Professor Grzegorz W. Kolodko - Books







Globalization and the postsocialist transformation are two distinctive characteristics of modern times. Are these epoch-making processes interconnected? Would the systemic transformations in Central and Eastern Europe and in the vast regions of Asia have taken the same course had it not been for globalization? And, conversely, would it be at all possible to speak of globalization without the concurrent changes in the former centrally-planned economies and their successive integration into the world system? What is the final outcome of these tremendous changes going to be and who are the likely winners and losers? These are the fundamental questions addressed in the present book.

        Globalization is in fact a permanent process which has been going on for centuries. However, at some points in history it gains a special importance. This is indeed the case now, at the beginning of the 21st century. But also certain other periods in the more or less distant past - following the Age of Exploration, which led to the emergence of the world colonial system in the 16th-18th centuries, or at the time of rapid technological progress in the 19th and early 20th centuries, when the world capitalist system was formed - witnessed intense processes of the type now termed globalization. Whenever certain trends in technological development coincided with innovations in the sphere of economic relations and the political situation was favorable for the expansion of economic activity (trade, manufacturing, finance or investment) across and beyond state borders, the economy would acquire an increasingly global character. This very phenomenon - the emergence of a single, integrated worldwide market of capital and goods (and, to a lesser degree, also labor) - is the essence of globalization.

        Nowadays globalization has acquired a peculiar aspect. On the one hand, this has to do with the Fourth Industrial Revolution and the emergence of a "new economy" of the information age and the Internet, which has eliminated the barrier of physical distance to a point when the world has expanded one more time, the way it did after the discovery of America. Enormous new opportunities have arisen, as if a new continent had been discovered, to conduct various novel forms of economic activity covered by the blanket term e-business.

        On the other hand, the present phase of permanent globalization is intimately linked with new geographic areas coming into view, known as emerging markets. A special role among these is played by postsocialist countries. From Central Europe to the Pacific coast, they are inhabited by 1.7bn people - who work, earn, spend, save and invest. This creates an immense potential. For the highly developed capitalist countries, this is yet another "America" in which to do business.

        For countries involved in the postsocialist transformation, the object of the game is to redefine their place on earth. It is with great difficulty and at the expense of a severe transitional recession, which slashed the region's GDP by more than 30% in 1990-2000, that these countries are laying the foundations for market economy, becoming in the process part of the global capitalist system. How successful are they going to be vis-à-vis the rest of the world? What position will they occupy in the global village? Which postsocialist countries have a chance to catch up with the rich in the next five decades and what development paths are they to take? And which countries will be marginalized? The object of the game is to have as many countries as possible redesign their economic and political structures in such a way as to start moving towards the center of the global village, but some economies may never be able to break out of the periphery.

        There are many participants in the game. The richest countries and the world capital try to approach globalization in a way that will maximize their benefits accruing from the liberalization and integration of the hitherto largely separated markets. This affects not only postsocialist transition economies, but also the less-advanced countries of Africa, Asia and Latin America. It has been a great and tenacious illusion that the postsocialist transition automatically leads from the "Second" to the "First World". Such is the logic of this process that many of the former centrally-planned economies will end up in the "Third World" instead. Some have already suffered that fate and few of them are likely to succeed in getting closer to the center of the global village - to the world of developed capitalism.

        Both globalization and transformation are irreversible. This fact must not be overlooked, yet one should also realize that, all told, the additional opportunities globalization brings to postsocialist transition economies outweigh the increased risk it causes. Hence the balance of the new processes resulting from the globalization vs. transformation interaction may be favorable; how favorable, depends on the policies adopted.

The point being made in this book is that, for all the substantial progress of globalization and transformation, a country can and must pursue its own national strategy of socio-economic development. The most successful implementation of this approach thus far was the "Strategy for Poland", followed in 1994-7, when Poland's GDP rose by a staggering 28%. No East Central European or post-Soviet economy was able to attain that much before or afterwards. However, in the case of China, which follows its own strategy of market reform and economic integration with the remaining part of the world economy, the 1990s - when globalization and transformation reigned supreme - turned out to be a decade of rapid economic growth. This demonstrates once again the existence of different ways to influence the course of events: the Russian besides the Chinese way, the Ukrainian besides the Polish way, etc. What remains at all times the key issue is the policy.

        The two processes in question are by no means complete. The transformation will be brought to a conclusion at some point, but globalization will be, essentially, permanent. It is a process, not a state that could be reached once and for all. However, in order to take advantage of the transformation - for the benefit of a specific society, state and economy - one should aptly grasp the opportunities offered by the progressing integration of the capital and commodity markets. And conversely, to make good use of the opportunities brought by globalization, one has to manage the systemic transformation prudently. Unfortunately, many countries and politicians are not quite up to this task.

        The present book is a self-contained whole, but nevertheless it follows logically from the author's previous works. It begins with an account of the essential challenges faced nowadays by postsocialist economies. Chapter 1 presents the specificity of postsocialist capitalism, still burdened by the legacy of the past. Chapter 2 discusses the interdependencies between globalization and the postsocialist market transition. Outlined in Chapter 3 are the historical roots of the present stage of globalization, including its previous phase in the 19th century. Chapter 4 covers the scope and dynamics of the transitional recession as well as the causes of the slump. Chapter 5 is devoted to various scenarios of recession, recovery and growth, as these processes follow different paths in specific countries and regions of Central Eastern Europe and the former Soviet Union. Chapter 6 takes a closer look at external shocks, economic policy adjustments (taking into account, in particular, the impact of institutional vacuum) and their effect on the dynamics of real processes and the prospects of catching up. The focus of Chapter 7 is on the opportunities, as well as threats connected with globalization, the latter being particularly acutely felt in transition economies, which are opening up to financial and trade contacts with the global economy. Regionalism, expanding in various parts of the world, which may either turn out to be an obstacle to further worldwide market integration, or act as a catalyst of this process, is analyzed in some depth in Chapter 8. The main point of Chapter 9 is that globalization, while leading to a single, integrated market, need not and should not bring about the formation of a world government. It does imply, however, profound institutional changes facilitating worldwide coordination of the economic policy. Chapter 10 describes alternative growth paths for the next fifty years and, furthermore, indicates various available political strategies to attain rapid growth, sustainable in the long run. Finally, Chapter 11 lists the conclusions concerning the appropriate choice of economic policy in the face of the challenge offered by the new century.

        The book contains a statistical appendix presenting, side by side with medium-term growth forecasts for postsocialist countries, data on their economic performance in the 1990s and the preceding four decades, beginning from 1950. Hence, the time span for the considerations covers a period of 101 years: from 1950 to 2050.