The Evolution of Financial Discipline under the Postsocialist System

This article examines how postsocialist society can learn the financial discipline characteristic of a market economy. The prerequisite for this is the commitment and credibility of the state. The new private firms must be imbued with the demand for financial discipline from the moment they are founded; an alteration in the behavior of state-owned enterprises is also possible but not certain. Both the state and the firms are under a big temptation to revert to their habitual behavior. Meanwhile, the imposition of financial discipline poses the bitter dilemma of efficiency versus security.