Myth of Output Collapse after Communism

Publication Date: March 2001

Publisher: Carnegie Endowment for International Peace

Author(s): Anders Aslund

Research Area: Economics

Type: Report

Coverage: Former communist countries

Abstract:

According to official statistics, output plunged in almost all Soviet-type countries toward the end of communism. In the first year of transition, the plunges turned even more dramatic, continuing for years. The total registered declines in GDP range from 13 percent in the Czech Republic from 1989 to 1992 to 77 percent in Georgia from 1989 to 1994. The analysis and conclusions in this paper contrast sharply with the conventional view.

This paper shows that both communist and post-communist statistics are deeply flawed. First, everywhere the decline in output has been much smaller than perceived, and a few countries grew immediately rather than contracted. Second, the Soviet economy was in far worse shape than generally understood. Third, even after revising the official statistics, the differences between failures and successes remain vastâ and the correlation between structural reform and economic performance becomes much stronger. Fourth, flawed statistics misled policy makers in post-communist transformation, inciting them to adopt inefficient gradual reforms, which reinforced rent-seeking and prolonged stagnation. And fifth, economic welfare has diminished far less than output.