Plan Meets Reality

Chapter 2 evaluates the implementation of the reforms offered by international financial institutions and shows the propensity of these plans to foster corruption and extreme wealth inequality and, in many cases, an economic collapse that was far greater than what had been foreseen. Those connected to the old regimes or with significant outside financial backing were able to capitalize on misguided and poorly implemented privatization plans. The chapter also explores how corrupt incentive structures created the oligarch class that is the primary driver of economic inequality in the postsocialist world. Finally, it considers the depth and length of transitional recessions, analyzing economic data to show that, in many cases, recovery took decades, and for the worst hit countries, productive capacity has yet to reach pre-1989 levels. Highlighting the dramatic rise of poverty during transition, this chapter points to the failure of the international organizations’ “targeted” poverty-prevention strategy.