This paper examines recent policy changes in Myanmar (formerly Burma), analyzing the reasons for the decision to move from a state-led, socialist planning system to a more market-oriented system, and attempting to evaluate both the direction and sustainability of these economic reforms. On the basis of this survey of recent economic development, the paper seeks to evaluate the argument that economic reform is a hostage to political reform. The discussion of the relationship between economic change and political reform has suffered from drastic oversimplification, and rests on misleading assumptions about causal relationships between economic and political factors. The paper argues that a less superficial account must embrace an understanding of the historical roots of the Burmese political economy; the history and nature of the Burmese state; and the characteristics of Burmese military and political elites. We conclude that it is more illuminating to focus on the historical interaction of economic and political factors so as to construct a convincing “political economy” of Myanmar, than to argue for the current significance of political conditionality.