VIABLE INSTITUTES AS GUARANTEE FOR DEVELOPMENT

Yerkir.am
June 23, 2006

Only 15 years after Armenia launched market reforms Europe is mulling
granting Armenia a status of a country with market economy. It is
said that the issue could be solved by the end of the year.

How serious are these discussions and what actually a ‘country with
market economy’ means?

The experience of leading countries

The fact is that only 10 percent or 20-25 countries out of 200 have
developed market economies. While other have some infrastructures
typical for market economies, market stagnates in those countries
without ensuring a glut for society’s prosperity.

International donors spend billions of dollars to reform the economies
of those countries but the expected results are not reached. The gap
between the rich and poor is gradually widening.

The experience of developed countries indicates that the first
precondition for a developed market economy is an efficient formulation
of property rights. Only then we can expect that the property rights
could become permanently available, standardized and subject to
exchanges that could be centrally registered, legally formulated and
guarantee that their owners would not be deprived form their rights,
or nationalized or uncertainty.

The situation in other countries

Apparently, in countries with underdeveloped market economies not only
are the property rights weak and unclear but also their registration
and protection mechanisms are inefficient.

This means that institutional weakness and underdeveloped
infrastructures are obstacles for implementing efficient market
economy. And fist of all this applies to underdeveloped government
institutions.

In theory, government can both contribute to establishment of
efficient and viable market institutions and block its development
through beneficent institutions.

Statements of politicians on political goals and necessity of reforms
often do not correspond to the institutional mechanisms capacities
for implementing such reforms since the price a society is to pay is
not clearly defined.

In this regard, a choice for an institutional structure of a country
is a result of proactive measures to better implement reforms. Western
countries posses more developed institutions that are in line with
dominating method of economic coordination.

From: Emil Lazarian | Ararat NewsPress