Equality, Participation, Transition: Essays in Honour of Branko Horvat

Ivo Bićanić 197
second appealing aspect of these models is that growth factors are
endogenous and thus can be changed and influenced by policy decisions.
The model includes the causal links for the changes and as a
result, in endogenous growth theories, there is room for active growth
policies, which can lead to accelerated growth.
In this way, optimism is restored to the growth of transition
economies: transition economies can generate high growth rates allowing
them to catch up (but not converge because there is no convergence
in these models, indeed the dynamics are rather poor), and
achieve Modern Economic Growth. The analysis of the policy implications
and generation of high growth rates is outside the scope of this
chapter. But endogenous growth has another important aspect which
makes it especially interesting for economies in transition. Equally
importantly though, the optimism is limited. The ‘world’ of endogenous
growth models need not generate high growth rates automatically.
Policies need not be developed, yet there is room for failure.
Success and failure enter on an equal footing. Growth potentials need
not be realized; there can be errors in policy choice and policy implementation,
derailments, barriers and a host of other obstructions
which prevent high growth and can occur in transition economies.
The rich possibilities opened by interpretations of endogenous
growth models has not gone unnoticed. Development economists
seem to favour them, even though they point out that they still have a
way to go for being applied in development theory (see Coricelli et al.,
1998), and researchers of growth in transition economies have also
pointed to their advantages (see Gomulka, 1998).
11.5 Conclusion
With the completion of the first phase of transition, the most important
aspect of the process concerns the issue of generating Modern
Economic Growth. By the end of the 20th century this goal has not
been achieved by any economy in transition. However, the dominating
paradigm of transition in theory and policy is based on notions of linearity
and optimism. The varied historical experience of growth, the
recent experience and some implications of the modern growth theory
cast a shadow on the optimistic and linear approach. Growth and
‘catch up’ are not inevitable.
The challenges of the second stage may likely show that the common
features of the transition process diminish and the variety of transition
paths increase. While for some, consolidation will be the main