The Second Decade of Transition

By design, our book has concentrated on the first decade of transition. To this point it has concentrated almost exclusively on tracking the changes to output and productivity during the first ten years after the start of the reforms, and on identifying key factors which have affected the choice of the governments during this period, and before. The analysis has considered the determinants of the changes that occurred during reform's first decade and measured some of the effects. As this book has demonstrated, much can be learned from studying the reforms, their causes, and their effects during this period.

However, institutional reform and economic change did not stop after ten years. Much has happened since. As in the first decade of transition, important variations exist among the regions. There are many common themes. For example, overall the picture in the second decade is generally more optimistic than that of the first decade. China and Vietnam have continued to grow at rapid rates for twenty years now and there is no end in sight. In Central Europe, productivity growth in agriculture has also continued. And, as before, there are still systemic differences among the CIS nations as some countries appear to be succeeding while others are continuing to struggle. For several countries in the CIS, the late 1990s are beginning to be recognized as a turning point. Russia's financial crisis in 1998 was in some ways at the same time the worst moment of transition and the start of recovery. Economic growth in countries such as Russia, Kazakhstan, and Ukraine has been strong since the crisis was resolved. Rural poverty has been falling strongly throughout the transition world since 1999 (World Bank 2005). Other nations, however, remain stagnant and are continuing to be plagued by corruption, inertia, and unrest.

There is something, however, fundamentally different about the second decade when comparing across nations. While economic fortunes are more similar in the second than in the first decade of transition, what certainly has differed has been the source of growth in agriculture. Economic transition, the realignment of prices, the emergence of property rights, and the appearance of institutions of exchange drove the rise in productivity (and explain the absence of productivity growth) in almost all of the transition nations during the first decade of reform. During the second decade, the main impetus of transition—in and of itself—is largely spent in several regions and the engines of growth, while still spinning, differ fundamentally from region to region. Despite this, we still believe that the analysis in this book remains valid for understanding several of the key changes that took place in the second decade.

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