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- Date Submitted: 05/04/2014 09:10 PM
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Analyze the potential difficulties of starting a business in a transition economy and provide recommendations on how they should be confronted.
Economies in transition involve the lowering and rising of trade barriers, redefining the role of governments and releasing demand to keep up with supply. The transition process can be bewildering to state officials and inflict extreme inflation-related hardships on average citizens. Foreign investments and open-door immigration policies, however, create greater capitalist opportunities for people who once depended upon allocations from the state (McLeod, 2010).
Where do the transition economies fit in to this global picture? If we look back at what has happened in this part of the world in the past twenty years or so, we can see that the transition economies increasingly face just the same problems and challenges as the rest of the world. That is a clear indication of the extraordinary progress made thus far. It is difficult to overestimate the achievements made in this part of the world in a remarkably short period. After all, reversing decades of economic mismanagement is no easy task (Krueger, 2006).
Adopting a market-based economic system is a difficult and lengthy process. It takes time for activities to spring up and for people to adapt to new incentives, institutions and constraints. Dismantling a command economy meant starting all over again. What economic assets remained had to be valued and transferred into private hands ‚and entrepreneurial private hands at that. At every level of activity people had to start thinking for themselves. Those in charge of economic policymaking had to learn how to function in a market-based economy. The basic structures of a market economy had to be put in place as rapidly as possible. Yet infrastructure was often lacking, or in poor condition. Health and education provision needed overhauling and pension systems needed radical reform. There was thus an urgent...
Economies in transition involve the lowering and rising of trade barriers, redefining the role of governments and releasing demand to keep up with supply. The transition process can be bewildering to state officials and inflict extreme inflation-related hardships on average citizens. Foreign investments and open-door immigration policies, however, create greater capitalist opportunities for people who once depended upon allocations from the state (McLeod, 2010).
Where do the transition economies fit in to this global picture? If we look back at what has happened in this part of the world in the past twenty years or so, we can see that the transition economies increasingly face just the same problems and challenges as the rest of the world. That is a clear indication of the extraordinary progress made thus far. It is difficult to overestimate the achievements made in this part of the world in a remarkably short period. After all, reversing decades of economic mismanagement is no easy task (Krueger, 2006).
Adopting a market-based economic system is a difficult and lengthy process. It takes time for activities to spring up and for people to adapt to new incentives, institutions and constraints. Dismantling a command economy meant starting all over again. What economic assets remained had to be valued and transferred into private hands ‚and entrepreneurial private hands at that. At every level of activity people had to start thinking for themselves. Those in charge of economic policymaking had to learn how to function in a market-based economy. The basic structures of a market economy had to be put in place as rapidly as possible. Yet infrastructure was often lacking, or in poor condition. Health and education provision needed overhauling and pension systems needed radical reform. There was thus an urgent...