Lectures in Macroeconomics- Charles W. Upton Unemployment and Business Cycles.
Lectures in Macroeconomics- Charles W. Upton The Transition from Communism.
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Transcript of Lectures in Macroeconomics- Charles W. Upton The Transition from Communism.
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Lectures in Macroeconomics- Charles W. Upton
The Transition from Communism
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The Transition from Communism
1989
• Berlin Wall falls in November 1989.
• By Christmas Poland, East Germany, Hungary, Czechoslovakia, Rumania, Bulgaria, and Albania have eliminated Communist Governments.
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The Transition from Communism
1990
• German Unification, October 1990.
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The Transition from Communism
1991
• Soviet Union ends Christmas Day, 1991.
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The Transition from Communism
The Puzzle
1tttt LKAY
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The Transition from Communism
The Puzzle
1tttt LKAY
AMarxist Economies < AMarket Economies
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The Transition from Communism
The Expected Pattern
Y
time
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The Transition from Communism
The Expected Pattern
Y
time
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The Transition from Communism
The Expected Pattern
Y
time
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The Transition from Communism
The Actual Pattern
Y
time
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The Transition from Communism
Issues
• Transition Problems
• Legal Systems
• Safety Net
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The Transition from Communism
The People’s Pizzeria
• The Peoples Pizzeria to be privatized.
• Shares are transferred to someone– Cannot exercise managerial control– Whole organization is incompetent and
collapses in the light of privatization
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The Transition from Communism
The People’s Pizzeria
AMP
APP
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The Transition from Communism
The People’s Pizzeria
AMP
APP
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The Transition from Communism
The People’s Pizzeria
AMP
APPTransition to new
businesses means a temporary decline in
productivity
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The Transition from Communism
Managing Miller’s Pizzeria
• Limited knowledge of how one works in a market economy– Showing up on time
• Limited legal system– Cannot enforce contracts
• High level of Corruption
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The Transition from Communism
The Stages of Transition
Feudalism
Capitalism
Communism
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The Transition from Communism
The Stages of Transition
Feudalism
Capitalism
Communism
Communism
Chaos
Capitalism
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The Transition from Communism
The Social Welfare System
• Hungary– 40% income tax– 40% social security tax– 24% VAT
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The Transition from Communism
Effective Taxes
100Forints
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The Transition from Communism
Effective Taxes
100Forints
29Forints Welfare
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The Transition from Communism
Effective Taxes
100Forints
29Forints Welfare
71Forints
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The Transition from Communism
Effective Taxes
100Forints
29Forints Welfare
71Forints
29Forints Income
Tax
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The Transition from Communism
Effective Taxes
100Forints
29Forints Welfare
71Forints
29Forints Income
Tax
42Forints
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The Transition from Communism
Effective Taxes
100Forints
29Forints Welfare
71Forints
29Forints Income
Tax
42Forints
9Forints VAT
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The Transition from Communism
Effective Taxes
100Forints
29Forints Welfare
71Forints
29Forints Income
Tax
42Forints
9Forints VAT
33Forints
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The Transition from Communism
The Response
• Cheat– Work for yourself– Deduct everything
• Don’t Work Hard
• Corruption
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The Transition from Communism
End
©2003 Charles W. Upton. All rights reserved