Human dimensions of transition
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As the transition in central and eastern Europe and the Baltic states (CEE) and the Commonwealth of Independent States (CIS) enters its second decade, the region as a whole is set to achieve its second consecutive year of growth. The economic recovery that started in the middle of 1999 has strengthened and broadened in 2000, and growth is expected to continue into 2001.
Two years ago, when the Russian crisis held the region in its grip, the current pace of recovery would have seemed an optimistic prediction. Indeed, reform reversals in Russia and the potential for political instability in the region’s largest economy cast doubt over the outlook except in the most advanced countries on the path of EU accession. Since 1999, however, the combination of an unexpectedly favourable international environment, temporary gains in competitiveness from large depreciations of the rouble and other CIS currencies, and the smooth presidential transition in Russia helped to defy the pessimistic predictions for Russia and other CIS countries.
Closer economic integration with western Europe and the momentum of the EU accession process have spurred an investment and export boom in central and eastern Europe as the frontrunners for accession seek to emulate the success of Ireland, Portugal, Spain and Greece. The end of the Kosovo conflict, the new reform-oriented government in Croatia and the heavy electoral defeat of the ruling coalition in the Federal Republic of Yugoslavia (see Annex 1.1) have brightened prospects for south-eastern Europe as well.
Despite this encouraging news, the harmonisation process remains vulnerable to setbacks, and the reform agenda remains challenging for all countries in the region. Moreover, the benefits of growth have not been evenly spread. Many people continue to suffer from social upheaval and poverty.
This Transition Report focuses, in particular, on how individuals are responding to the pervasive economic changes brought about by transition as well as by the rapid pace of innovation and technological change in the industrialised countries. The people of the region have shown tremendous resourcefulness in a difficult environment by taking on multiple jobs or by starting their own business. However, more could be done to help them adapt, including removal of obstacles to entrepreneurship and, in some countries, renewed emphasis on formal education and training. The lack of restructuring in many CIS countries is also cause for serious concern, with many people under-employed in dead-end jobs, while their job skills deteriorate. Unblocking the restructuring of large industrial enterprises, particularly in the CIS, remains an urgent priority and this requires the creation of new jobs largely through business start-ups and a more effectively targeted social safety net.
The Report begins by examining the recent progress and patterns of reform across the region and the reasons for the substantial variation in economic performance. It emphasises how economic and political freedom and competition act as the driving forces for sustained progress in transition, including institutional performance (see Chapter 2). Progress in transition, in turn, has a strong influence on macroeconomic performance (Chapter 3) and access to private international capital markets (Chapter 4). The Report then looks at some of the human dimensions of transition, assessing the trends in employment and poverty and the way that both individuals (Chapter 5) and enterprises (Chapter 6) have adapted to the introduction of markets and private enterprises.
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