Vocabulary Box

to suppress inflationary pressures

other challenges confronting the countries

inexperienced policymaking institutions

collapse of fiscal revenues

redrawn national boundaries

output has been resilient to disinflation

to experience a reignition of severe inflation

to experience relapses of less severity

to risk losing control over inflation

moderate and manageable but persistent inflation

comprehensive structural reforms

to sustain low inflation

to be complacent

Task 2. Scanning

 Scan the text:

• to find the arguments for and against the anti-inflationary policy.

• to find the proofs of the fact that small size of the transition countries’ financial sectors determined a number of prerequisites contributing to the unexpectedly favorable climate for disinflation.

Task 3. Building vocabulary

1  Before you read the text, study Key Words and Word-Combinations and give Russian equivalents for them.

KEY WORDS AND WORD-COMBINATIONS

to tame / to subdue inflation

loose macroeconomic policy

tight macroeconomic policy

median inflation rate

resurgence of high inflation

anti-inflationary stance

collapse of output

contraction of output

to weaken fragile external balances

sacrifice ratio

external current account balance

debt financed external balance

equity flows

resilience of the external balance to antiinflationary measures

context for disinflation

to resort to adaptive measures

backward looking indexation

not to generate inflation inertia

financial fragility

two-tier banking systems

to impede disinflation

to ensure financial sector resilience

fiscal policy

sharply falling nominal interest rates

to fix bank lending rates

to widen bank spreads

to bolster financial stability

to result in greater supply-side flexibility

2  The vocabulary exercises below will help you to master the key vocabulary. It will provide you with the required vocabulary to speak on the problems under consideration.

A. Find in the text English equivalents for the following word-combinations.

Средние темпы инфляции; двухуровневая банковская система; сальдо счета внешних текущих операций; прибегать к мерам адаптации; условия дезинфляции; обвал производства; отсутствие макроэкономической политики; обуздать инфляцию; показатель «жертвенности»; препятствовать дезинфляции; не приводить к инфляционной инерции; сальдо, финансируемое за счет внешнего долга; обеспечивать устойчивость финансового сектора; увеличивать банковскую маржу; резкий спад номинальных процентных ставок; привести к повышению гибкости рыночного предложения; налогово-бюджетная политика; индексация с учетом прошлых периодов; способствовать достижению финансовой стабильности; потоки, связанные с участием в капитале; фиксировать ставки ссудного банковского процента; рецидив высокой инфляции; антиинфляционная политика; сокращение производства; ослабить непрочный баланс внешних операций.

B. Match the following English word-combinations from the text with the Russian equivalents given below.

To get inflation under control; to yield lessons for other countries; centrally planned economies transforming themselves into market economies; removal of price control; within six months of taking anti-inflationary measures; to persist at moderate to high levels; the advanced reformers; to be not costly to output; unwarranted concerns; the extent to which inflation exceeds the threshold; controlling for the underlying relationship between inflation and output; to call for explanation; at the outset of disinflation efforts; to reinforce political commitment to implement reforms; the small size of the transition countries’ financial sectors; to be ill prepared to cope with major relative price changes and shocks ; to be small relative to output; a limited need for public resources, to ensure financial sector resilience; transmission of disinflation policy to the real sector; fiscal root of inflation; to increase the diversification of funding sources available; fiscal corrections; to achieve a strong fiscal position; the delayed establishment of the country’s new currency; a large, externally funded public invesment programme; tough domestic credit.

Жестко ограниченное внутреннее кредитование; расширять диверсификацию доступных источников финансирования; страны, продвинувшиеся в реализации реформ; необоснованные опасения; достигать прочного бюджетного сальдо; передача воздействия политики дезинфляции на реальный сектор экономики; отмена контроля над ценами; страны с централизованным планированием экономики, преобразующиеся в рыночные экономики; требовать объяснения; не быть готовым к резким переменам в относительных ценах и ценовым шокам; с поправкой на базовые отношения между инфляцией и объемом производства; запоздавшее введение в стране новой национальной валюты; причины инфляции коренятся в налогово-бюджетной сфере; обрести контроль над инфляцией; в пределах полугода с момента принятия антиинфляционных мер; масштабная программа государственных инвестиций, финансируемых из-за границы; ограниченные потребности в обеспечении устойчивости финансового сектора за счет государственных ресурсов; на раннем этапе проведения дезинфляции; чем больше инфляция превышает этот порог…; бюджетные корректировки; быть незначительным по сравнению с объемом производства; усилить политическую решимость в проведении программы; малые размеры финансового сектора в странах с переходной экономикой; не быть связанным с чрезмерными издержками для объема производства; давать возможность другим странам извлекать уроки; сохраняться на уровне от среднего до высокого.

Task 4. Discussing the Content

1  Formulate the essence of introductory part of the text.

2  Comment on : “…if comprehensive structural reforms are not preconditions for achieving low inflation, they appear to be essential to sustain it.”

3  Describe the context for disinflation in various transition economies.

Task 5. Analysing Text Structure

 Explain the function of the lead to the article.

 Underline the topic sentences in paragraphs 1-3.

 Highlight the key terms in paragraphs 1-3 and show how they reflect the general inflationary trend in transition countries.

 Trace the means of coherence in paragraphs 4-9.

