On This PageJune 1992, No. 58

In this Chicago Fed Letter I discuss the current economic situation in the CIS in order to provide some insights into some of the problems involved in moving from a planned economy to a market economy.

Capitalism and change in the Commonwealth of Independent States
Last Updated: 06/30/92
The dramatic change resulting in the dissolution of the Soviet Union and the formation of the Commonwealth ofIndependent States (CIS) has excited much discussion among economists concerning the problems and opportunities involved in moving from a planned economy to a market economy. Of particular importance are questions concerning the form Western aid to the CIS should take, as well as what opportunities will exist for Western entrepreneurs and investors. This discussion has often focused on so-called macroeconomic problems such as controlling inflation, stabilizing the ruble, decreasing budget deficits, and so forth. However, it is also important to focus on microeconomic problems, that is, the problems involved in developing the institutions and mechanisms whereby a planned economy can be transformed into a market economy. During a recent trip to the CIS in conjuntion with the International Monetary Fund, I had a chance to observe first hand the status and moves for change in the CIS republics.