Abstract

Since my policymaking experience relates to transition economies, I will focus on a number of challenges and problems that policymakers in transition economies are facing. These problems are closely related to the issues discussed by Grzegorz Kolodko in his paper. The transition countries have inherited from their communist past a welfare system that is much more advanced, comprehensive, and mature than those of developing countries, many Latin American economies (e.g., Chile), and Southeast Asian countries. In fact, during the transition, these welfare systems did not shrink. Actually, during the first years of transition they grew sharply, in relative terms, in most of the Central European countries and in many members of the Commonwealth of Independent States (CIS). The share of social spending in Russia, for example, increased by 5 percent of GDP in the three years after market reforms began (1991), and the share of social spending exceeded 60 percent of the overall spending of the general government.