In this essay, I tried to compare the real process of transition from plan to market economy to the image that created the laud political proclamations. The political leaders of this process presented themselves as supporters of the austrian school of economy and convinced others that they are strictly on the side of liberalism.
The theoretical part of this paper is therefore describing the theoretical base of the austrian school of liberal economy, to be specific, aproach of Friedrich August von Hayek. It shows beyond any doubts that the key part of any functioning economic system is the socalled rule of law - accordingly functioning system of laws.
The analytical part summarizes the process of transition and I am trying to point out the main mistakes that were done. Among those I stress are ignorance or misunderstanding of the role of laws for the emerging market economy, systemic defects in the privatisation and failing to follow through same key parts of the transition (price liberalisation, privatisation).