Introduction to the World Economy

Philip Leatherwood, Lecturer

Kazakhstan Institute of Management, Economics, and Strategic Planning

18 April, 2001

Problems of Planning a Market Economy

The Plan

  1. Stabilization
    1. Low inflation
    2. Stable currency
    3. Balanced budgets
  2. Marketization
    1. Liberalization
    2. Privatization
    3. Market Supportive Infrastructure
  3. Foreign Aid
    1. Debt relief
    2. Currency stabilization fund
    3. Social safety net

The Problem

  1. The Dynamic--Big Bang vs. Gradualism
    1. Big Bang—priority given to liberalization and privatization
    2. Gradualism—priority given to the creation of a market supportive institutional framework
  2. Inflation
    1. "Inflation causes recession," p.207
  3. Lack of Competitive Industry
    1. Privatization implies "creative destruction"
  4. Trade Liberalization Misunderstood
    1. Should avoid excessive penalization of consumers

Conclusion

We are still learning.
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