 Explain why paragraphs 6 and 9 are so short.

Task 6. Summarizing

 The extract below is a review of the text presented above. Analyse it and say if this version covers the essentials in the optimal way.

“The economic literature on the transition process has grappled with two critical questions on disinflation. First, how rapid has disinflation been during transition? Second, what effect has disinflation had on output? In fact, Carlo Cottarelli and Peter Doyle found that disinflation had been achieved quite rapidly in many of the transition countries. The median inflation rate in the Central and Eastern European countries dropped from 84 percent in 1992 to about 9 percent in 1995. Disinflation was achieved even more rapidly in the Baltics, Russia, and other former Soviet Union countries, where the median inflation rate fell from 1,210 percent in 1992 to 60 percent in 1995. The two groups of countries converged to a median inflation rate of 11-12 percent by 1997. But the reduction in inflation, with a few exceptions, has not been sustained, and inflation has resurged in some countries.

Despite such rapid disinflation, no general evidence was found that disinflation had been a factor in depressing output. Four factors played a key role in limiting the impact of disinflation on output: there was considerable political support for disinflation and price liberalization; stabilization policies were introduced early; comprehensive fiscal consoli­dation underpinned disinflation in a number of countries; and the various monetary frameworks were appropriately flexible. In fact, rather than depressing output, the resulting moderate- and low-inflation environment had, in due course, a positive impact on growth.”

Saleh M. Nsouli

A Decade of Transition An Overview of the Achievements and Challenges

© Finance & Development

Task 7. Précis / Abstract Writing

1  Analyse the composition of the abstracts (Patterns 5, 6, 7, 8) according to the following basic elements:

 the subject matter of the work

 the basic aspects of the work under analysis

 addressee and / or evaluation of the work

2  Analyse the language of the abstracts (Patterns 5, 6, 7, 8) in terms of the following parameters:

 the use of tenses and voice forms in the abstracts

 participial constructions and the function they perform

 types of sentences (simple, compound and complex with maximum two subordinate clauses)

 clichés specific for this genre

3  Sort out these clichés according to the thematic classification given above.

4  Find the most suitable Russian equivalents for the following English word-combinations.

To provide an overview and assessment; to report new findings concerning… , to present an extensive and thorough treatment of; to introduce a rigorous examination of a number of timely topics; to comprise a theoretical overview of; to be a tool for theoretical and numerical investigation; to be found helpful in the study of; to be of interest to researchers in other fields of study.

5  Match the Russian word-combinations to the English ones. Sort them out according to the given thematic classification. (See p. 21 )

— основная задача публикуемой статьи	— the paper / the article under review aims at starting / striking up a debate
— работа ставит своей задачей	— in conclusion the article reads
— в первой части работы делается попытка проанализировать	— the article begins / starts with
— в третьем разделе подчеркивается важность	— the article under consideration points out
— рассматриваемая статья выделяет	— a special concern of the discussion is
— значительное внимание в ходе обсуждения уделяется	— in the third section emphasis is given to
— статья начинается с	— the main aim of the paper is
— в заключение в статье говорится, что	— in the first part of the paper effort is undertaken to analyse
— цель реферируемой работы — положить начало обсуждению	— the primary task of the published article

6  Using these clichés give an overview of Text 3.

7  Develop your plan of Text 3 into a précis.

8  Write an abstract of Text 3

BOX 3

Notes from underground: The growth and costs of unofficial economies

Transition has brought marked growth in countries' unofficial economies. Many commercial and even many productive activities go underground to evade high and volatile taxes, circumvent restrictive and often unpredictably changing government controls, and employ workers flexibly and cheaply. Estimates based on electricity consumption suggest that, between 1989 and 1994, the share of unofficial activity in the economy grew, on average, from 18 to 22 percent in a sample of CEE countries and from 12 to 37 percent in a sample of NIS. Surveys in Ukraine confirm a very large unofficial economy.

Unofficial economies tend to be large where political controls have weakened, economic liberalization is lagging, and burdensome regulations and high taxes make the formal environment hostile for the newly developing private sector. Where the informal economy has grown significantly, it has cushioned the output decline and provided an outlet for entrepreneurial talent. But it is mostly a “survival” economy that focuses on short-term objectives, invests little, and loots state assets. Firms waste time and money in their efforts to get around controls and taxes. These efficiency losses, and the difficulty of conducting certain transactions unofficially, limit its growth. Informalization also lowers government revenues and encourages capital flight. And by its very nature it breeds corruption and undermines the credibility of formal market and government institutions. Thus, a growing informal economy is no substitute for a formal, open private sector, but in fact eventually impedes its development.

Latin America presents striking parallels. There, too, unofficial activities account for between roughly one-fifth and two-thirds of total output. They thrive where political freedoms are many and economic freedoms few. And where informalization has been most extensive (Bolivia, Peru), growth has been slowest. Measures that have helped in Latin America to bring the informal sector back into the economic mainstream are likely to work in the transition economies as well. These include extensive price, trade, and foreign exchange liberalization; tight macroeconomic policies; a sharp reduction of regulatory constraints; and more professional government administration. A combination of carrot and stick—possibly including a one-time, partial tax amnesty — can help reduce the costs of returning to the formal economy.

