1. Lectures in Macroeconomics- Charles W. Upton The Transition from Communism

2. 1989 Berlin Wall falls in November 1989. By Christmas Poland, East Germany, Hungary, Czechoslovakia, Rumania, Bulgaria, and Albania have eliminated Communist Governments.

3. The Transition from Communism 1990 German Unification, October 1990.

4. The Transition from Communism 1991 Soviet Union ends Christmas Day, 1991.

5. The Transition from Communism The Puzzle

6. The Transition from Communism The Puzzle A Marxist Economies < A Market Economies

7. The Transition from Communism The Expected Pattern Y time

8. The Transition from Communism The Expected Pattern Y time

9. The Transition from Communism The Expected Pattern Y time

10. The Transition from Communism The Actual Pattern Y time

11. The Transition from Communism Issues Transition Problems Legal Systems Safety Net

12. The Transition from Communism The People’s Pizzeria The Peoples Pizzeria to be privatized. Shares are transferred to someone –Cannot exercise managerial control –Whole organization is incompetent and collapses in the light of privatization

13. The Transition from Communism The People’s Pizzeria A MP A PP

14. The Transition from Communism The People’s Pizzeria A MP A PP

15. The Transition from Communism The People’s Pizzeria A MP A PP Transition to new businesses means a temporary decline in productivity

16. The Transition from Communism Managing Miller’s Pizzeria Limited knowledge of how one works in a market economy –Showing up on time Limited legal system –Cannot enforce contracts High level of Corruption

17. The Transition from Communism The Stages of Transition Feudalism Capitalism Communism

18. The Transition from Communism The Stages of Transition Feudalism Capitalism Communism Chaos Capitalism

19. The Transition from Communism The Social Welfare System Hungary –40% income tax –40% social security tax –24% VAT

20. The Transition from Communism Effective Taxes 100 Forints

21. The Transition from Communism Effective Taxes 100 Forints 29 Forints Welfare

22. The Transition from Communism Effective Taxes 100 Forints 29 Forints Welfare 71 Forints

23. The Transition from Communism Effective Taxes 100 Forints 29 Forints Welfare 71 Forints 29 Forints Income Tax

24. The Transition from Communism Effective Taxes 100 Forints 29 Forints Welfare 71 Forints 29 Forints Income Tax 42 Forints

25. The Transition from Communism Effective Taxes 100 Forints 29 Forints Welfare 71 Forints 29 Forints Income Tax 42 Forints 9 Forints VAT

26. The Transition from Communism Effective Taxes 100 Forints 29 Forints Welfare 71 Forints 29 Forints Income Tax 42 Forints 9 Forints VAT 33 Forints

27. The Transition from Communism The Response Cheat –Work for yourself –Deduct everything Don’t Work Hard Corruption

28. The Transition from Communism End ©2003 Charles W. Upton. All rights reserved