The Lessons of Limited Market-Oriented Reform

The waves of reform and restructuring now engulfing most of Eastern Europe did not begin from the same starting point in each country. While they all share a common economic legacy—the traditional Soviet-type centrally planned economy—some countries had been experimenting with limited forms of market-oriented reform for one or two decades. In particular, Hungary (since 1968) and Poland (since 1981-82) had been flirting with a market-oriented system for years, with programs aimed at achieving an efficient coexistence of plan and market. This paper will first examine the thinking behind the early attempts to combine plan and market. It will then outline some of the key elements of the limited market-oriented reforms undertaken in Hungary and Poland in the 1980s. Finally, it will suggest some of the important lessons from this experience.