1  Match the phrases underlined in the text with the appropriate equivalents from the list below.

теневая экономика

параллельная экономика

заметный рост

не платить высоких и постоянно меняющихся налогов

обходить жесткие правительственные ограничения

либерализация задерживается \ отстает

жесткое регулирование

смягчать последствия спада производства

наживаться на государственных активах

способствовать бегству капитала заграницу

порождать коррупцию

подрывать доверие к организованному рынку

подрывать доверие к государственным органам

препятствовать развитию открытого частного сектора

теневые предприятия преуспевают

масштабная либерализация цен, торговли и валюты

жесткая макроэкономическая политика

устранение ограничений

формирование профессионального государственного аппарата

политика кнута и пряника

одноразовая частичная налоговая амнистия

2  Speak on the context for a marked growth of unofficial economies.

3  Identify positive and negative effects of unofficial economies.

4  Scan the text and note the measures that could help the transition economies to bring the informal sector back into the economic mainstream.

5  Comment on the statement: “A combination of carrot and stick — possibly including a one-time, partial tax amnesty — can help reduce the costs of returning to the formal economy”.

TEXT 4

Task 1. Skimming for main ideas

 Skim through the text and formulate the topic of each paragraph.

C EE and the NIS: Liberalization Boosts Recovery From Initial Output Losses

utput has fallen dramatically in European and Central Asian transition economies. Some of the official estimates overstate the decline because of statistical weaknesses, not least, in many countries, the exclusion of a large and growing unofficial economy. But the data show a substantial decline even after adjusting for these biases; in Russia, for example, output fell by about 40 percent during 1990-95. Estimates based on electricity demand are also problematic but provide perhaps a lower bound to the output decline; they suggest that GDP fell, on average, by around 16 percent in five CEE countries between 1989 and 1994, and by around 30 percent in eleven NIS. Because of sharp falls in investment, consumption has declined less than output, but there is little doubt that living standards fell in the early stages of reform in most countries, notwithstanding improvements in product quality and the elimination of queues.

2. Liberalization, combined with stabilization, meant the end of the supply-constrained shortage economy, in which even the shoddiest products could always be sold. Now unwanted goods remained on the shelves. Firms and consumers drew down their supply stocks as hoarding became unnecessary — falling inventories contributed about one-third to the output drop in Poland in 1990-91 and over half of the 11 percent drop in the Baltic countries in 1993. In Russia military procurement was cut by 70 percent. Of course, the elimination of unwanted production and excess inventories did not reduce welfare. But all initial cuts in output had second-round effects on spending and demand, which may have doubled the overall effect on output.

3. The disintegration of the CMEA and the Soviet Union, coupled with trade liberalization, led to a collapse in trade among CEE countries and the NIS. Buyers substituted imports, including consumer durables, from outside the CMEA, while the shift toward world market prices and trade in convertible currencies entailed huge price rises for previously subsidized energy and raw material imports, especially from Russia. According to one rough estimate, Russia's price subsidies to other countries were worth $58 billion in 1990, of which $40 billion went to the rest of the Soviet Union and $18 billion to other CMEA countries. Ending these subsidies raised the cost of imported production inputs, reducing aggregate supply and output. Many non-NIS countries suffered overall terms-of-trade losses of more than 10 percent of GDP, and even as high as 15 to 20 percent in the case of some highly import-dependent countries. For its part Russia was unable to exploit fully the improvement in its terms of trade because of collapsing trade volumes and its own continued export restraints. The collapse in trade was compounded by the stupendous inefficiency of the initial interstate payment system, which usually took about three months to process transactions.

4. Finally, in CEE and the NIS, unlike in China, planning institutions had vanished before new market institutions could develop. For example, many countries have discarded the old systems for allocating agricultural credit and distributing farm output, but new wholesale and retail networks and market-based credit systems are not yet in place. The lack of market institutions caused coordination failures throughout the production and trading system — many of them related to limited information and to uncertainty. Inadequate incentives, often linked to deficient property rights, compounded the shortage of modern technology and skills and created formidable obstacles to swiftly redeploying factors of production to emerging sectors. Uncertainty encouraged capital flight by firms and households alike, and many firms became survival-oriented, waiting and hoping for better times rather than restructuring actively. To some extent, such problems are an inevitable result of these countries' dramatic break with the past. But they were exacerbated, in many countries, by inconsistent reform policies—including a lack of policy coordination in the ruble zone. Coordination failures, uncertainty, and distorted incentives constrain the start-up or expansion of profitable activities — even as unprofitable or overbuilt sectors collapse. For example, livestock herds shrank dramatically across the NIS in response to steep increases in fodder prices relative to prices for animal products. But Russian oil production has also fallen — by almost half since 1988 — despite a steep increase in the relative price of energy. The main reasons are an acute shortage of maintenance and upgrade investments and an inadequate legal, institutional, and fiscal framework that discourages management improvements, foreign investors, and new technology.

© World Development Report

Task 2. Scanning

 Scan the text:

1) to illustrate substantial fall in GDP;

2) to illustrate the point of Russia’s price subsidies to other countries;

3) to give the main reasons for oil production fall in Russia.

