Balcerowicz speaks on transitions in Eastern and Central Europe (12/26/93)

Balcerowicz speaks on transitions in Eastern and Central Europe

WASHINGTON (UNIS) - Dr. Leszek Balcerowicz, former deputy prime minister and finance minister of Poland, spoke at the International Finance Corporation's second annual lecture on the "Economic Transition in Central and Eastern Europe: Comparisons and Lessons."

The December lecture covered the process of reform in Central and Eastern Europe, and offered suggestions on what must be done in order to achieve success in these regions.

Dr. Balcerowicz began his lecture by noting that the reforms in Europe are unique for three reasons. The first difference is that the reforms are not limited to one part of society, but rather are occurring in all areas. Another special feature is the method of change, by which revolutions have occurred with relatively no bloodshed. The third is the sequence of change, as Dr. Balcerowicz noted we are seeing "mass democracy first and then capitalism" - the reverse of prior historical trends.

Emphasizing the importance of economic transition, Dr. Balcerowicz said he believes that only a government that is interested in change can achieve reform, because "the policy of reforms can be controlled," while internal conditions and environmental conditions are beyond anyone's control.

Supporting radical change over gradual reform, Dr. Balcerowicz pointed out that generally people are willing to endure short-term, severe pain over a moderate, drawn-out pain. He also believes radical change ignites several levels of reform simultaneously. including: stabilization, liberalization and institutional change.

In addition, radical change leads to the elimination of shortages, an increased variety of goods, and a convertibility in currency, which increases trade. He underlined the importance of a convertible currency, by stating, "without a convertible currency privatization is much more difficult, and indicates to the world the instability of the nation."

The dangers of hidden unemployment also were discussed. Dr. Balcerowicz said hidden unemployment drains the cash of the government and masks the extent of reforms needed. It does not maximize productivity, which is essential in today's global economy.

In his closing remarks, Dr. Balcerowicz noted that the recent election of Communists to the Polish government should not be blamed on reforms. Reforms should not be curtailed simply because Communists have won more seats, because, he underlined, "reform may not be good politics, but it is good policy."

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