W. Arthur Lewis Lecture: Should there be a Marshall Plan for Eastern Europe?

The desirability of massive financial aid to support the transition of East European countries to market economies is considered in the light of structural adjustment experience of Latin American countries. It is argued that, politically, an autonomous state is necessary to guide the restructuring. The democratization of Eastern Europe decreases the autonomy of the state. Economically, recent experience in Latin America and Eastern Europe has demonstrated that reforms take place during periods of stringency rather than affluence. It is therefore argued that trade and foreign investment are preferable to generous aid.