Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Transition Economies

450,634 views

Published on

Transition economies are involved in a process of moving from a centrally planned economy to a mixed or free market economy

Published in: Economy & Finance
  • Dating for everyone is here: ❤❤❤ http://bit.ly/39mQKz3 ❤❤❤
       Reply 
    Are you sure you want to  Yes  No
    Your message goes here
  • Sex in your area is here: ❶❶❶ http://bit.ly/39mQKz3 ❶❶❶
       Reply 
    Are you sure you want to  Yes  No
    Your message goes here
  • Looking For A Job? Positions available now. FT or PT. $10-$30/hr. No exp required. ★★★ http://t.cn/AieXSfKU
       Reply 
    Are you sure you want to  Yes  No
    Your message goes here
  • It's genuinely changed my life. I have been sleeping in the spare room for 4 months - and let's just say my sex life had become pretty boring! My wife and I were becoming strangers living in the same house. Thanks to your strategies, I am now back in our bed and the closeness and intimacy have returned. Thank you so much for taking the time to put all this together. It has genuinely changed my life. ◆◆◆ http://ishbv.com/snoringno/pdf
       Reply 
    Are you sure you want to  Yes  No
    Your message goes here
  • Follow the link, new dating source: ❶❶❶ http://bit.ly/2LaDVgK ❶❶❶
       Reply 
    Are you sure you want to  Yes  No
    Your message goes here

Transition Economies

  1. 1. Transition Economies Year 1 Microeconomics
  2. 2. Free Market, Mixed and Command Economies An economic system is a network of organisations used to resolve the problem of what, how much, how and for whom to produce Freemarket • Markets allocate resources • Driven by the profit motive • Limited role for state • Private sector dominates Mixedeconomy • Mix of state and private ownership • Government intervention in markets • Mix will vary from country to country Commandeconomy • Most resources are state owned • Planning allocates resources • Little role for market prices
  3. 3. Transition Economies Transition economies are involved in a process of moving from a centrally planned economy to a mixed or free market economy Some key aspects of the transition process Liberalization of markets to give prices a bigger role in allocating scarce resources between competing uses Privatisation of government (state) assets – transferred to the private sector Reduction in tariff and other trade barriers so that the economy becomes more open Reduction in the scale and scope of government subsidies e.g. to loss making industries Legal reforms e.g. to protect private property rights Banking reform and interest rate liberalization
  4. 4. Current Listing of Transition Economies (2014) This listing of transition countries comes from the World Economic Situation and Prospects 2014 published by the United Nations • South-Eastern Europe – Albania – Bosnia and Herzegovina Montenegro – Serbia – The former Yugoslav Republic of Macedonia • Commonwealth of Independent States and Georgia – Armenia, Azerbaijan, Belarus – Georgia, Kazakhstan, Kyrgyzstan – Republic of Moldova, Russian Federation – Tajikistan, Turkmenistan – Ukraine, Uzbekistan
  5. 5. Problems that Transition Economies have faced Many transition countries experience severe economic difficulties in the short to medium term during their transition process. • The removal of subsidies / state aid in many countries led to a sharp rise in unemployment as unprofitable businesses shed thousands of jobs • Inflation increased as market subsidies and price ceilings were taken away – in some cases countries experienced hyper-inflation as prices moved towards market levels • In many countries, a severe recession followed in the early stages of transition • An underlying lack of cost and no-price competitiveness meant that many transition countries ran large trade deficits • Endemic corruption proved difficult to reduce • Wealth and income inequalities widened • Many countries have experienced a brain drain of younger and skilled workers in search of better pay and conditions in richer nations
  6. 6. Advantages of Free Market Competition Free markets operate without government intervention • Competitive markets help to bring about 1. An efficient allocation of scarce resources – resources tend to go where the market return is highest 2. Competitive prices for consumers and suppliers look to increase and protect their market share 3. Competition drives innovation and invention in markets which can bring higher profits for businesses and better products for consumers 4. The profit motive stimulates capital investment which encourages economies of scale and lower prices in the long run 5. Competition in the form of international trade in goods and services helps to reduce domestic monopoly power and increases choice
  7. 7. Disadvantages of Centrally Planned Economies 1. Bureaucratic costs of central planning of resources – petty officialdom can lead to wasteful inefficiencies and higher costs 2. Problems in fixing the prices of goods and services – central planners are unlikely to be as accurate as the market in determining suitable equilibrium prices 3. Relative absence of incentives for both workers and businesses can damage productivity and lead to large levels of over-employment 4. Low productivity and weak incentives leads to rising losses for many state-owned businesses. The incentive to innovate is also limited. 5. Changing consumer needs and wants are not expressed as preferences in markets – the state is slow to react to these 6. The state suffers from information failures and there is a much higher risk of corruption which ultimately damages welfare 7. State run economies are at higher risk of mal-investment driven by political motivations
  8. 8. Cuba as a Transition Economy – Trade Partners in 2013 Nearly 30% of trade is with China and Venezuela – this will change 16% 15.2% 14.2% 7.5% 5.6% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% Canada China Venezuela Spain Netherlands Shareintotalexport
  9. 9. Cuba begins the process as a Transition Economy • A 311-point economic reform agenda that was adopted by the Cuban Communist Party in 2011. – Reforms have allowed the setting up of small businesses and measures to cut vast bureaucracy – Farms have been turned over to producer-owned co-operatives to encourage the profit motive – Cuba is actively seeking inflows of foreign investment (FDI) • The United States has recently moved to end trade sanctions with Cuba that have lasted more than 50 years • Cuba is reforming but will stick to her socialist principles – For example land can be leased to overseas investors but not sold – In 2015, more than 70 percent of the economy remains in state hands, usually in the form of monopolies • Cuba has a complex system of parallel currencies—the peso for Cubans, a convertible peso for tourists, and multiple other exchange rates
  10. 10. The Role of the State in a Mixed Economy A mixed economy has a mix of private and public (Govt) sectors • Businesses wholly or part state- owned – for example: Royal Bank of Scotland, Network Rail State-Owned Industries • Broad range of welfare benefits • Universal e.g. state pension • Means-tested e.g. housing benefit Welfare State • Spending on education & health • Capital spending on infrastructure Government spending on public services
  11. 11. Transition Economies Year 1 Microeconomics

×