A brave new world in Eastern Europe.

• Position: Special Section - Future of the Global Economy: Challenges of the 90s - Includes related information on perestroika

A brave new world in Eastern Europe

An economic revolution is sweeping Eastern Europe. Centrally-planned economies are switching to free markets, prices fixed by supply and demand, private ownership, competition and foreign investment.

The economic transformation is following close on the heels of the political revolution that dramatically changed the face of the region in 1989. Except in Romania, change has been accomplished without bloodshed. Only Albania has stayed on a steady, strictly socialist course.

For the first time in over 40 years, openly-contested elections have been held in Bulgaria, Czechoslovakia, East Germany, Hungary and Romania. Several communist parties are stepping down from Governments they have dominated since the end of World War II. The region has been engulfed by a tidal wave of civic activism, ranging from newly-legalized political parties and independent labour unions to environmental and women's movements.

This is how top international economic experts, both within and outside the UN, generally are describing recent changes in that part of the world.

Poland has opted for a "shock treatment" to quickly switch to a market economy. Severe austerity measures are being carried out: currency has been devalued and made convertible; subsidies slashed; money-losing state enterprises are being sold; and tax-evaders will be prosecuted.

The immediate results of this strong anti-inflationary medicine have not been pleasant for the Polish people. Prices soared by 70 per cent in January. Real income fell by 40 per cent. As factories were shut down, the number of unemployed rose from 9,600 in December 1989 to 55,800 in January 1990--1 per cent of the labour force.

The Government is expecting up to 400,000 jobless people but the figure could be much higher. Workers who lose their jobs would be provided with a safety net in the form of unemployment insurance and other measures.

Polish Prime Minister Tadeusz Mazowiecki assured the international Labour Conference in Geneva on 12 June that his Government wanted to give the market economy "a social content". The laws of the market should decide the creation of national income, he said, but income distribution policies should take due account of social objectives. Elected in June 1989, the new Polish Government is led by Solidarity, the previously banned independent trade union.

Hungary has a substantial head start since it started reforming its economy in 1968. The transition there...