Annual Paper of “World Economies”

“Creating Market Economy in Eastern Europe”

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The Summary

Introduction

1. Meaning of market Economy and Tasks of the Transitions.

2. The Emergence of Market Economy in European countries.

1. . The Transition to a Market Economy.

2. Poland and Hungary as the best example of transition in the East

Europe.

2. Moldova’s way to an open economy.

Conclusion.

Introduction

This paper is oriented toward the problems of transition and creating in countries of Eastern Europe, namely Poland, Hungary, all of which are attempting to make the transition under a democratic, parliamentary form of government.

The last new years have witnessed truly extraordinary events in the formally communist societies. Under newly established conditions of free speech and freedom of organization, communist principles of political and economic control have been widely repudiated, and communist governments have been swept aside, replaced by governments committed to democratic principles and a market economy. While in some countries and parts of countries former communist have not been decisively dislodged, in almost all cases communism has lost whatever remaining legitimacy it possessed, and it most of these societies the crucial economic issue has suddenly changed from reforming the socialist planning system by the introduction of market-like elements to moving to a market-economy with private ownership of most of society's assets.

There are several reasons why the task of designing this transition is fascinating, especially to economists.

First, the problem in new: no country prior to 1989 had ever abandoned the communist political and economic system.

Second, the experience to date indicates that countries attempting transition face a number of common problems and difficulties. While there are important differences in the inherited situations and the choices made by governments of these countries, the similarities in the problems they face and the difficulties they are encountering suggest that there is logic to the transition process.

Third, the absence of any close historical parallels and the limited experience economics in transition offer an opportunity and a challenge for development of normative transition scenarios. This turn out, however to be extraordinarily difficult to construct.

Finally, the problems are not waiting for annalists' solutions; decisions currently being made may lead to an evolution with irreversible consequences.

1. Meaning of Market Economy and the Tasks of the Transitions.

That economic system which brings together natural resources, labour supply and technology and which is principally privately owned and were government has to some extent always been involved in regulating and guiding the economy, has been referred to as "Market Economy". Yet, despite this history of government intervention, individuals in that country have always been able to choose for whom they will work and what they will buy.

Now 3 groups make decisions and it is their dynamic interaction that makes the economy operate. Consumers, producers and government make economic decisions on a daily basis, the primary force being between producers and consumers; hence, the market economy designation.