Are We Transitioned Yet?
By David Lehrer

In the early 1990s, the goal of a market economy for the postcommunist countries was assumed to be self-evident, and "transition" came into use as shorthand for "transition to a market economy." Many professed belief in a window of opportunity for reformers to choose financial and industrial structures, corporate governance regimes, and social welfare systems from a menu of OECD models: Anglo-American, German, Nordic, or Japanese. With few dissenters, privatization was viewed as inevitable and as essential to transition.

The advocacy of economic reforms paralleled expectations of a general convergent trend toward consolidated democratic polities. Various privatization programs were undertaken on a simple premise: transition countries privatize their enterprises and banks because private banks and enterprises underpin a market economy. The form and timing of privatizations were constrained primarily by the financial sector model each country chose; the domestic technical capacity (institutional structures, legal and regulatory frameworks, and professional skills base) available for deployment by each country in pursuit of the market ideal; and the political will of each country to reform, that is, the level of greed and authoritarianism of both rank and file bureaucracy and political elites. As the assumptions underpinning such implicit models eroded, social scientists turned their attention from advising and predicting to explaining why outcomes have so lagged and diverged from expectations. Suggested causes for the delays, failures, limits, and unpredictability of transition now proliferate.

What Went Wrong?

Institutional explanations preserve the market-focused, neoliberal, economic paradigm, but point out the need to first lay the groundwork essential for privatization in each country. Such accounts describe a daunting range of supporting institutions, both formal, such as bankruptcy laws, and informal, for instance, trust, that are prerequisites for the transition to a market economy. Accounts of the potholes on the road to a market economy represented by insufficient institutional infrastructure have been supplemented by complementary analyses of the roadblocks to marketization represented by the corrupt activities of government officials and enterprise managers in postcommunist countries. Some analyses view corruption or kleptocracy as abstract, independent systems of a status similar to that imputed to the market and as contending with the market for supremacy as the organizing principle of postcommunist economic life.

Another explanation of why per capita GNP has grown in some postcommunist countries and contracted in others, namely, geographic proximity to the West, is a rule riddled with exceptions. Why, for example, did the Croatian and Czech economies grow while Albania’s and Slovakia’s did not, and how does a country as vast as Russia fit into such a proximity argument?

Some explanations have relied on various forms of historical determinism to demonstrate that what is was meant to be. Historicist explanations hold that reforms were constrained by prior conditions ranging from the legacy of relative autonomy that Moscow allowed Soviet republics and satellite states to the differing path-dependent, contingent, or lock-in effects of communism’s immediate aftermath, for example, the rapidity with which national elections were held after 1989. Such determinisms accord little self-determination to those now living in postcommunist countries.

A New Dialectic?

The debate on how transition went also concerns who really does transition. Some views distinguish which countries are truly in transition and which are not by whether they have implemented a Western-advised reform program and of which type (shock therapy or gradualism). Like the Washington Consensus, the Brussels Consensus renders Western advisors the chief protagonists of institutional transformations occurring in the postcommunist countries. EU accession potential and Brussels’ tutelage fail, however, to explain the wide variations in speed in conforming to the acquis communautaire among candidate countries, and begs the question of why some were short-listed and others were not in the first place.

As with any unprecedented social transformation, many causal factors have contributed to divergent postcommunist country outcomes. Explanations could be improved by more comparative data not only on outcomes, but also on such inputs as domestic policymaking and perceptions; by a willingness to begin analysis with questions rather than with answers; by the discipline to distinguish ex post theoretic and explanatory models from ex ante applied and aspirational ones; and by greater tolerance for complexity. If we have learned anything over the past decade or so, it is that transitions, like economies, do not always go according to plan.

The author is a visiting researcher at BOFIT. This article was published in the January 2003 issue of the Russian Economy—The Month in Review.