As you know, there are two main models of the economy:command and market. The command (planned) economy is characterized by direct government regulation of all economic processes, while the market economy is characterized by minimization of regulatory intervention in the economic activities of residents. Intermediate place is occupied by countries with economies in transition. We will talk about them in this article.
Countries in transition are those thatCurrently, they are on their way from the planned mode of business management to the market one. In fact, these are the states of the former Soviet Union, which after its collapse chose the market model. Therefore, all the countries of the former USSR, except perhaps Belarus, are the countries of transition economy. They are characterized by the acceleration of economic development after a period of crisis in the planning system (in fact, precisely because of the government’s inability to plan the entire economic life of the state and the Union collapsed), the creation and development of new enterprises, an increase in the standard of living of the population, wages, the elimination of goods deficiency and stuff. The economy is becoming more open both from the inside and the outside - this means that both resident entrepreneurs receive a greater degree of freedom in setting up and developing their own business, and foreigners have the opportunity to invest their free cash in facilities and enterprises located in the country .
As a rule, countries in transitionattract increased attention from foreign actors who want to make the so-called direct investment in the economies of these countries. The reason for this increased interest is the possibility of a more profitable investment of capital, which can be explained through the action of the laws of supply and demand. Capital is the same resource as raw materials and labor, which means that there is its market, and its price is the percentage return on investment. Naturally, in the capital markets of developed countries there already exists a certain excess of it, which means that its profitability is very low (for example, interest rates in foreign banks, rarely exceeding 3–4 percent per annum). At the same time, there is a significant lack of capital in the countries in transition, which means that the rate of return on investment projects there will be significantly higher.
Characteristics of countries in transitionincludes some negative features: rapid social stratification, as a result of which the difference between the incomes of the rich and the poor is tens and hundreds of times. Moreover, there is political and social instability, high likelihood of conflict, increased crime and others. It is also worth noting that countries with economies in transition may be characterized by an imperfect and unstable system of national legislation, which can be badly perceived by foreign investors who prefer more stable countries with a lower rate of return.
The main tasks of the government of a country in transition should be:
In the social sphere - ensuring equality andstability, minimizing the likelihood of social conflicts, caring for the vulnerable groups of the population (payment of pensions, scholarships, unemployment benefits);
In the economic sphere - increasing investmentthe attractiveness of the state, bringing the legislation system (including in the field of taxation) in line with world standards, ensuring protection of foreign investors from changes in legislation and the tax system for a long period.
