The impact of transition to the market economy on welfare changes: lessons from the experience of Asian transitional economies

This paper, published in China and the World Economy, explores the economic and social changes that occurred during the transition to a market economy in the countries of east and central Asia. It contrasts countries such as China and Vietnam, which experienced high economic growth, improved quality of life, and reduced poverty, with the central Asian republics and Mongolia, in which radical transition measures led to recession and worse standards of living. But unemployment and inequality have risen throughout the Asian transition countries, and they have all struggled to maintain education, health care and welfare systems.

The paper’s recommendations include bridging the huge gap between urban and rural welfare systems in China and Vietnam, and creating broad-based social welfare systems and safety nets. In the central Asian republics and Mongolia, the paper suggests that the challenge is to maintain current social provision while adjusting to the new role of the market. In general, the paper argues that it will be disastrous to focus on simply reducing welfare provision, rather than on making welfare systems more effective and efficient. It concludes by emphasising that the well-being of the population needs to be placed at the centre of transitional strategies, rather than seeing transition as an end in itself.