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The Politics of Economic Transformation: Is Third World Experience Relevant in Eastern Europe?

Published online by Cambridge University Press:  13 June 2011

Joan M. Nelson
Joan M. Nelson
Affiliation:
Associate at the Overseas Development Council in Washington
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Extract

Two sets of Third World nations can shed light on the politics of economic transformation in Eastern Europe. First, there are nations that pursued particularly vigorous reforms in the 1980s. They shared three key political features: popular consensus that basic reforms were imperative; antireform groups largely in disarray or suppressed; and substantial executive autonomy in economic management. The first of these features is clearly present in Eastern Europe; the second is questionable; and the third is present but precarious and probably temporary. Second and also relevant to Eastern Europe is the growing group of Third World nations seeking to consolidate political openings simultaneously with major economic reforms. Economic and political liberalization conflict with, yet are crucial for, each other. Proposals that they be sequenced are unrealistic. In Eastern Europe as in the Third World, a crucial dilemma is reconciling public demands for access to decision making with sufficient executive autonomy for coherent economic management.

Type
Research Article
Information
World Politics , Volume 45 , Issue 3 , April 1993 , pp. 433 - 463
Copyright
Copyright © Trustees of Princeton University 1993

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References

1 See Barbara Stallings, “International Influence on Economic Policy: Debt, Stabilization, and Structural Reform,” and Miles Kahler, “External Influence, Conditionality, and the Politics of Adjustment,” both in Haggard, Stephan and Kaufman, Robert, eds., The Politics of Economic Adjustment: International Constraints, Distributive Politics, and the State (Princeton: Princeton University Press, 1992).Google Scholar On “trough” theory (the depth of domestic economic difficulties) specifically, see Callaghy, Thomas, “Lost Between State and Market,” in Nelson, Joan, ed., Economic Crisis and Policy Choice (Princeton: Princeton University Press, 1990), 263.Google Scholar

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6 Malloy (fn. 4), 21.

7 There are several reasons for this bias in research. Policy-oriented analysts have understandably been preoccupied with getting reforms under way. Moreover, policy choices provide a fairly sharp focus for research: the time period, the key events, and the key actors are all fairly clear. In contrast, consolidation is a much more gradual and diffuse process during which expectations, incentives, public and private institutions, and recognized self-interests grow up around a reform and make it increasingly difficult to reverse.

8 See World Bank, Report on Adjustment Lending II: Policies for the Recovery of Growth (Washington, D.C.: World Bank, March 1990), 54–57Google Scholar; idem, Adjustment Lending: An Evaluation of Ten Years of Experience (Washington, D.C.: World Bank, 1989), 89–91.

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10 Kaufman, Bazdresch, and Heredia (fn. 4).

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16 Haggard, Stephan and Kaufman, Robert R., “Economic Adjustment in New Democracies,” in Nelson, Joan M., ed., Fragile Coalitions (New Brunswick, N.J.: Transaction Books for the Overseas Development Council, 1989).Google Scholar The cases were selected mainly for availability of detailed studies of the adjustment process; they include most major debtors. Measures of macroeconomic management include the ratio of fiscal deficit to GDP, the ratio of changes in expenditures to GDP, and expansion of central bank credit.

17 Haggard and Kaufman (fn. 13), 338.

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19 For survey evidence on public attitudes toward old and prospective political and economic systems in Eastern Europe, see Rose, Richard, New Democracies between State and Market: A Baseline Report, Studies in Public Policy no. 204 (Glasgow, Scotland: Centre for the Study of Public Policy, University of Strathdyde, 1992), 33–37Google Scholar, 45–46.

20 Parallel factors, including the attraction of membership in the European Community, played an important part in the successful structural adjustment of Spain in the mid-1980s.

21 That is, the list of policy principles spelled out in Williamson, John, ed., Latin American Adjustment: How Much Has Happened? (Washington, D.C.: Institute of International Economics, 1990), chap. 1.Google Scholar

22 See, e.g., Fanelli, Jose Maria, Frenkel, Roberto, and Rozenwurcel, Guillermo, Growth and Structural Reform in Latin America: Where We Stand (Buenos Aires: CEDES 1990)Google Scholar; Szlajfer, Henryk, “Promise, Failure, and Prospects of Economic Nationalism in Twentieth Century Poland” (Paper presented at the annual conference of the Economic History Society, Leicester, England, 1992).Google Scholar

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24 For data on the distributive impact of social expenditures in Eastern Europe, see the World Bank series summarized in Transition 2, no. 11 (December 1991), 10, published by the Socialist Economic Reform Unit, Country Economics Department, World Bank. Regarding attitudes toward income inequality, poll results in Hungary as of late 1990 indicated that only a fifth of working-class respondents and much smaller proportions of those better-off favored virtual equality. Moreover, these figures were not dramatically different from U.S. patterns and showed greater tolerance for inequality than polls in Spain in 1986. See Laszlo Bruzst and Janos Simon, “The Great Transformation: Opinions on Democracy and Capitalism in Hungary” (Manuscript, Budapest, Erasmus Foundation for Democracy, March 1992), 14–15. Fear of insecurity, rather than generalized distaste for inequality, may turn out to be the more important issue in Eastern Europe.

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26 Richard Rose offers an additional reason for low mobility. Drawing on survey evidence, he argues that most East Europeans depend for survival not only on their formal jobs but also on a portfolio of informal, sometimes illegal activities entailing networks of friends and contacts. Even if they lose their formal jobs, moving means leaving behind these networks and the modicum of security they provide. See Rose (fn. 19), 26.

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29 Bulgarian Agency for Economic Coordination and Development, Monthly Business Survey (December 1991), 10.Google Scholar Note that in Argentina, where social security does have broad coverage but real pensions have declined steadily, pensioners are a potent voting bloc and have been actively protesting the Menem government's reforms.

30 Contrast, for instance, the effects of devaluation and import liberalization on large state farms growing grain for domestic consumption and on private farms (in Poland) or plots producing livestock, vegetables, and fruit partly for export.

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41 Much of this line of argument is usefully summarized in Ajit Singh, “Close versus Strategic Integration with the World Economy and the Market-Friendly Approach to Development versus an Industrial Policy: A Critique of the World Development Report 1991 and an Alternative Policy Perspective” (Manuscript, Cambridge University, April 1992). For an argument relying much less on the Asian experience, see Carlos, Luiz, Pereira, Bresser, Maravall, Jose Maria, and Przeworski, Adam, “Economic Reforms in New Democracies: A Social-Democratic Approach” (Paper presented at the Conference on Democracy, Markets, and Structural Reforms in Latin America, organized by the North-South Center of the University of Miami in collaboration with CEDES, and held at the Simon Rodriguez Foundation, Buenos Aires, March 25–27, 1992).Google Scholar

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