Transition: Market Fundamentalism, Evolutionism, and the Great Divide

The so-called economics of transition refers to the policy literature on the systemic transformation of countries of the former Soviet bloc and similar economies. As recounted by otherwise contrasting reviews (see, for example, IMF 2000, Stiglitz 1999), in its short history, the literature has witnessed two waves of debates that are of fundamental, paradigmatic importance. The first wave, which occurred in the late 1980s and early 1990s, can be seen as an extension of the rivalry between existing theories of the market economy — in particular, standard neoclassical economics versus evolutionary economics. The second wave is more complex in nature. Occurring at the turn of the century, it reflects the continuous refinements of the relevant theories in response to challenges presented by transition. Specifically, this second wave of debates was largely motivated by the sharp contrast between the aspirations and realities of transition. The tremendous fall in output levels (and with it the catastrophe in social development) across most of the concerned economies is so phenomenal — to the extent that it has come to be dubbed the ‘transition depression’ — that the demand for adequate explanations is just unavoidable.