Task 3. Building vocabulary

1  Before you read the text, study Key Words and Word-Combinations and give Russian equivalents for them.

KEY WORDS AND WORD-COMBINATIONS

output decline / output losses

lower bound to the output decline

demand shifts

supply disruptions

supply-constrained shortage economy

shoddiest product

unwanted goods hoard

to draw down the supply stocks

falling inventories

military procurement

shift toward world market prices

trade in convertible currencies

to entail huge price rises

to suffer overall terms-of-trade losses

collapse in trade

inefficiency of the interstate payment system

to process transaction

to develop new market institutions

to discard the old system for allocating credit

market-based credit systems

deficient property rights

to redeploy factors of production to emerging sectors

to encourage capital flight by firms and households

inconsistent reform policies

2  The vocabulary exercises below will help you to master the Key Vocabulary. It will provide you with the required vocabulary to speak on the problems under consideration.

A. Find in the text English equivalents for the following word-combinations.

Чрезмерно жесткая стабилизационная политика; изменение структуры спроса; некачественная продукция; не пользующиеся спросом товары; cбои в системе поставок; параллельная экономика; запасы; уменьшать количество запасов; переход к мировым рыночным ценам; вызвать резкий скачок цен; крах торговли; торговля в конвертируемой валюте; нести убытки вследствие ухудшения условий торговли; закупки оборонной продукции; неэффективность межгосударственной системы платежей; отказаться от старой системы предоставления кредитов; оформлять сделки; рыночная кредитная система; создавать новые рыночные институты; вызвать бегство капитала за границу; нечеткие права собственности; перенаправить ресурсы в новые отрасли; непосле­довательные реформы; экономическая ситуация, характеризующаяся всеобщим дефицитом и ограниченным предложением.

B. Match the following English word-combinations from the text to the Russian equivalents given below.

Official estimates; statistical weakness; after adjusting for these biases; the collapse ( the disintegration) of the CMEA; coupled with trade liberalization; according to one rough estimate; planning institutions; new wholesale and retail networks; coordination failures throughout the production; shortage of modern technology; problems were exacerbated; a lack of policy coordination; a steep increase in the relative price of energy, lower bound to output decline.

С поправкой на указанные отклонения; распад СЭВ; оценки, приведенные на основе официальных данных; на фоне либерализации торговли; неполнота статистической информации; менее резкий спад производства; плановые органы; несогласованность действий производственных предприятий; по приблизительным оценкам; нехватка современных технологий; новая сеть оптовой и розничной торговли; проблемы обострились; резкое повышение относительных цен на электроэнергию; недостаточная согласованность политики.

3  Word Study

Economic terms payment, credit, capital are as a rule used in the analysis of liberalization processes in transition economies. Study the given word-combinations to enrich your vocabulary. Use them commenting on consequences of liberalization.

payment (n)

to anticipate ~ уплатить досрочно

to effect ~ осуществить платежи

to enforce ~ взыскивать платеж

to make ~ производить платеж

to postpone ~ отсрочить платеж

to resume ~ возобновить платеж

to suspend ~ приостановить платеж

upon ~ после платежа

credit (n)

on ~ в кредит

~ partially drawn down ~ частично использованный кредит

to cancel a ~ погасить кредит

to give ~ предоставлять кредит

to obtain ~ получать кредит

сapital (n)

to endow with ~ обеспечивать капиталом

to furnish the ~ предоставить капитал

to invest ~ вкладывать / инвестировать капитал

to keep ~ intact сохранять величину капитала неизменной

to mobilize ~ переводить капитал в ликвидную форму

to raise ~ изыскивать средства

to withdraw ~ изымать капитал

Task 4. Discussing the content

1  Paragraph 1 contains a number of official estimates characterizing dramatically fallen output in European and Asian transition economies. To what extent do you think the exclusion of growing unofficial economy affects the official data?

2  Look through paragraph 2 and give the list of factors that generated a considerable output fall.

3  Paragraph 2 reads that “all initial cuts in output had second-round effects on spending and demand, which may have doubled the overall effect on output”. Extend on this statement.

4  Paragraph 3 points out that “the disintegration of CMEA and the Soviet Union coupled with trade liberalization led to a collapse in trade among CEE countries and the NIS.” The collapse in its turn led to some negative consequences treated in the paragraph. Comment on them.

5  In paragraph 4 the author of the paper considers the problem of “coordination failures throughout the production and trading system” induced by the lack of market institutions. Study the paragraph and present the author’s reasoning and argumentation.

6  Finally the author presents the reasons for a steep fall in Russian oil production. What should be done to revitalize it?

Task 5. Analysing text structure

 What did the title lead you to expect?

 Indicate the topic sentence in each paragraph.

 Briefly develop the idea of each topic sentence.

 Trace the formal structure in paragraph 4.

Task 6. Summarizing

 Sum up the main points presented in Text 4. Write the plan of the text in the form of statements.

