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In order to describe main trends in group dynamics of the transitional reform the authors have extracted three basic constituencies in "a typical economy at the start of the transition": State sector workers are described as those "without the skills to become new entrants in the competitive market". In the state sector downsizing accompanied with unemployment and price increases "they face significant losses".
Potential new entrants are described as "workers and new entrepreneurs, originally from state owned enterprises, who have the skills to become new entrants in the competitive market". They manage to adjust to the state sector decline and overcome initial losses. Insiders and oligarchs are described as "actors who begin the transition with substantial de facto control rights over state assets and close ties to the political elite inherited from the previous command system. Insiders and oligarchs benefit immediately from liberalisation and privatisation because they can convert their existing control over state assets into substantial gains."

> Transitional countries had left the model of non efficient centrally planned economy. For more than ten years, they are trying to establish market economy model capable to compete globally. And, of course, not to be a permanent looser as they were before!
The market economy is not only about competition. Still, the old model is very much blamed for tightening competition and liberties. In the centrally planed economies the state was the dominant constituent, a "commander in charge" for all major enterprises and institutions in society.

Redistribution of economic chances
What happens when the old command system is abandoned and the new rules of market economy system are "on the way" but not established yet ? Who gets the control rights over state assets in the process of liberalisation and privatisation? Who are the winners and losers after a decade of the long term reform?
Increasing inequality in all transitional countries is expected temporary result of the adjustments to the new competitive market rules. But most of the reform supporters had not predicted the heights of inequality that are reached in the very beginning of the transition.

The main competitors
In recent World Bank study ("Transition, The First Ten Years Analysis and Lessons for Eastern Europe and the Former Soviet Union") paid much attention on that: "The countries of Europe and Central Asia started transition with some of the lowest levels of inequality in the world. Since then,however, inequality has increased in all transitional economies and dramatically in some of them..." (page xiv,). The authors expressed concern about the fact that some groups have realised substantial, extraordinary gains from the first level of the (partial) reforms and about their ability to freeze the reform The winners of the first level of the reform are oligarchs and insiders! Who are they and how they manage to win?

Drawing the paths of winners and losers
On the Figure 9.1 we can follow the rise of inequality between three major actors of transition reform. Paths of three main actors at the first level (from R0 to R1) are drawn according to numerous empirical data. There is a lot of statistical evidence in majority of transitional countries about extraordinary rise of the income gains of the minority group of "oligarchs and insiders", about the slow income rise of the new entrants and steady looses of the former state sector workers not only in their income but also in their social care beneficiaries.

How to get to the second level
In other words the Figure 9.1 seems to be "realistic" about the first level of transition. In the terms of competitive game, it presents extraordinary high results of one small "team" in relatively short time and it is hard to find such example in developed economies of our time. What if oligarchs and insiders have not left other "teams" far behind themselves temporary, but forever? Paths from R1 to R2 point (second level and further) are traced according to favourable direction of the reforming process where transition is over and efficient economy established. The levels after the point R1 are about the future and how to get there. The authors have expressed their concerns about freezing the reforming process. And what about the people's lives in a such dramatic changes in economic and social positions? How does it look like to live in typical (or non typical) transitional country? This section of our newsletter is opened to commentaries, testimonies and dialogue related to these questions.
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