From a labor-managed economy to a market economy: A contribution to economic transformation

Does transition of a labor-managed economy to a capitalist economy really lead to an efficient economy? Which transformation strategies can be established during the transition? Which type of capitalist economy can be predicted by such transition strategies? This paper answers these questions by using the economic models described and explained by the main principles of post-Keynesian economic theory. It is found that the transition process leads to replacing the investment function, instituting the labor market, and replacing the expectations of a personal income rate with a profit rate. To achieve these processes, privatization and institution building, or institutional restructuring, are crucial. They also remove problems that should be removed by stabilization and restructuring.