Task 7. Précis / Abstract writing

1  Analyse the composition of the abstracts (Patterns 9, 10, 11, 12) according to the following basic elements:

 the subject matter of the work

 the basic aspects of the work under analysis

 addressee and / or evaluation of the work

2  Analyse the language of the abstracts (Patterns 9, 10, 11, 12) in terms of the following parameters:

 the use of tenses and voice forms in the abstracts

 participial constructions and the function they perform

 types of sentences (simple, compound and complex with maximum two subordinate clauses)

 clichés specific for this genre

3  Sort out these clichés according to the given thematic classification.

4  Find the most suitable Russian equivalents for the following English word-combinations.

To offer an integrated approach to; to provide the latest research perspective on; to explore the underlying motivation; to treat the interpretation; to present practical techniques for; to provide detailed coverage of; to conclude with an examination of; to present step-by-step procedures for; to introduce tested models for; to use a variety of methodologies; to offer guidelines for; to prove by numerous flowcharts; to illustrate with numerous checklists and worksheets; to be aimed at; to be divided into.

5  Match the given Russian word-combinations on the left to the English word-combinations on the right. Sort them out according to the suggested thematic classification.

— был проведен краткий анализ	— to provide complete explanation
— аналогичное исследование проводится для того, чтобы	— the method offers advantages / suffers from disadvantages
— предварительный анализ завершен досрочно	— the proposed approach allows to study
— настоящая теория была тщательно разработана на основе	— the preliminary analysis was completed ahead of time
— этот метод обладает преимуществами / страдает недостатками	— a brief study was undertaken
— предложенный подход дает возможность изучить	— a similar work is under way in order to
— сосредоточить внимание на сути проблемы	— to offer a solution to the task
— давать исчерпывающее объяснение	— to offer arguments stating that
— приводить доводы, подтверждающие	— the present theory was carefully worked out / elaborated on the basis of
— предложить решение проблемы	— to focus on the essentials

6  Write a précis of Text 4.

7  Write an abstract of Text 4.

BOX 4

Trade policy and performance: Estonia and Ukraine illustrate how close the link

Estonia and Ukraine have pursued diametrically different trade policies. Their trade performance has varied accordingly.

Rapid trade liberalization pays off. Estonia removed virtually all export barriers, eliminated all quantitative import restrictions, kept only a few low import tariffs, and made its new currency fully convertible for current account transactions, all by the end of 1992. Import liberalization introduced world relative prices for tradables. And radical export liberalization — a policy that distinguished Estonia from most other NIS — allowed a rapid reorientation of trade, accelerated adjustment to Western quality standards, and boosted hard-currency export revenues. More than half of Estonia's exports now go to Western Europe, and close to two-thirds of its imports come from there. Export growth contributed 11 percentage points a year to GDP growth during 1992-94. Even if one corrects for Estonia's special advantages — close ties with Finland, proximity to Western Europe, and Baltic Sea ports that have boosted legal and illegal trade — its export performance has been phenomenal.

Slow trade liberalization imposes high costs. Ukraine maintained many price and trade controls until the fall of 1994. State trade — including state procurement and an extensive network of bilateral trade agreements with other NIS and ex-CMEA countries — remained intact. Administrative controls kept domestic prices below world prices. Tight export controls (including licenses and quotas) sought to prevent producers from selling subsidized goods abroad. Exporters had to surrender foreign exchange earnings at below-market exchange rates. The import regime remained liberal, but domestic buyers lacked foreign exchange to pay for imports. Ukraine's policies proved counterproductive. The intergovernmental agreements failed to stem the trade decline with the other NIS and blocked trade diversification: Western Europe accounted for less than 20 percent of Ukraine's total trade in 1994. Isolation from world markets delayed enterprise adjustment and perpetuated inefficiencies. Exports fell, contributing negatively to output growth during 1992-94, and large trade deficits contributed to a spiraling depreciation of the currency and economic destabilization. Ukraine's reforms in late 1994 included considerable price liberalization and the elimination of most direct export controls, and exports grew in 1995. A nontransparent reference price system continues de facto to restrain exports below a minimum price, encouraging rent seeking and corruption, but as of early 1996 its coverage is limited to a small and declining share of exports.

1  Scan the extract to provide figures that prove that rapid trade liberalization pays off.

2  Provide figures concerning the share of Western Europe in Ukraine’s trade.

3  Match the following English word-combinations to the Russian variants given below.

To pursue trade policy; to remove export barriers; to eliminate quantitative import restrictions; to make national currency fully convertible; current account transactions; radical export liberalization; rapid reorientation of trade; adjustment to Western quality standards; to boost hard-currency export revenues; proximity to Western Europe; to boost legal and illegal trade; to maintain price and trade control; state procurement; to remain intact; tight export controls; subsidized goods; to surrender foreign exchange earning at below-market exchange rates; pursued policies proved counterproductive; to stem the trade decline; to block trade diversification; to delay enterprise adjustment; to perpetuate inefficiencies; spiraling depreciation of the currency; a nontransparent reference price system; to restrain exports below minimum price; to encourage rent seeking .

Отменить количественные ограничения на импорт; радикальная либерализация экспорта; проводить торговую политику; обеспечить полную конвертируемость национальной валюты; устранить все ограничения на экспорт; сделки по текущим счетам; увеличить объем валютных поступлений от экспортных операций; сохранять регулирование внешней торговли и цен; быстрая переориентация торговли; увеличить объем как законных, так и незаконных торговых операций; государственные поставки; переход к принятым на Западе стандартам качества; жесткие экспортные ограничения; близость к странам Западной Европы; проводимая политика лишь ухудшала положение; оставаться неизменным; субсидированная продукция; препятствовать диверсификации; сдавать валютную выручку государству по курсу ниже рыночного; усугублять неэффективность экономики; приостановить сокращение объема торговли; непрозрачный характер системы относительных цен; задерживать перестройку предприятий; вести к извлечению сверхприбыли; ускоряющаяся девальвация валюты; удерживать экспортные цены на уровне ниже минимального.

