Frye Chapter1

Frye Chapter1 - Oligarchs and Markets 01/28/05 Chapter 1....

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Oligarchs and Markets 01/28//05 Chapter 1 1 Chapter 1. Economic Reform and Economic Performance in the Postcommunist World Debates among social scientists and policymakers over the proper roles of states and markets in promoting economic development have reached a critical moment. In the 1950s and 1960s, academics and political elites exhibited great faith in the capacity of the state to rectify market failures and promote economic development. Disappointment over the pace of economic growth brought a pendulum swing in the mid-1970s and 1980s as many recommended increased scope for markets to curb the power of state agents to intervene arbitrarily in the economy. Elite and popular enthusiasm for markets reached a peak in the early 1990s as the collapse of the command economy appeared to vindicate the triumph of the market over the state. The experience of the last fifteen years, however, has brought a new tenor to the debate. Most observers agree that that the expanded scope for markets has brought strong incentives to produce, but now also recognize the critical role of state institutions in generating the proper incentives to spur production in the first place. Absent the provision of public goods, like political stability, the protection of property rights, and sound currency by state agents, the powerful incentives generated by market forces are for naught. More controversially, some argue that absent the intervention of state agents to coordinate complex types of investment or to share information about the behavior of economic agents, markets fail to deliver on their substantial promise. Rather than blindly embracing market forces or state power, policymakers and academics have groped for ways to find a proper mix of state and market.
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Oligarchs and Markets 01/28//05 Chapter 1 2 There is a broad consensus that recognizes the beneficial effects of markets regulated by capable state institutions, but little consensus about how to create markets and institutions in the first place. Across the globe, scholars and policymakers facing a variety of initial conditions and institutional endowments have experimented with different institutions, policies, and strategies in hopes of creating well-regulated markets that promote economic growth. Perhaps nowhere are these efforts more intriguing than in the postcommunist world. Having experienced some of the most extreme forms of state-led economic development for more than half a century in many cases, countries across the region have spent the last decade seeking to introduce elements of market economies, such as private property rights, free prices, and economic openness on a scale rarely seen in world history. Moreover, the process of building markets has been accompanied by a massive overhaul of economic institutions. State institutions that played passive roles in the command economy, such as courts, central banks, and finance ministries, needed to be strengthened, while state institutions that dominated the command economy, such as state planning agencies and industrial branch ministries, needed to be weakened.
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Frye Chapter1 - Oligarchs and Markets 01/28/05 Chapter 1....

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