Big bang or gradualism - which way to reform?

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Oleh Havrylyshyn, former deputy minister of finance of Ukraine, looks back at the transition experience of post-communist countries from centrally planned to the market economy. The author contrasts the two opposite reform approaches: big bang, also known as the "shock therapy," with gradualism.

The study finds that the main motivation behind pursuing gradualism – the fear of a rise in inequality – was unsupported. And though the early and rapid reformers did not avoid an increase in poverty altogether, they suffered less of it and more than fully recovered by 2000.

Based on the initial speed and scope of reforms, Georgia was classified as a gradualist but for the last two years managed to become the top-reformer in the Doing Business report.

Lastly, a word from Mr. Havrylyshyn:

Statements about the need for transparency, a level playing field for SMEs and better rule of law, have more effect when they come from a CEO of a leading multinational, rather than when they come from World Bank or IMF officials

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