Problems That Economies in Transition Faced

Problems That Economies in Transition Faced

Problems that economies in transition faced as they adopted free market economies

Countries with command economies faced a lot of problems as they were trying to adopt free market economies. The most important thing is that every country is different, what worked in one country wouldn’t work in another. And because of this every country had to make their own path to free market. But despite this fact many problems were similar. And in this essay I would like to consider them. First of all, free market requires property rights.

But in pure command economy everything was wend by the state, so there were no need to develop them. Government was able to do whatever it wished. So, everything had to be done from the beginning. And also. After introducing property rights businessmen started to face with racket. There were high level of criminal. Businessmen had to pay money to racketeers to have their protection, otherwise, they could be killed. During the transition towards free market economies countries had to deal with a huge inflation. That happened because prices were no more established by the state.

Shops raised them. Also, what made situation worse, government started to print more money to pay people and this caused an inflation. In some countries inflation was 300 – 400%. The result of inflation was that a lot of people plugged into poverty. All their lifetime savings were now useless. Another really serious problem was that when it was command economy fabrics didn’t have to worry about money. They were given by the government. And that why there were no innovations in productions. Also they had consumer base.

But after establishing free market consumer had a choice and they usually preferred to buy better quality products from abroad. To make more profit fabrics started to produce more expensive goods and as a result there very deficit of everyday goods. Prices raised. In conclusion I can say that despite all problems that countries faced as they adopted free market economy, now they have stability, owners of fabrics try to improve production and as a result countries are getting stronger. But it will take a long time before they would be as powerful as before.