The huge leap forward made by the Chinese economy over the past four decades as a result of market reforms and openness to the world is awe-inspiring for some and anxiety-inducing for others. Questions arise as to whether the foundations of Chinese economic success are sustainable and whether economic growth will be followed by political expansion. China makes great use of globalization and is therefore interested in its continuation. At the same time, it wants to give globalization new features, specific Chinese characteristics. This is met with the reluctance of the current global hegemon, the United States, even more so as fears arise that China may promote abroad its original political and economic system—Chinism. However, the world is still big enough to accommodate all of our systems. Potentially, not necessarily. What we need to make it happen is a proper policy, which, in the future, must also involve its better coordination at a supranational level.

Is China still building socialism or has it already built capitalism? Or maybe both? Or maybe none of those two systems? Or maybe with the market reforms that deviate from the traditional socialism, it has created something different from the classical types of political and socio-economic regimes known from the 20th century? Some authors have proclaimed that there has been capitalism in China for some time; others claim that socialism has developed there, of course one with Chinese characteristics. Shortages have been successfully eliminated, but the economic system is unbalanced, showing surpluses this time. So, is it socialism, as the official Chinese authorities claim, or capitalism, as asserted by numerous economists? Tertium non datur ? By no means, as there are yet other possibilities of system interpretations and the most fascinating of them is being offered by the present-day China, where a unique internal convergence is taking place. Features of socialism intermingle with essentials of capitalism and vice versa , creating a new, different quality. Tertium datur .

Of the 11 post-socialist states that have already become European Union members only five have joined the common currency Eurozone. The other six, including Poland, the region’s largest economy, have, pursuant to accession treaties, the right and obligation to adopt euro as their currency. They fail to exercise their right and meet their obligation, which has both causes and consequences. These are economic and political in nature and that is why there is no certainty about how the situation will evolve in future. However, from both of those perspectives, and especially for economic reasons, Eastern European EU members should join the Eurozone, as the resulting benefits, not only for Poland, significantly outweigh the conversion costs. Thus, new countries, especially Poland, adopting euro would have a positive impact on the European integration process, which is experiencing a serious structural, institutional and political crisis.

The progress toward institutional changes should be evaluated through the prism of their influence on a country’s development abilities. In Poland, during the twenty years of comprehensive systemic shift, gross domestic product (GDP) has increased more than in any other post-communist country. While judging the transformation progress, not only the improvement of competitiveness and growth in terms of quantity must be taken into account, but also social and cultural aspects. There have been five distinct periods in Poland, from the viewpoint of economic growth. Had there been a better policy coordination of systemic change and socio-economic development, GDP over the periods considered could have increased by a half more. This opportunity has been missed due to the intermittent implementation of wrong economic policies based on wrong economic theories. Poland’s transformation can be seen as a success, but only to the extent of two-thirds of its potential.

It is widely assumed that the post-socialist transformation started in Poland. This is true, but only in part. Although it was indeed in Poland that various processes contributing to this dramatic change gained the greatest momentum in the 1980s, things were not at a standstill in other countries of central and eastern Europe, either. Another widespread assumption is that the post-socialist transformation was set in motion in 1989, when—first in Poland and then, through a chain reaction engulfing the entire region—‘real socialism collapsed’ or, as others would prefer to put it, ‘communism was defeated’. There is no doubt that later in many respects Poland has handled the challenges of the great transformation better than other countries. Hence, after already over 15 years of ongoing post-socialist transformation toward democratic polity, market economy and civil society, there must be certain lessons the other countries, especially the so-called emerging markets, can learn from the Polish experience. Hence it is worth having a closer look at what works and why and what does not work and whyŒ

The transitional recession in countries of Eastern Europe and the former Soviet Union has lasted much longer than expected. The legacy of the past and recent policy mistakes have both contributed to the slow progress. As structural reforms and gradual institution building have taken hold, the post-socialist economies have started to recover, with some leading countries building momentum toward faster growth. There is a possibility that in the wider context of globalization several of these emerging market economies will be able to catch up with the more advanced industrial economies in a matter of one or two generations. © 2001 Published by Elsevier Science Ltd on behalf of The Regents of the University of California.

The political and ideological concerns aside, the fundamental economic argument in favor of postsocialist transition to a market system has been a supposition that it will improve allocative efficiency and thus the competitiveness of the industries and standard of living of households. It is believed that the shift of property rights from the state to private sector must quickly facilitate such an improvement. Yet in the majority of cases, even after the first decade of transition, the economies have not returned to the path of sustainable growth. The countries tackling the issues of recovery and growth relatively better are these which were able to focus not only on de-nationalization of the state assets, but mainly on the development of venture entrepreneurship. The grass-rooted development of especially small and medium enterprises has contributed significantly to overcoming the transitional depression and then to recovery and fast growth. Yet to accomplish such a sequence specific systemic and policy conditions must be met. To facilitate such a path of development proper institutional arrangements must be executed by the governments, legal framework must be established and the government policies ought to support the rise and competitive performance of the small and medium enterprises (SME). Liberalization is a prerequisite of growth of this sector in transition economies, but is not a sufficient condition. The crucial factors involve the institutional arrangements.

Transition to a market economy is a lengthy process comprised of various spheres of economic activities. The belief that a market economy can be introduced by “shock therapy” is wrong, and in several cases has caused more problems than it has solved. Since a market economy requires adequate institutional structures, transition can be executed only in a gradual manner. Despite the fact that so-called Washington consensus, i.e. a set of policies aiming to shift from stabilization to growth, was developed without concern for post-socialist transformation, these ideas have significantly influenced the path of thought and action in Eastern Europe and the former Soviet Union. After a decade of transition and lasting depression, a new, post-Washington consensus is developing. Major policy conclusions suggest that the core of emerging consensus, also based on the lessons from transitions, is institutional building. Only with strong institutions can liberalization and privatization put emerging post-socialist markets on the path of sustainable growth. Yet, to accomplish such a task the policy reforms must also take into consideration the need for equitable growth and the new role of the state. The latter must not retire from economic activities, but ought to change its role to support the reforms and integration of the post-socialist countries into the world economy in the era of globalization, of which the post-communist transition is an important part.