Therapy after the Shock

        Reviews of a New Book   
        From Shock to Therapy: The Political Economy of Postsocialist
Transformation by Grzegorz W. Kolodko  Hardback, 0-19-829743-2  UK Price:
£48.00  Publication date: 20 April 2000  Available at the publisher Oxford
University Press  <<...>>   UNU/WIDER Publication catalogue     
        Reviews Vito Tanzi, International Monetary Fund In "From Shock to
Therapy", Grzegorz W. Kolodko has given us his highly original and personal
interpretation of the decade of transition. His background, as a first-rate
economist, and his policy experience, as a former Minister of Finance and
Deputy Prime Minister during a particularly sensitive period, has given him
a unique background for interpreting what happened and for drawing
conclusions and lessons. Not all readers will agree with his interpretation
of what happened and with his conclusions but all will benefit from this
very valuable and informative book. From Shock to Therapy should become
essential reading for all those genuinely interested in the experiences of
economies in transition.  Gur Ofer, Hebrew University, Jerusalem This book
is a Tour de Force on the neglect but utmost importance of institutional
buildup as part of the requirement of the transition process. It is written
by a long-term advocate of gradual reform that emphasizes institutional
building, along side with taking care of the "fundamentals" as included
under the so called "old Washington consensus," that, as a finance minister
and deputy prime minister of Poland during the mid-1990s. He had a chance
also to implement his ideas as actual policies, and with a large measure of
success. The book carefully discusses strategies and policies regarding
market-oriented institutions, reforming the government and the financial
sector, the informal sector, and the creation of a political-economic growth
lobby.  Marko Skreb, University of Zagreb and Governor of the Croatian
National Bank In his new book "From Shock to Therapy", Professor Kolodko is
vividly showing the depth of the transition process. Transition is much more
than simple economics textbook recipes (liberalize, privatize, deregulate,
etc.), but is a long-lasting, multifaceted, and broad social change in every
aspect of this endeavor. Fourteen chapters of combining "hands on"
experience in policymaking (as a minister of finance) and academic analysis
will give a much better understanding on this complex change to every
reader.  Ravi Kanbur, Cornell University and the World Bank I believe that
the experiences of the transition economies in the 1990s are deeply relevant
to developing countries as they make difficult choices of development
strategy and institutional transformation in an increasingly global yet
volatile world. Kolodko's work highlights the central importance of the
institutional structures needed for market liberalization to succeed. His
analysis and his experience will prove valuable to those interested in
designing and implementing strategies for poverty reduction and growth in
developing countries.  Marie Lavigne, ISMEA (Institut de Sciences
Economiques et Mathématiques Appliquées), Paris This is the first
comprehensive, single-authored book on the economics of "post-socialism"
that is written by somebody who has been deeply and actively involved in the
transformation process. The courage and the vision of the author should be
praised, especially as they are based upon a rich and successful experience
and a wide expertise. Many people writing on the transition process from the
centrally planned system to a market economy offer advice and
recommendations that are not really credible. In the present case, the
author actually solved many difficulties and developed a "Strategy for
Poland" that allows him to come forward with policy proposals and long-term
forecasts. The treatment of the transition as a historical process is an
important feature of the book. History is important, though the author
claims that whatever the legacies of the past, there is no historical
fatality, and sound policies in the present are more determining than the
favourable or unfavourable legacies inherited from the previous system. What
the author usefully reminds of is that the process is not just transition
from plan to market for the sake of it. The aim is to create and maintain
the conditions for a sustainable growth and for a durable development
Vladimir Popov, Russian Academy of Sciences and Carleton University, Ottawa
This book is written by a good researcher and good economic policymaker - a
fortunate and rare combination in general and in post-communist countries in
particular. The author presents the most powerful critique of and the most
convincing alternative to the "conventional wisdom" policies based on the
Washington consensus. His analysis is always provocative and controversial,
his presentation is anything but boring. This is a must reading for everyone
who studies transition. Even those who do not share the views of the author
will not be able to ignore the book on one simple reason, if not anything
else: neither before, nor after the period that Grzegorz W. Kolodko was in
charge of economic policy (1994-97) had the Polish economic performance been
so strong.  Fan Gang, National Economic Research and China Reform
Foundation, Beijing Kolodko not only writes about the Polish case, but also
tackles the general issues of economic transformation with the reference to
much broader background. And the Polish case itself shares the common
features of institutional transition from the planning economy. As a Chinese
economist, I am so grateful having Kolodko's new book that provides us with
such insightful analyses of the ongoing process. We will benefit from it a
lot because in many aspects, China's reform is still trying to catch up.
Alexander Nekipielov, Institute for World Economic and Political Studies,
Moscow Fundamental research by Professor G. Kolodko is a powerful
intellectual challenge to the advocates of "simple decisions" to the
problems of post-socialist transformation. Convincing character of
theoretical reasoning is further strengthened by the author's practical
experience of elaborating and implementing Polish economic policy in
1994-97, which brought him fully merited worldwide recognition.  Michael S.
