July 08, 2003
Notes: Blanchard on Transition

Olivier Blanchard's view on the transition from communism to capitalism as of the mid-1990s. If I read his Economics of Post-Communist Transition right, the key problem was the absence of a Marshall Plan to keep demand high and employment high during transition. In the immediate aftermath of World War II in Western Europe, the Marshall Plan allowed countries to maintain high aggregate demand without worrying about balance-of-payments constraints. There was no similar inflow of hard currency in the early 1990s to allow transition governments to create the demand to rapidly reemploy those laid off from state industries. The Bush I Administration had, because of the Reagan deficits, "more will than wallet." As a result, Blanchard argues, high unemployment led to a fear of reallocation and restructuring, and the slowing of the entire process of reform down to a glacial pace. If only demand and employment could have been kept high during the initial stages of transition... And since the mid-1990s? Since Blanchard wrote his book, what has happened? If I read the data right, economic progress in Central Europe has been slow, in Eastern Europe has been very slow, and in the former Soviet Union (where there never was the...

Posted by DeLong at 03:28 PM

May 19, 2002
Thinking About European Unemployment

Surely the most thoughtful and brilliant macroeconomist trained in the late 1970s is M.I.T.'s Olivier Blanchard. In his Robbins Lectures he turns his mind to summarizing what he knows about the nature, causes, persistence, and prospects of and for European unemployment. [Olivier Blanchard (forthcoming 2002?), The Economics of Unemployment: Shocks, Institutions, and Interactions (Cambridge: MIT Press:).]

Posted by DeLong at 02:38 PM