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Global Development and Poverty Reduction

The Challenge for International Institutions

Edited by John-ren Chen and David Sapsford

At the beginning of the third millennium, underdevelopment and poverty continue to remain critical problems on a global scale. The purpose of this volume is to explore the various ways in which the institutions of the global economy might rise to the challenges posed by the twin goals of increasing the pace of global development and alleviating poverty.
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Chapter 9: The Role of International Institutions and the Government in Development: The Case of Croatia (Poverty and Inequality as a Consequence of the Transition Path)

Mirjana Dragicevic


Mirjana Dragicevic ˇ ´ INTRODUCTION Transition from command to the market economy in Croatia started, as in all other CEE countries, with democratic elections which enabled the transformation of the one-party (communist) political system to a multi-party system. In spite of the war aggression in Croatia, government decided on adopting ‘orthodox’ market reforms under the guidance of the IMF and World Bank. The strategy of economic liberalization, privatization, deregulation and structural adjustment and ‘conditionality’ policies reflected the principles of the so-called ‘Washington Consensus’, which laid out policy priorities that were adopted in different combinations by many countries. The economic and social consequences of the war, fast privatization and liberalization were increasing poverty and inequality. The objectives of this chapter are to analyse (a) the circumstances of the transition path in Croatia, (b) transition failures and causes of inequalities and poverty, (c) the role of government and international institutions in mapping the transition path, reduction of poverty and future development in Croatia. TRANSITION IN CROATIA The Heritage Before the dissolution of former Yugoslavia, Croatia and Slovenia had been the most developed industrial republics, with a per capita GNP which was a third higher than the Yugoslav average. Unlike other countries in Central and 197 198 Particular international institutions and poverty Eastern Europe, which had to operate behind the ‘Iron Curtain’ and had a command economy, Croatia, as a republic within the Yugoslav confederation (from the Constitution of 1974) was moving along a so-called ‘mixed path’. This path was marked by self-management and...

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