Bernstam, Hoover Institution, Stanford University Grzegorz Kolodko explains
the only economic success story in the post-communist world northwest of
China - Poland - which moved from depression to growth under his
stewardship. He furthermore shows the theoretical inconsistencies and
practical failures across countries of the conventional approach to
transitions, the so-called Washington consensus. He offers broadly useful
policy proposals based on the true economic reasoning: improvements of
people's well-being, not reforms for the sake of social engineering, should
measure success and guide policymakers. This book is bound to become a
classic, like Kolodko's practical work before it.  Jeffery E. Garten, Dean,
Yale School of Management, Yale University Grzegorz Kolodko is a great
scholar and a great public official. In this book, he combines path-breaking
ideas with practical realities. This is essential reading for anyone
interested in the world economy.  Kazimierz Z. Poznanski, University of
Washington, Seattle This is a rare - and most refreshing -- book in its
balanced account of both economic and social aspects of transition. Kolodko
has never overlooked the latter as the theorists. And has given great
attention to social concerns as a reformer -- he tried to take Poland's
economy from an unnecessary shock to a viable therapy. And it is largely to
his credit that the economy did it.   Domenico Mario Nuti, London Business
School and Universita di Roma 'La Sapienza' The Great Transformation
undertaken by the former socialist bloc in 1989-99 exhibits the most diverse
morphology-in terms of initial conditions, shifting target models,
consistency, paths, speed, progress to date, and economic performance.
Grzegorz W. Kolodko, the architect of the successful Polish strategy for
recovery and growth, maps out these diverse and complex routes guiding the
reader through the maze of a decade of unexpected, unimaginable, spectacular
developments. Such a comprehensive guide will be invaluable to scholars and
practitioners alike, businessmen, investors, national and international
civil servants, as well as to the enlightened general reader. The astounding
success of the Polish economy - unquestionably the frontrunner among all
transition economies, in terms of recovery and sustained growth, stability,
resilience - is due not only to the Polish people's sacrifices of the early
nineties-probably higher than need be in the circumstances - but also to the
imagination, wisdom, and determination of Grzegorz W. Kolodko and his
innovative "Strategy for Poland" programme which was implemented in 1994-97.
Anything that the former Minister of Finance and First Vice-Premier in
charge of the economy may have to say on the transition is worth reading
because of the part he personally played in it, but this book will meet and
exceed any reader's expectations.  Tadeusz Kowalik, Polish Academy of
Sciences His hard work, his rich experience in managing the economy during a
period of great change, and his openness to new ideas for the economy have
resulted in a profound understanding of the transformations occurring
throughout the entire post-communist world. A bit of luck placed Kolodko in
the fortress of mainstream orthodoxy at the very moment when its supporting
theses were being revised. Thus he could not only observe, but even
contribute to what has become known as the post-Washington consensus.
Kolodko's criticism of the shock programs of the IMF and the World Bank is
excellent. I hope that when he returns to his country he will find that
therapy is not only about institution building, but that it is also a time
of cooperation with the patient. It is therefore closer to group therapy
than to a treatment for poisoning.  Janine Wedel, George Washington
University, Washington, D.C. "From Shock to Therapy" is one of the most
important books written on the economic 'transition' away from communism.
Grzegorz W. Kolodko's rare combination of experience as Poland's Minister of
Finance and First Deputy Prime Minister, as a Western-trained economist, and
as a visiting scholar with the Bretton Woods institutions uniquely qualifies
him to debunk pervasive mythology about the economic orthodoxies and
'reforms' offered up by the West to the post-communist countries. "From
Shock to Therapy" should be required reading for everyone curious about the
true story of economic transition in the former communist countries.
Giovanni Andrea Cornia, The former Director, UNU/WIDER The transition to the
market economy of the former socialist countries of Europe and Asia is
certainly the most momentous event of the last two decades of this
millennium. Its onset has been unpredictable, and most of its outcomes
contrast sharply with the initial expectations. While generating an
extensive - and still rapidly growing - literature on it, many aspects of
the transition process - such as the huge cross-country differences in
economic and social performance - remain broadly ununderstood and
unexplained. Until recently, most of the transition debate has placed
greater attention on some aspects of this great transformation, e.g. on
rapid macroeconomic stabilization, liberalization and privatization. It has
emphasized less the role of initial institutional conditions, the political
economy of transition, and the role of external advice in this process. In
this highly original single-authored study on the economics of
post-socialism, Grzegorz W. Kolodko attempts to fill this gap. He recognizes
the need for sound economic fundamentals but, at the same time, emphasizes
the long-term multifaceted nature of the transition process, the influence
of historical factors on the outcomes of the reform process, and the crucial
need for developing gradually but steadily those institutional arrangements
which are the best guarantees of successful transition. While all readers
may not agree with his interpretation of the transition or his policy
approach, they will no doubt benefit from this well researched and
provocative analysis which challenges many of the simplicities of the
'Washington consensus'. Indeed, Kolodko places his analysis of the
transition in a broader social and political-economic context, and strongly
emphasizes the need for a gradual build up of institutions. This book has
been written by a scholar who played a key role in the formulation of the
successful policies adopted in Poland over 1994-97, the most successful
transitional economy of Europe. As such it does not suffer from the lack of
credibility and reality testing that affects a part of the current
literature on the transition process. Kolodko's book is therefore essential
reading for anyone interested in a critical assessment of the transition
process. It is an invaluable guide for those seriously interested in
understanding the great transformation still underway in most of the former
socialist bloc. As such, I warmly recommend it to academics and
practitioners alike, as well as to investors, economists from the
international agencies working on the transition, and, of course, the
enlightened general reader.