Creating Capitalism

Creating Capitalism

Transitions and Growth in Post-Soviet Europe

Patricia Dillon and Frank C. Wykoff

Employing historical analysis and building on growth theory and modern political economy, Dillon and Wykoff explain Soviet disintegration and analyze efforts to create capitalism in newly independent states. They show how five fundamental economic reforms generate growth, and use an original model to test the connections between reforms, elections and economic performance. The authors examine the progress of six countries (Bulgaria, Czech Republic, Estonia, Hungary, Russia and Slovakia) in terms of each country’s history and its successful application of the five reforms. Anyone interested in how capitalism works and why pro-market reforms encounter resistance in spite of their potential for generating higher living standards will find this book essential reading.


Patricia Dillon and Frank C. Wykoff


The economic and political progress of newly independent Central and Eastern European states has been a popular subject for research since the early 1990s, generating a steady flow of articles and new magazines, journals and books. Why should you, the reader, be interested in another book on transition from planning to markets? We think that some key issues are underrepresented in the literature and have been virtually inaccessible to the general interest reader. Ultimately it is economic growth that indicates whether transitions are working. Yet little has been done to apply growth analysis, a powerful implement in the economist’s toolbox, to evaluate economic performance. Furthermore, we have ten years of evidence telling us that efforts to transplant Western economic reform measures without careful political analysis does not work well. Political and social structures in post-Soviet states have not adapted easily to economic reform programs. Some countries continue to vacillate between liberalization toward markets and reversion to various forms of socialism. This book integrates growth theory with a public choice approach to explain why each potential reform is necessary and why reforms nevertheless encounter so much resistance. Our framework can assist those interested in the transformation of poor economies anywhere. Many nations, not only former Eastern bloc countries, want to enjoy the fruits of both decentralized market systems and democratic political systems. ORGANIZATION OF THE BOOK This book has three parts: the first six chapters make up the theoretical foundations; the next seven chapters are case studies of individual countries (Bulgaria,...

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