The demise of communism has given people of the reforming countries greater individual freedom, but the rise in living standards for most people has not so far materialized, and poverty, unemployment, and death rates are rising. This book assesses the situation in the countries of Central and Eastern Europe and the European countries of the former USSR and suggests policies for labour markets and the social sectors during the early years of transformation - and beyond. It has three main arguments. First, it is crucial that these countries' human resources be developed through more effective labour markets, better designed poverty relief, improved education and better health care. Second, the state has a major role in these areas. Third, reform will fail unless policy design takes adequate account of political and administrative realities.