The Economics of Transformation (PDF)

Janos Kornai The collapse of the socialist system in eastern Europe and the Soviet Union is one of the major events of this century, perhaps the most important of all. The transformation now taking place is without any precedent in history. The original development of capitalism was a process that lasted for centuries. The almost total liquidation of capitalism in the countries ruled by communist parties took place-in historical terms-in a very short period of time, but it was carried out by force and repressive methods. The transformation which has now begun is diverting these countries back onto the path of capitalist development and the hope is that the process will take place much faster than the original emergence of capitalism. And another hope can be expressed: that the governments of these countries will not resort during the process to the arsenal of political violence and repression in order to speed it up. Although the post -socialist transformation is a historically unique phenomenon, some components and features of it show a similarity with other processes or events that took place under other circumstances. Other empires before the Soviet empire collapsed. The political structures of other countries took the path from dictatorship to democracy. Under other conditions, state assets have been privatized, inflation has been curbed, foreign capital has flowed in, new oligopolies have formed, and so on. The uniqueness lies in the new, specific configuration of these component processes and may other phenomena.