THE 1985 STABILIZATION FROM THE PERSPECTIVE OF THE 1990S1

The paper focuses on the perspectives of the 1985 stabilization that could not be envisaged at the time by its planners, led by Michael Bruno. One of these aspects is the extension of the disinflation process over many years. It turned out that the dramatic reduction of inflation in 1985 was only a first step in a long-term process. The paper analyzes the reasons for the slow process of disinflation. We view the inflation and disinflation process in the context of chronic high-inflation economies which failed to disinflate in the 1970s and the 1980s but succeeded in the 1990s. This success has to be viewed in the context of the process of globalization which prevailed in the 1990s and the growing recognition of the advantages of market-oriented regimes. We also distinguish between the short-term measures of stopping inflation (like the heterodox features of the stabilization program) and the long-term process of securing price stability. We conclude with some remarks concerning the changes which could have been made–with the benefit of hindsight–in the 1985 program 1