Central and Eastern Europe, Essay Example

Central and Eastern Europe have moved from a planned to a free market. What are the two main types of privatization that have occurred in these areas? The main types of privatization in these areas involve franchising which involves one company with absolute monopoly control but the state controls the prices of the goods and services provided by the franchise. The other method is the contracting out where a contractor appointed to offer services; in this situation the government does the financing while the contracted party offers the services only.

In comparison to the Czech Republic and Hungary, Poland has not progressed in the retail sector. What might be some reasons for this? Lack of progression in the retail sector in this case is the lack of previous retail innovations in the industry which limits progression. The other reason is the lack of outside factors such as transport and communication to allow networking.

Describe the characteristics that typify a planned economy. The features of a planned economy are all the resources are government owned, and it is the government that sets the quantity of production. The prices of the goods not set by market forces and there is no sovereignty.

Describe the various business privatization processes seen throughout central Europe as countries make the transition to free market economies. The processes employed in privatization are through the fiscal process which sought to change the financial structure. The economic process sought to shift the functions in the economy and the administrative process aimed at reallocating authority and responsibility. The political approach aims at giving citizens more decision making power.

New free market economies have produced an “economy of shortage” in many central European countries. What types of consumer behavior are typically observed under this condition? The consumer behavior observed under these circumstances is the forced substitution of the customer’s choice due to lack of the prior choice. The other behavior is the increased savings by the customer due to reduced spending.

Explain the difference between a blocked or nonconvertible currency and a convertible currency. How do these types of currency affect trade and economic development strategies in a given country? Non convertible currencies are those currencies where the currency cannot be changed to another currency, and there is no legal exchange rate. Convertible currency, on the other hand, can be freely exchanged to another currency without restrictions. The currency in this case affects the economy of a country as some investors avoid non convertible currencies and trading with economies with such become impossible.