Foreign Trade Decisionmaking under Balance of Payments Pressure: Poland versus Hungary,
RAND CORP SANTA MONICA CA
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This paper argues that the Polish economic system, particularly the Polish system of making decisions affecting foreign trade, was a major cause of the Polish economic collapse of 1981. The argument is developed through a comparison of the foreign trading system in Poland and Hungary, both of which are centrally planned economies CPEs experiencing hard currency balance of payments problems. They are compared during periods when their governments made balancing their hard currency current accounts a priority. The comparison highlights differences in the foreign trade decisionmaking systems of the two countries which partially explain differences in the economic outcomes experienced by the two countries as their leaders sought to reduce their hard currency account deficits. The periods under discussion are 1976 to 1981 for Poland and 1979 to 198s for Hungary. A major factor in explaining this appears to be differences in economic system, especially regarding foreign trade decisionmaking. An examination of the environmental and policy differences between Hungary and Poland during the periods of analysis indicate a surprising number of similarities, although some environmental factors and policy differences were important factors generating the different economic outcomes.
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