4  Using these word-combinations speak on trade liberalization processes in Russia.

TEXT 5

Task 1. Skimming for main ideas

 Skim through the text and formulate its subject matter.

H OW HAS LIBERALIZATION SPURRED RECOVERY?

cross CEE and the NIS liberalization has been positively associated with growth. In countries where liberalization has been stronger (as measured by average liberalization scores), output losses have on average been smaller. And the difference increases over time: relatively stronger liberalization boosted average growth during 1989-93, but it boosted average growth in 1994-95 even more. Two other factors have had a strong impact on recent growth. First, output has tended to increase further since 1989, or decline less, in poorer, more agricultural countries than in richer countries with more overbuilt industrial sectors. Second, each year a country has been adversely affected by regional tensions has added 6.5 percentage points of GDP, on average, to the annual decline in output since 1989.

2. How can countries judge whether market reforms have paid off overall, given that earlier and more vigorous liberalization has led to an earlier decline but faster medium-term growth? One way is to regard the market system as an asset in which countries invest by liberalizing. Countries have invested different amounts at different times, and these investments have generated initial income (GDP) losses and subsequent income gains of different magnitudes. The value of countries investments as of the end of 1995 is their total GDP accumulated since 1989 (and discounted back to 1989 to allow for the fact that people value income today more than income tomorrow). On average, liberalization has indeed been a good investment. The least liberalized countries have fared slightly better than moderate reformers. More advanced liberalizers, however, whose cumulative market reforms have now reached a critical mass, have come out far ahead, at least in terms of national income. This does not imply that rapid, all-out liberalization is always possible — or preferable. When choosing how much and how fast to liberalize, governments are constrained by initial conditions, and often the effects of different strategies will be highly uncertain. Initial conditions still leave policymakers a fair amount of choice—they influence but by no means predetermine economic performance. The fact that, liberalization tends to pay off suggests that, on average, policymakers will maximize people's incomes by liberalizing as much as possible within the range left open by country-specific constraints.

New growth comes from letting exports and services expand

3. Exports and services, two previously repressed activities, have been the major engines of growth in transition economies. Overall, the European transition countries have been strikingly successful at opening their economies and reorienting their exports toward world markets . Despite early skepticism, many have been able to penetrate the “quality barrier” to expanding exports to the West. Countries have rapidly diversified their exports, and some have begun to reverse the trend of falling unit value for machinery exports — a sign of rising quality. Exports from countries with more open trade regimes, mostly in CEE and the Baltics, declined less with the initial disintegration of the Soviet Union and the CMEA and recovered faster, contributing more to overall output growth . By contrast, in most NIS, which stuck with state trading arrangements and still impose significant export controls, OECD-oriented exports of manufactures have remained marginal and the contribution of exports to growth has been negligible.

4. Some have argued that, whatever the overall speed of liberalization, foreign trade and exchange transactions should be liberalized more slowly than internal markets to lessen the initial decline in domestic employment and output. Yet there is powerful evidence from transition economies that the benefits of early external liberalization — in parallel with domestic liberalization and stabilization — far outweigh the potential costs. Establishing essentially free trade (except, possibly, a modest and uniform import tariff) early on yields a particularly large return in these countries, for several reasons. First, the legacies of central planning — especially the bias toward autarky and large firms — magnify the efficiency and output gains from competing in world markets, and comparisons of countries' aggregate trade performance bear this out. Firm-level evidence from Bulgaria, Poland, and Russia also shows that trade liberalization has indeed spurred enterprise restructuring and helped make markets competitive. Second, in the early stages of liberalization, producers in most countries have been shielded from foreign competition by heavily undervalued currencies, whether exchange rates are fixed or floating. Undervaluation also created a strong incentive to seek export markets.

5. By contrast, continued trade controls are likely to yield few benefits for transition countries. Import protection is at best a blunt instrument for alleviating the pain of adjustment, since it cushions entire industries, not just the weakest firms. Entry promotion, retraining programs, and targeted social assistance are likely to be much more effective. Furthermore, unlike these measures, trade controls need to be enforced against strong incentives for both partners in a voluntary transaction to circumvent them. In transition economies, whose institutional capacity is especially weak, trade controls therefore tend to be relatively ineffective at protecting firms or raising tariff revenues, and instead breed corruption. Finally, worldwide experience has shown that “temporary” protection measures all too often become permanent, and that frequent changes in trade policy are bad for firms that are expanding and developing foreign ties. Both problems have particular relevance to those of the transition countries where political conditions are volatile.

