Emerging From Communism -- Lessons From Russia, China, and Eastern Europe.

Boone, Peter, Stanislaw Gomulka, and Richard Layard, Emerging From Communism --Lessons From Russia, China, and Eastern Europe, Cambridge, MA and London: The MIT Press, 1998, 244 pp., index, hb, $35.

This book is a product of the Emerging Markets Group, which forms part of the Centre

for Economic Performance at the London School of Economics, but the collaborators in this project are not necessarily stationed in London. It attempts to bring together lessons drawn from the experiences gathered by the Group, and presumably others, in their involvement, in various capacities, with transition economies. The product encompasses eight chapters involving ten contributors, the first six mainly dealing with the transformation outcomes in the eastern part of Europe, with some papers devoted to only one or a few countries, and the last two dealing with China.

The topics covered range from an overview of why there has been so much distress notably in the transition economies of the eastern part of Europe, as distinct from China and Vietnam (by Richard Layard); to the causes of the output decline and recovery, with primary emphasis on Poland but something is said on why the Chinese and Vietnamese experiences are not relevant to European transition economies (by Stanislaw Gomulka); to various aspects of the origin of inflation in many transition economies and how this phenomenon can best be tamed (by Peter Boone and Jakob Horder); to privatization and enterprise restructuring, with much more emphasis on Poland than on Czechoslovakia (and later the Czech Republic) and Hungary, and parenthetically Russian, privatization (by Saul Estrin); to bank restructuring and enterprise reform, with primary attention to Poland and only some incidental remarks on Hungary and Slovenia (by Sweder van Wijnbergen); and to unemployment as it pertains in particular to enterprise restructuring in central and eastern Europe as well as in Russia and Ukraine (by Richard Jackman). The chapters on China focus on why China has grown so rapidly since 1978 (by Wing Thye Woo) and the role of decentralization in China's growth (by Chenggang Xu and Juzhong Zhuang). The latter contribution presents a useful disquisition on the evolution and importance of decentralized decision making in China since the reform process started.

Inasmuch as this is a collective effort on the part of a group of economists who know each other well and have worked together fairly closely in a variety of roles, one would have anticipated the outcome to be more homogeneous than is normally the case for collected works. But this expectation is not quite delivered upon, and not only because the eight chapters are of varying quality and will appeal to different audiences.

As usual, it is not straightforward how best to highlight the pros and cons of the volume. Since so many of the contributors have been involved in transformation policies, many in the context of advisory services, it should not be surprising to learn that the articles are in part attempts to justify the kind of policies the authors advocated. This is certainly true for Gomulka, for example. While I have no doubt about his fundamental thesis that the output decline in many transition economies sterns from the need for economic structures to adjust to the elimination of shortages and to the radical realignment of prices once price liberalization gets adopted, that the latter necessarily had to be undertaken in a comprehensive manner all at once does not follow, nor does the author satisfactorily justify it. Likewise for privatization, enterprise restructuring, and retuning the banking sectors. Only in Sweder van Wijnbergen's account is there a marginal reference to what the authorities could conceivably do when the institutional prerequisites for financial intermediation through commercial banks are not in place. Boone and Horder should at least have addressed the conceptual and measurement problems with the regressions on which the bulk of their commentary relies. The first article on China enters into excessive data and methodological detail, pitting one group of researchers against another, one lambasting the other for untidiness, of the kind that used to be waged by `Sovietologists' of various stripes. In the process, sight is lost of the far more important questions of sustainability of the catch-up process in China and the kind of lessons, other than the Chinese exceptionalism, to be drawn for other transition or other economies.

As could be anticipated, few remarks are made with regard to the economic role of the state in the transformation process, except in a highly negative manner. The authors on privatization, enterprise restructuring, and banking reform reject outright the desirability of any involvement by government in these, and, I would venture, in most other, stages of the transformation. But they bias their case in the sense that they do not consider what could conceivably have been undertaken if governments in the area, and their outside advisers and assistance providers, had from the beginning sought a rapid restructuring of the `state' so that governance capacities could have been quickly acquired and brought to bear on the transformation processes.

On the whole the book is well produced. But there are some typos and repetitions (e.g., notes to the two tables facing each other pp. 22-3 are identical, except for the typesetting!) that could have been avoided. Ditto for terminology, with one chapter using the notion "transformational economy" while most other authors use the more common "transition economy." It is rather curious that, unlike in other compendia of papers where contradictions and conflicts among the various papers are the norm, here we have contradictions within several of the papers (compare pp. 43 and 46 in the Boone-Horder's or pp. 100 and 106 in Van Wijnbergen's article). Why the editors did not remove them I fail to understand. It would have been useful if the editors had at least ensured tabulation or citation of the affiliation of the authors.

For the novice in matters concerning transformation, especially in central and eastern Europe, the volume offers a fairly well written, if unbalanced and partisan, account of key aspects of the transformation such as stabilization, privatization, enterprise and bank reform, employment policies, decentralization, and so on. Would it not have been better, if that had been the target audience, to design a more encompassing work covering all the basic aspects of transformation with roughly a similar time span, where relevant? For those who have watched the decade-long scene of transformation, the papers in this volume are on the whole too dated, too partisan, and too selective. In other words, the volume does not really have much to offer to the area specialist, and I am at a loss as to why it was put out at all. But I found the contributions by Van Wijnbergen, Jackman, and Xu-Zhuang worth reading just the same.

Jozef M. van Brabant, DESA/DPAD DC22150 New York, NY 10163-0020