Transition and Growth in Post-Communist Countries
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Transition and Growth in Post-Communist Countries

The Ten-year Experience

Edited by Lucjan T. Orlowski

Transition and Growth in Post-Communist Countries documents the first ten years of economic transition in Central and Eastern Europe.
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Chapter 12: Comment on Barr

Stanisaw Wellisz


¬ Stanis¬aw Wellisz What should a commentator do when asked to discuss a masterly study? First of all, he should praise it. Professor Barr gives an eloquent exposition of the thesis that ‘the communist welfare state was, for the most part, well adapted to the old order and – precisely for that reason – is systematically and predictably ill-suited to a market economy’. He appraises the reforms of the social security, welfare and educational systems that have been instituted in various countries in transition. But by far the most important part of the chapter is devoted to the discussion of policy changes that are yet to be made. In contrast to the economic witch-doctors, Barr does not offer cure-alls for social and economic ills. Instead, he gives a balanced exposition of the strengths and weaknesses of alternate institutional arrangements, and suggests which of them are likely to succeed, given the limited administrative capability of countries in transition. In short, his study can and should be read by anyone who has the welfare of society at heart. Any commentator worth his salt must also find something to criticize. According to Barr, the funding of retirement pensions ‘contributes to growth only if it increases domestic investment. In TEs, however, domestic investment may be low yield and high risk, the exact reverse of what pension fund managers look for. Thus pensions policy faces a horrible dilemma: domestic investment puts old-age security at risk; foreign investment puts growth at risk’. It is true that investing abroad...

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