6. Services have been the second major source of growth in transition economies. One study estimated that reversing the past repression of services in the NIS could increase national income by more than 10 percent and generate around 6 million additional jobs, substantially compensating for declines in other sectors. Service sector output has indeed soared during transition, especially where liberalization is more advanced. In the leading reformers the initial “service gap” (the shortfall in the service sector share of GDP relative to that in established market economies) has essentially been closed. Spirited entrepreneurs have responded vigorously to improved incentives, often despite serious obstacles, including numerous and frequently changing regulations, slow and often corrupt bureaucracies, and crime, in addition to high taxes and lack of credit. Services have grown less in countries such as Belarus, where reforms are not as advanced.

7. The adjustment from industry toward services has meant huge shifts in relative prices. In Russia the price of paid services relative to that of goods in the average consumer basket rose fivefold between 1990 and 1994. In parallel, the share of industry in GDP fell 7 percentage points and that of agriculture 9 percentage points, while the share of services increased by 16 percentage points. Industry's share has declined even more sharply in the advanced reformers. This has contributed to an improved environmental record across CEE countries and the NIS, whereas rapid industrial growth has led to deteriorating environmental conditions in the East Asian transition economies.

8. Agriculture's share in GDP has fallen somewhat in most transition economies. In CEE and the NIS, agriculture was highly inefficient and, in contrast to East Asia, sustained by subsidies on inputs, credit, and retail prices. The sector has suffered an unnecessarily severe relative price shock — input prices, especially fuels, rose four times as much as output prices — because supply and processing are not yet fully competitive, and governments still intervene to hold down food prices. Further liberalization should allow agricultural producers to retrace some of their lost ground.

© World Development Report

Task 2. Scanning

 Scan the text:

1) to find three main factors which facilitated economic growth;

2) to pick out information on service sector performance.

Task 3. Building vocabulary

1  Before you read the text, study Key Words and Word-Combinations and give Russian equivalents for them.

KEY WORDS AND WORD-COMBINATIONS

to spur recovery

average liberalization scores

strong / vigorous liberalization

overbuilt industrial sectors

to pay off

least liberalized countries

to fare / to get on better

rapid, all-out liberalization

to open economies

to reorient exports toward world markets

to penetrate the “quality barrier”

to diversify the export

early external liberalization

heavily undervalued currencies

to alleviate the pain of adjustment

entry promotion

retraining programs

targeted social assistance

trade controls

transition economies’ institutional capacity

to be ineffective at raising tariff revenues

to breed corruption

to reverse the past repression of services

to generate additional jobs

to close the initial “service gap”

the shortfall in the service sector share of GDP

huge shifts in relative prices

to rise fivefold

improved environmental record across CEE countries and NIS

to be sustained by subsidies on inputs, credit, and relative prices

to suffer an unnecessarily severe relative price shock

2  The vocabulary exercises below will help you to master the Key Vocabulary. It will provide you with the required vocabulary to speak on the problems under consideration.

A. Find in the text English equivalents for the following word-combinations.

Активная либерализация; быстрая и обширная либерализация; страны, не спешившие с либерализацией; средний индекс либерализации; возрождать экономику; рыночные реформы оправданы; гигантский промышленный сектор; положение стран, не спешивших с либерализацией, лучше; обеспечить открытость экономики; расширить ассортимент экспортируемой продукции; переориентировать экспорт на мировые рынки; форсированная либерализация внешнеэкономической деятельности; преодолеть «барьер качества»; смягчать болезненные последствия перестройки экономики; адресные социальные программы; содействие открытию новых компаний; программы переподготовки кадров; не давать заметного увеличения поступлений от импортных тарифов; стремиться обойти контроль; порождать коррупцию; организационно-технологические возможности стран с переходной экономикой; ликвидировать первоначальный дефицит услуг; развивать ранее отсталую сферу услуг; радикальное изменение структуры цен; отставание доли услуг в ВВП; существовать за счет льготных кредитов и субсидирования производственных ресурсов и розничных цен; испытывать скачок относительных цен; улучшившееся состояние окружающей среды в странах ЦВЕ и СНГ; увеличиться в пять раз, сильно заниженный валютный курс.

В. Match the following English word-combinations from the text to Russian equivalents given below.

To boost average growth; to be adversely affected by regional tensions; to generate initial income (GDP) losses; to generate subsequent income gains; liberalization has indeed been a good investment; when choosing how much and how fast to liberalize; initial conditions in transition economies leave policymakers a fair amount of choice; to influence but by no means predetermine economic performance; to reverse the trend of falling unit value; to stuck with state trading arrangement; to impose significant export controls; the benefits of early external liberalization far outweigh the potential costs; free trade early on yields a particularly large return in transition economies; legacies of central planning; to spur enterprise restructuring; to shield producers from foreign competition by heavily undervalued currencies.

Вызывать лишь уменьшение доходов; либерализация действительно является неплохой инвестицией; способствовать экономическому росту; при определении размаха и темпов либерализации; испытывать отрицательные последствия региональных конфликтов; впоследствии приносить прибыль; влиять на экономические результаты; быть не в состоянии избавиться от государственной системы торговли; исходные условия в странах с переходной экономикой оставляют политикам возможность выбора; ввести жесткое регулирование экспорта; преодолевать падение средней стоимости; преимущества форсированной либерализации внешнеэкономической деятельности перевешивают возможные издержки этого процесса; наследие централизованного планирования; свободная торговля уже на ранних стадиях реформ дает положительные результаты; дать толчок перестройке предприятий; не давать производителям возможность конкурировать с иностранными фирмами из-за чрезвычайно заниженных обменных курсов.

