Constructing a Market Economy

Constructing a Market Economy

Diverse Paths from Central Planning in Asia and Europe

Richard Pomfret

During the 1990s over two dozen countries in Europe and Asia underwent a transition from centrally planned to more market-oriented economies. In Constructing a Market Economy, Richard Pomfret reviews their diverse experiences and assesses the outcome of transition in each case. The book includes an extensive review of empirical evidence and, uniquely, aims to cover all the transition economies in a comparative fashion rather than focusing on any particular country.

Chapter 2: The Soviet Blueprint

Richard Pomfret


The starting point for any study of transition is the Soviet model, or more specifically the policies introduced by Stalin in the USSR in the late 1920s and the 1930s. These policies became the blueprint for centrally planned economies in eastern Europe, Mongolia and China in the late 1940s. Even though there was later substantial divergence, especially by Yugoslavia and China, the Stalinist model was the common starting point. Moreover, for the USSR and eastern European countries other than Yugoslavia the 1980s endpoint was not so far from the Stalinist model, despite various attempts at reform. 2.1 THE SOVIET EXPERIENCE The Soviet Union was widely seen as an economic success in the 1950s and then as a failure in the 1980s. What was the overall economic record of the USSR: was it as successful as it seemed, and as dismal a failure? The Soviet starting point was denigrated by Lenin and Stalin, and their view became the conventional wisdom even among non-Soviet economic historians. Lenin’s view of Tsarist Russia as economically backward and incapable of matching western European economies without drastic change was echoed by Gerschenkron, Nove and others. Gregory’s statistical evidence shows, however, that Russian performance between the emancipation of the serfs in 1861 and the outbreak of war in 1914 was not bad; the Tsarist economy was catching up with the older industrial nations of western Europe and institutionally it was dynamic (Gregory, 1994; 1982). By 1913 Russia had the world’s fifth-largest industrial sector behind the USA, Germany,...

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