International resource transfers and the respective roles of governments and private capital flows: economic and political reforms in Eastern Europe

Abstract

Over the past 18 months or so, the economic picture in Europe has undergone a sea change: European integration — ‘1992’ — no longer is an idea to work toward, but a very concrete step toward the creation not only of a European market, but also of a European economy. At the same time, the countries of Central and Eastern Europe have embarked on a historic move toward systemic transformation that will once again make them an integral part of the world economy. However, in the time since the unprecedented decision of these countries to change their economic orientation fundamentally toward guidance by market signals, the stark realities of that decision have become clear. They are the more apparent as the efforts at economic reform break decisively with the past. Previous such attempts generally sought to find ways of cohabitation for what remained essentially different economic systems, including a way to operate within a multilateral trading framework. Today, these countries no longer seek a way to live in a world while retaining their different economic orientation, but rather to adapt themselves to be part of that world and to regenerate linkages that have been stunted during decades of politically determined, inward-looking economic development. In short, they look to political and economic transformation.

The views expressed are those of the author and do not necessarily reflect those of the International Monetary Fund.