspects of the early (first phase) reform period identified
by Naughton in China?
2. What are the transition aspects of the early (first phase) reform period in China?
3. How does Perkins see the “withering away of the State” occurring in China?
4. What role does Yusuf see stabilization playing in China’s growth during this early
period?
5. What roles do price and trade liberalization play in China’s transition during this
early period?
6. What is left for China to do after the first phase of reforms to complete a successful
transition to a market economy?
7. How does Naughton view the completion of China’s transition in the second period
of reforms with respect to stabilization and liberalization only?
Week 6 China’s Transition to the Market: Toward a Harmonious Society?
Institutional Background: Naughton: Chapters 10 & 14 & 15 & 20
Main Readings
Naughton: Chapters 12 & 13 & 17
Jefferson, Gary and Rawski, Thomas, “Enterprise Reform in Chinese Industry,” JEP, 8:2,
(Spring) 1994, pp. 47 - 70.
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Tutorial Paper #4 China as a Transitioning/Developing Giant
Beginning in 1978, China began to reform its economic system in what is often described as
a gradualist transition to a market economy. In the subsequent three decades, the speed of
China’s development and its growth rates in GDP are without precedent in history. Justin Lin,
the Chief Economist at the World Bank, describes China’s policies during these three decades as
pursuing “ a comparative advantage oriented development strategy.” Naughton characterizes the
thirty-year period of economic reform as “growing out of the plan.” Using information from the
readings, discuss the juxtaposition of plan and market ingredients to support Naughton’s point.
Using information from the readings, identify the main engines (factors) of China’s rapid growth
during this period. Use your analysis to support or contest Lin’s characterization of China’s
development.
Naughton divides the thirty years of reform in China into two phases. He characterizes the
first phase as “reforms without losers” and the second phase as “reforms with losers.” Would
Perkins and Yusuf agree with Naughton’s assessment of the first phase? Justify your opinion by
using information from each of their assessments of the early reform period. Rawski and
Jefferson conclude their analysis of the first phase of enterprise reforms in China with this
optimistic statement: “… the current acceleration in the tempo of industrial reform, with its new
focus on establishing conditions similar to standard market arrangements, may open the way to
harnessing China’s potential for further gains in industrial productivity without creating
intolerable political tensions or social costs.” What changes were unanticipated by Rawski and
Jefferson that support Naughton’s more pessimistic view of the second phase? Relate the
outcomes from policies undertaken in the first phase to subsequent reform policies in the second
phase. Discuss the consequences of policies undertaken in the second phase and identify any
resulting distortions. On page 4 of the introduction, Naughton claims that China’s current
diversity can be traced to two incomplete transitions. Establish the sense in which the second
phase of reforms leaves incomplete China’s transition to a mature, developed market economy.
Conclude your essay with a brief assessment of whether China’s current transition path is
leading the country toward a harmonious society, which is the overarching policy goal adopted
by the Chinese Communist Party at its last Congress. Be sure to include your definition (view) of
a harmonious society in your evaluation.
Expected Length:
No more than seven (7) but at least five (5) double-spaced typewritten
pages in standard font of normal size, e.g., this assignment is typed in
Times New Roman, size 12, with standard page margins.
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Week 7 Country Expert Research Report
Expected Length: Twelve to Fifteen pages with a bibliography at the end.
WRITING TIPS
1. Every paper should have an integrative theme in the introductory paragraph. The integrative
theme specifies the position that will be taken and defended; hence, it serves as a selection
tool to guide the writer in determining what to include in the final version of the paper.
Write no paper without an integrative theme.
2. The easiest way to develop a strong argument is to force differences. Sometimes this can be
done effectively in a point-counterpoint framework. Evidence and well-structured logical
arguments are the foundations of good analytical writing.
Make sure that your paper deals with the topic in sufficient depth.
3. Each paragraph must have its own integrity and be brought to closure. A paragraph is NOT
a laundry list of assertions. Nor should a point-counterpoint development be left unresolved
to drift into oblivion.
You should be able to state the basic point of each paragraph
using a four-word phrase.
Each paragraph must bring the point to closure.
CONCLUDE a paragraph; don’t simply end it.
4. A paper is like an hourglass. The introduction begins from a broad perspective to motivate
the paper and narrows by stating the integrative theme. The body of the paper develops fully
and solidly the position in the integrative theme. Paragraphs make individual points; they are
arranged sequentially to support and defend as strongly as possible the position taken. The
conclusion does not simply restate the position or recapitulate what has been done. Rather
the conclusion should convince the reader that the writer has supported the position
compellingly.
Convince the reader of the strength of your analysis in the conclusion.
FROST YOUR CAKE!