3  Word Study

Economic terms subsidy, revenue, tariff, export are used in the analysis of economic growth trends. Study them and use in your comparative analysis of transition economies’ performance.

subsidy (n)

government (al) ~ государственная дотация

industrial ~ ies промышленные субсидии

public ~ государственная субсидия (из средств местных властей)

wage (- employment) ~ ies субсидии, стимулирующие занятость (в форме выплат или налоговых льгот предприятиям)

revenue (n)

budget ~ бюджетные доходы

earned ~ полученный доход

marginal ~ предельный (добавочный) доход

non tax ~ s неналоговые поступления

operating ~ доход от основной деятельности, выручка

public ~ s государственные доходы

tax ~ s налоговые поступления

tariff (n)

customs ~ таможенный тариф

differential ~ дифференциальный тариф, дифференциальные пошлины

discriminating [discriminatory] ~ дискриминирующий, [ограничительный] тариф

flexible ~ гибкий тариф

foreign ~ таможенный тариф иностранного государства

most favored nation ~ тариф на основе режима наибольшего благоприятствования

protection ~ протекционистский тариф, протекционистские пошлины

reduced ~ льготный тариф

revenue ~ фискальный тариф

statutory ~ установленный законом тариф

export (n)

~ s in excess of imports ~ активное сальдо торгового баланса

to be engaged in ~ заниматься операциями по эскпорту

to go for ~ идти на экспорт (о товаре)

to produce for ~ производить на экспорт

to step up ~ увеличивать экспорт

chief ~ s главные статьи экспорта

national ~ общая сумма экспорта из страны

Task 4. Discussing the content

 Look through paragraph 1 and focus on the arguments the author uses to prove his statement that “across CEE and the NIS liberalization has been positively associated with growth”.

 Paragraph 2 emphasizes that “when choosing how much and how fast to liberalize governments are constrained by initial conditions and often the effects of different strategies will be uncertain”. Do you agree or disagree? Develop your ideas.

 Turn to paragraph 3. Look through the comparative analysis of processes related to opening economies and reorienting exports toward world markets characteristic of European transition economies and NIS. Point out the essential differences.

 Paragraph 4 points out that there are several reasons for establishing essentially free trade.

 In paragraph 5 the author argues that continued trade controls are likely to yield few benefits for transition countries. Look through his arguments and sum them up. Express your point of view.

 In paragraph 6 services are considered as the major source of growth in transition economies. Study the paragraph and comment on the information given in it.

 Look through paragraph 8 and express your attitude to the situation in agricultural sector in CEE and NIS.

Task 5. Analysing text structure

 What is the function of the questions opening paragraph 2?

 Indicate the formal connectors (transitions) in paragraph 4 and 5.

 What is the referent of pronoun ‘they’ in paragraph 2?

Task 6. Summarizing

 Sum up the main points presented in the text. Write the plan of the text in the form of statements.

Task 7. Précis / Abstract writing

1  Revise all the clichés used in patterns (see SUPPLEMENT I);

2  Write a précis of Text 5 in Russian;

3  Write an abstract of text 5 in English and in Russian.

TEXT 6

Task 1. Skimming

 Skim through the text and give a brief overview of its structure and main problems under consideration.

Transition and the Changing Role of Government

O ver the past decade, many centrally planned economies have set out to transform themselves into market economies. To be successful, they need to develop the necessary institutions and ensure a proper role for government.

hile much has been written about the economic changes that must take place for centrally planned countries to become market economies, less has been written about how the economic role of the state must change. In “shock therapy,” advocated by some economists at the start of the transition, the main ingredients for success were assumed to be price liberalization, macroeconomic stabilization, and privatization. Little was said about the role of the government in the new environment. A complete transformation of the economy, the institutions, and economic processes requires, in addition, that

• profitability be the guiding criterion for most investment decisions;

• activities deemed socially desirable be financed by the government;

• the government effectively perform its core functions in the economy while withdrawing from, or drastically reducing its role in, many secondary activities.

Elements of a market economy

2. To function well, market economies need governments that can establish and enforce the “rules of the game,” promote widely shared social objectives, raise revenues to finance public sector activities, spend the revenues productively, enforce contracts and protect property, and produce public goods. They also need a pared-down set of regulations that are clear and leave little margin for interpretation or discretion. While the guiding principle under central planning was that nothing was permitted unless explicitly authorized, the guiding principle in a market economy should be that everything is permitted unless expressly forbidden.

3. The transformation to a market economy is not complete until functioning fiscal institutions and reasonable and affordable expenditure programs, including basic social safety nets for the unemployed, the sick, and the elderly, are in place. Spending programs must be financed from public revenues generated — through taxation — without imposing excessive burdens on the private sector. Because the level of taxation of a country depends on, among other criteria, the extent of its economic development and the sophistication of its tax systems and administration, these constraints must be considered in discussions of public spending.

4. Finally, because the optimal role for government derives not just from economic considerations but also from the interplay of political and economic forces, the views of the executive branch of government should broadly match those of the legislative branch. If the two sides are miles apart on what the government should do, as they have been in Russia and some other countries, neither an optimal government role nor rational policies are likely to emerge.