Political legitimacy versus economic imperatives in system transformation: Hungary and East Germany 1990-93

Abstract

East European policy makers currently face critical trade-offs between economic imperatives and system legitimacy imperatives. Economic imperatives, derived from the goal of medium term prosperity, demand rapid privatization and marketization. System legitimacy imperatives demand measures to minimize the unemployment, wage cuts and income inequality resulting in the short term from privatization and marketization. In 1989-90 East Germany and Hungary appeared to face the least harsh trade-offs and to be best placed of the ex-communist countries to achieve successful system transformation. Unlike their East European neighbours, neither had to develop democratic and market institutions from scr..