Countries with economies in transition: description and distinctive features

As you know, there are two main models of the economy: command and market. The command (planned) economy is characterized by direct government regulation of all economic processes, while for the market economy it is typical to minimize the intervention of regulatory bodies in the economic activities of residents. Intermediate place is occupied by countries with transitional economies. We'll talk about them in this article.

Countries with economies in transition are those that are currently on the road from a planned mode of farming to a market economy. In fact, these are the states of the former Soviet Union, which, after its disintegration, have chosen a market model. Therefore, all the countries of the former USSR, except perhaps, Belarus - are countries in transition. They are characterized by the acceleration of economic development after a period of crisis phenomena in the planned system (in fact, precisely because of the government's inability to plan the entire economic life of the state and the collapse of the Union), the creation and development of new enterprises, raising the standard of living of the population, the level of wages, Deficit and so on. The economy becomes more open both from within and outside, which means that as resident entrepreneurs get a greater degree of freedom in creating and developing their own business, foreigners also have an opportunity to invest their available free funds in facilities and enterprises located in the country .

As a rule, countries with economies in transition attract increased attention from foreign entities willing to make so-called direct investments in the economy of these states. The reason for this increased interest is the possibility of a more profitable investment of capital, which can be explained through the action of the laws of supply and demand. Capital is the same resource as raw materials and labor, which means that its market exists, and its price is the percentage of return on investment. Naturally, capital markets of developed countries already have some of its excess, which means that its yield is very low (for example, interest rates in foreign banks, rarely exceeding 3-4 percent per annum). At the same time, in the countries of transition economy there is a significant lack of capital, which means that the rate of profitability of investment projects there will be much higher.

Characteristics of countries with economies in transition also includes some negative features: rapid social stratification, as a result of which the difference between rich and poor incomes is tens and hundreds of times. Moreover, there is political and social instability, a high probability of conflicts, an increase in the level of crime, and others. It is also worth noting that countries with economies in transition can be characterized by an imperfect and unstable system of national legislation, which may be difficult for foreign investors who prefer more stable countries with a lower rate of return.

The main tasks of the government of the country with a transition economy should be:

In the social sphere - ensuring equality and stability, minimizing the likelihood of conflicts on social grounds, caring for unprotected layers of the population (payment of pensions, scholarships, unemployment benefits);

In the economic sphere - increasing the investment attractiveness of the state, bringing the system of legislation (including taxation) in line with world standards, protecting foreign investors from changes in legislation and the tax system for a long period.