Whatever happened with Transition in Central and Eastern Europe?

Jonathan Scheele (ESC Fellow, St Antony's College, Oxford)

Alina Mungiu-Pippidi is a regular visitor to SEESOX and, as always, gave us a thought-provoking evening and material for much further work. Last year she spoke about corruption in the new EU Member States, but this time she developed some of her earlier work on transition, in particular her 2009 paper “The Other Transition”[1]. There, she had argued that the history of the post-communist transition could be rewritten as a renegotiation of a social contract between state and society after Communism.

Now, 25 years after the fall of the Berlin Wall, Alina felt it was time to re-examine the whole issue of transition. Among a list of questions to be answered was whether “transition” still deserved a word for itself. Are ‘transition’ and modernisation synonyms? How does transition relate to development and is it a necessary stage? When can we consider transition as accomplished? And once it is accomplished, is it sufficient for development? Are some transition policies more successful than others? And what is the share of policies and institutions in shaping transitions?

Alina warned us that she would not be giving answers to all these questions. She also warned against some of the risks of using overarching concepts of development and transition, pointing out that development is a process lasting hundreds of years, while transition is seen as more clear-cut – a move from totalitarianism to democracy and, in the case of post-communist transition, from a command to a market economy. But there were several examples of institutional overhaul that correspond to the definition of a transition, which didn’t, however, lead to development (Moldova, Albania). And the economic crisis has led to reform stagnation throughout the region, as the last issue of the EBRD Transition Report warned.

In CEE countries, reform efforts were based on the Washington consensus, which made no distinction between development and transition. This had mainly focused on economic reform, with little emphasis on institutional aspects. While globally the Washington consensus seemed to have had only limited success, the CEE countries seemed an exception. Reforms there had worked over time, some using “shock therapy” (Poland, Czech Republic, Estonia, Latvia), while others took a more gradualist approach (Hungary, Slovenia).

But all reformed and did fairly well, whatever their exact policy mix, until the economic crisis. So what explains success or failure? Why did the Baltics end up in Europe and Ukraine, Belarus and Moldova not? The only convincing answer, given the diversity of policies followed, seems to relate to the extent of state capture and society’s capacity to constrain predatory behaviour of elites. Thus institutional reform is critical to effective transition as a basis for successful development. But institutions are so deeply embedded in society that real change is very difficult and slow, except in the aftermath of war or some other major political upheaval.

Alina therefore hypothesised the state-society nexus as a causal framework for both policies and institutions. Success required several factors:

1. The importance of the existence of a single political nation
2. The importance of real social differentiation, e.g. between entrepreneurs and politicians
3. The importance of getting past state dependency and creating autonomous citizens (e.g. ; people on public payroll are, on the average, less pro-Europe and pro-democracy than the rest)
4. The importance of a new social contract emerging between a non-predatory state and a law-abiding citizenry who agree to pay taxes in exchange for honest government (the alternative being state capture and the societal response to it, informality.

Even if the success of transition was still mostly determined by the degree of modernisation of the country (47%), analysis suggests that a strong civil society was a critical factor in pushing further or not. In this context, Alina noted that the strength of civil society was inversely correlated with the strength of the state in communist times. She concluded that there was no single “right prescription” for success.

Othon Anastasakis, commenting, shared Alina’s views on the need to get beyond transition as a concept and as a categorisation for assessing change in the post-communist world. But how is success to be measured? Could Hungary be described as a success story? Would we do better to think in terms of EU core and periphery, rather than consolidated vs transition democracies and market economies? How had the EU accession issue confused the notion of transition? And was not the whole notion of convergence flawed and raising high expectations? For Alina responding to this, the issue was less one of core-periphery and more one of sustainability of development; the core-periphery question arose mainly in the Eurozone context. Greece was an example of a state where development was still the key issue in some areas.

The subsequent discussion was wide-ranging. Issues raised included:

• The quality of decision makers: this was much better in some states, even if it had declined since 1990, and this had impacted on their success in achieving reform.
• EU accession and development: transition should focus on institutional change, alongside the necessary overall development strategies. These needed to be considered by Balkan countries, rather than focusing solely on accession-related measures.
• Augmenting the role for agency in transition: this was desirable and, at critical junctures, could be very effective. But numbers were important and, once pre-accession leverage disappeared, then things tended to decline (as in Romania).
• The relationship between constitutional transition and economic change: changing the constitution is not a substitute for real change. Poland achieved great success in transition without modifying the communist constitution. A bigger problem is the implementation gap (between law and reality); concern should be to narrow that gap.

[1] Mungiu-Pippidi, Alina, Twenty Years of Postcommunism: The Other Transition (October 20, 2009). Journal of Democracy, Vol. 21, No. 1, p. 120, January 2010. Available at SSRN: http://ssrn.com/abstract=1627646