The transition from state socialism to capitalism or market socialism has been a profound, indeed revolutionary, change in the socio-economic system of countries with about a quarter of the world’s population. The IFIs (International Financial Institutions) have been closely involved in it for more than 20 years. It has also given rise to an extensive academic literature. The purpose of this paper is to argue that this experience, and the policy-related and academic discussion about it, has made a useful contribution to mainstream economics. This contribution is analyzed in the following sections.
This paper discusses the key reform agenda and economic characteristics of selected Middle East and North Africa (MENA) countries in comparison with Central, East and Southeast Europe (CESEE) and draws policy lessons for MENA transitions. The main task in the MENA countries will be a thorough modernization based on already existing structures with the help of external assistance and foreign direct investment. In contrast to the CESEE, MENA countries have failed to increase their export market shares. Foreign capital inflows and the regional integration need to be fostered. The existing diversity will persist and affect the outcome of transition strategies.