IMF_1998.doc - Equity Issues in Policymaking in Transition...

This preview shows page 1 - 5 out of 44 pages.

Equity Issues in Policymaking in Transition Economies Grzegorz W. Kolodko Professor, Warsaw School of Economics, Poland, and Senior Visiting Fellow at the Development Economics Research Group, World Bank Prepared for Conference on Economic Policy and Equity June 8–9, 1998 International Monetary Fund Washington, D.C. Published in: Vito Tanzi, Ke-young Chu, and Sanjeev Gupta. (eds.), (1999). “Economic Policy and Equity”, International Monetary Fund, Washington, DC, pp. 150-88.
- 1 - Equity Issues in Policymaking in Transition Economies Grzegorz W. Kolodko* Professor at Warsaw School of Economics, Poland, and Senior Visiting Fellow at the Development Economics Research Group, World Bank *The author was the First Deputy Premier and Minister of Finance of Poland in 1994–97, and led his country into OECD membership in 1996. In 1997–98, he was Distinguished Sasakawa Chair for Development Policy at the United Nations University World Institute for Development Economics Research (UNU/WIDER), in Helsinki. He is currently an Advisor to the President of Poland. The views expressed in this paper are those of the author and do not necessarily represent those of the IMF or other institutions.
- 2 - C ONTENTS I. Introduction .................................................................................................................... 3 II. Departure ....................................................................................................................... 4 III. Expectations ................................................................................................................... 8 IV. Reality .......................................................................................................................... 15 V. Mechanism ................................................................................................................... 23 VI. Policy ............................................................................................................................ 33 VII. Nouveaux Riches Versus Nouveaux Pauvres ............................................................... 53 VIII. Conclusions .................................................................................................................. 62 Text Tables 1. Income Inequality Indexes in Eastern and Western Europe, 1986–87 ........................... 5 2. Changes in Income Inequality During Transition ......................................................... 16 3. Recession and Growth in Transition Economies, 1990–97 .......................................... 36 4. Russia: Placing the Blame ............................................................................................ 42 5. Increase in Poverty and GDP Decline During Transition, 1987–94 ............................. 57 Figures 1. Changes of Gini Coefficient in Transition Economies, 1998/88–1993/94 .................... 18 2. Poland: Gini Coefficient During Implementation of Strategy for Poland ..................... 43 3. Poland: Decile Ratio for Wages, 1993–96 .................................................................. 44 4. Selected Countries: Poverty Groups, 1987/88 and 1993/94 ....................................... 55 References ................................................................................................................................ 65
- 3 - I. I NTRODUCTION The biggest challenge an economist can face is not answering a difficult theoretical question but introducing reforms and making the day-to-day policy decisions that will prove that theory works. However, often that theory does not work. The next challenge, then, is to modify the theory or to keep trying to change the reality to follow that theory. In the real world, far from the ivory tower of academia and elegant models, political life is brutal. What matters is political power, not the logical arguments and statistical evidence. In a classroom or at a conference, it may be enough to be right and to be able to prove it in a scholarly way; policymakers, however, need a majority in the parliament and, more important, social and political support for reforms. Policymakers need to be wise and effective, but these attributes do not always go together. Equity issues in policymaking are difficult to resolve because they are linked not only to economic matters but also to social constraints and political conflicts. What is fair and what is not, seems to be more a matter for ideological or philosophical dispute, not mathematical models. Equity is always a concern of policymaker, especially in transition economies’ early

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture