The necessity and essence of the transition period in the economy

No matter how different and called the historical stages of the development of human society and its economic systems, the transitions from one stage to another are always not instantaneous. They occupy a certain historical period of time and are clearly different from the functioning of an already established economic system.

Thus, a pure liberal market economy, which was based on private property and perfect competition, as it developed and concentrated capital, gave rise to many forms of competition, among which oligopoly, monopolistic competition and monopoly should be distinguished. The mechanism of the functioning of the market, based on perfect competition and dependence of supply and demand only on price, began to falter. The Great World Depression of 1929-1932 confirmed this. the need to move to a new economic model – a mixed market economy, which, firstly, is based on a mixed form of ownership, in which, secondly, the mechanism of functioning of the economy allowed for various types of competition and, thirdly, required taking into account the impact on supply and demand (except for price) of non-price factors, and finally, fourthly, in the economy, along with the market, a state with special economic and legal functions appeared. For these and other reasons, at the end of the twentieth century, the essence of the market economic system changed very noticeably, in particular, in the direction of socialization, making transitions to different economic models.

What is the reason for the need for transitions and the transition period itself?

The need for a special, transitional period is due, firstly,  to historical development, the progressive movement of mankind and its socio-economic structure, and evolution itself. The aging of the economic system, its inability to self-resolve internal contradictions and self-renewal creates the need for a transition to a new system. Secondly, over time, changes occur and accumulate in the general conditions for the functioning of economic systems, which are:

natural and climatic conditions; the degree of development of the social community of people; socio-cultural environment (value orientations, spiritual, moral culture, etc.)

Accumulated changes in the system itself and its conditions under a certain critical mass of them become contradictory. If the economic system is no longer able to resolve these contradictions, then they cause the need to change or change the economic system itself. The sharpness of contradictions eventually reaches a point of tension in which the stability of this economic system is lost. It can no longer self-replicate in its former capacity, it can no longer be itself. There comes a need to determine the new economic system and carry out a transitional stage of development.

The features of the contradictions of the transitional society in comparison with the contradictions of a stable economic system are as follows.

First, they are deep, i.e. they reflect the incompatibility of the basic foundations representing opposites (the system principles of the old and new system that appear together).

Secondly, these contradictions are not temporary and “healing”, stabilizing, as in a stable system, but growing and destructive, since they lead not to balance, not to compromise, but to the displacement of one (new) economic system – another (old).

Thirdly, due to the growing social tension, the contradictions of the transition period can be attributed to socially dangerous, because the form of their manifestation can be mass confrontations of citizens within a given country with all the ensuing serious consequences.

The main contradictions of the transition economy of the transformational type include contradictions:

between ownership relations resulting from  hasty (“nomenclature” or “voucher”) privatization and public sector ownership relations; between the still undeveloped money system of the market and the real need to do without money (barter) or money surrogates; between relations in the economy and legislative and  legal relations; between a legal and a booming shadow economy. between the bureaucratic “introduction” of the market and its real  underdevelopment; between labor and its real pay in the face of rising inflation; between the sphere of production and the sphere of circulation, transforming in different speed and quality modes; between the unjustified enrichment of some and the unjustified overeating of others.

The main of these contradictions should be called contradictions in the relations of property, labor and income. So, for example, the rapid and deep decline in production in the Republic of Belarus and other CIS countries as a result of the systemic crisis requires a labor and creative breakthrough in order to “jump out” of the “crisis pit” and enter the path of sustainable economic growth. But this is contradicted by the existing collapse of the poverty of the main population and the loss of their material and moral motivation for labor enthusiasm.

The mechanism for resolving contradictions in a stable economic system and in a transitional society, as well as the nature of contradictions, cannot be the same. In addition, this mechanism depends on the strategic objectives of the ongoing transition, i.e. on the system (or model) of society to which it is transitioning.

When creating and using a mechanism for resolving contradictions, time is an important factor. A number of contradictions need to be resolved immediately, urgently, without delay, so as not to cause irreversible consequences – hysteresis phenomena. Hysteresis means the inability of an economic system or its components to return to normal, i.e. their destruction. And this is especially dangerous when it comes to the human factor of the economy, as well as morality, the morality of the population.

It should be added that the mechanisms for resolving the contradictions of the transition cannot but be influenced by the specific socio-economic characteristics of the country in which the transition is taking place, i.e. in different countries they may not coincide.

And so: the need for a transition period in the economy is due to the presence of the following main factors, which should include:

economic (obsolete production relations that inhibit economic development); technical and economic (moral and material deterioration of the production potential, requiring a transition to a fundamentally new scientific and technological level); organizational and managerial (management crisis); motivational (exhaustion of the motivational potential of the current system); social (falling living standards, tensions, conflict and the need to move to a more progressive system); external (inhibiting or destructive effects of external conditions and forces).

To enter the transition period, the whole complex of these factors is not necessary, the strength of some of them may be so great that it will cause a transition.

Signs of the coming or coming transition period can be considered:

incompatibility, alternativeness of economic forms; instability, instability of economic development with the phenomena of recession or crisis; intensive development of new economic relations for the existing system; aggravation of interests, conflict of old and new economic relations and their subjects.

Thus, the transition period in the economy reflects its special state, characterized by instability, intermediateness and expressing a transition from one stage of development to another or a transition to another type of economic system.

The transition period in the development of the economy reflects its intermediate state and means the transition from one stage to another or the transition to a new type of economic system.

The main function of the transition period is to form the basis of the new economic system. Moreover, the criterion of a new, more progressive system will be the growth of economic and social efficiency.

It should be borne in mind that the transition economy itself does not represent an economic system, since it does not have the properties of the system – stability, integrity, general goal-setting, integrative structure. A transition economy is a special state of the economy, characterized by intermediateness and instability.