Industrial Policy in Eastern Europe

This volume in essence continues my recent contributions towards building up a better understanding of the wide range of obstacles besetting the transitions away from administrative planning in the former communist regimes in the eastern part of Europe. It is self-contained, however. As such, it specifically addresses issues revolving around how best to govern economies, and indeed societies more generally, that are undergoing fundamental structural transfor- mation, and whether industrial policy can facilitate progressing with the vexing transformations that will have to be enacted over a protracted period of time. Because of the bewildering variety of hindrances that the managers of the transition have been confronted with, many of which were not even contem- plated when the programs were first designed, regaining a measure of good governance, including notably good economic governance, is critical in formu- lating a positive pOlitical economy of transition. Arguably most critical is steering the processes of destruction and creation-not creative destruction in the Schumpeterian sense. In some cases, this requires reallocating decom- missioned resources, both capital and labor, to new activities. Changing rules on the utilization of existing assets is evidently at the core of what the transi- tion towards market-based economic systems should be all about Very often, however, this requires establishing new economic activities from domestic and foreign savings.