The paper investigates the utility of economic theory for post‐Communist economic transformation. It serves to explain the main reasons for market reform failure in different post‐Communist countries.
A literature review suggests that after the collapse of the Communist system there was no economic theory of transition to market. Whenever one considers the transition of post‐Communist economies to a market system (which, in fact, is nothing but post‐Communist transition to capitalist economies), it has to be placed on record, as this kind of transition has no precedent in history.
The main mistake of gradualists stems from their overlooking some very important conditions for successful transition: political guarantees and internal assets for reforms. And the success of shock therapy rests on the paradox, “the worse, the better”.
There is as yet no special economic theory of post‐Communist transformation and it is just developing. This paper helps one to understand the main features of shock therapy and gradualism for designing the framework of such a theory. It is geared towards researchers and students interested in the theoretical aspects of the post‐Communist economic transition to markets.
