The establishment of a suitable institutional environment for comprehensive functioning of a market economy in the transition countries was one of the most important and complex matters in the 1990s. The central planned (socialist) economies of Central and Eastern Europe differed from Western market economies particularly in the matter of defining markets and the roles of the state and the financial system. For the development of a well-functioning market economy, it is characteristic to emphasize: the development of banks and financial markets; the fiscal environment; private property rights and contracts; labour market institutions; institutions dealing with competition policy, industrial policy and trade policy; and trust between economic agents and the honesty of public institutions.
To establish a knowledge-based economy and society, it is important to create and strengthen the connections between knowledge sources and business enterprises. Weak connections hinder the attainment of a successful level of this kind of economy. Different means of regulation, upgrading political-bureaucratic hierarchical intervention, and a sufficient quantity of social capital are also needed.
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