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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.
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Chapter 7: Bulgaria: Impatient but Indecisive

Transitions and Growth in Post-Soviet Europe

Patricia Dillon and Frank C. Wykoff


* We failed to explain to our people – because we didn’t know – that in order to build a society with a market economy and mature democratic institutions, we needed to go through the valley of tears. (Petar Stoyanov, President of Bulgaria, May 2001)1 So … you had no bidders other than worker/management buyouts. Most of these enterprises are garbage. People can make them work for a while but investors are not interested. (Georgi Ganchev, Centre for Liberal Strategies, May 2001)2 Bulgaria has for centuries been a battleground between East and West, swamped by sea changes of foreign conflicts and overrun by powerful neighbors. Prior to the late nineteenth century Bulgaria was under Ottoman Turk domination for 500 years. During most of the twentieth century it was controlled by either Germany or the Soviet Union. In spite of the long period under the Turks and communist oppression of the Muslim minority in the 1980s, Bulgaria is peaceful and enjoys good relations between the Bulgarian majority (85 percent) and the Turkish minority (9 percent). Bulgarians are tolerant people; they provided shelter to Armenians in 1915 and they protected their 50,000 Jews in the 1940s. In the 1990s Bulgarians again found their fortunes largely driven by outside forces, primarily the collapse of the Soviet empire. Prospects for Bulgarian reform toward a healthy Western market democracy are uncertain. Its long history of foreign domination, the effects of its communist period and its upheavals in reaction to Gorbachev’s perestroika and glasnost that forced...

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