Transitional Economies

Transitional economies is a term used to describe economies which are undergoing structural reform with the intention of making them more market orientated. The term was first used to describe the move made by South American states away from military rule toward globally integrated markets. Since the collapse of the Soviet Union, the phrase has more commonly been used to describe the economic reforms undertaken in Eastern and Central Europe and the former Soviet states. Its central tenet is that the state should remove itself from the economic and that the market knows best. The term ‘transition’, however, is now considered to be rather problematic as the policy advice it describes was applied to regions with little consideration for their economic geographies. Therefore, a ‘one-size-fits-all’ approach was bound to experience difficulty. Although the institutions which led the reforms have now reconsidered their approaches, the effects of the initial reforms are still felt today. Using Russia as a case study it is clear that the social costs of transition are far worse than those guiding the reforms envisaged and that the forms of economies that have developed in the region are far removed from textbook versions. Many now argue that the term transformation is a far more apt way of describing the processes that these countries are undertaking.