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30 Years of economics for development

Reflections on Transition: Twenty Years after the Fall of The Berlin Wall

Gérard Roland

The above titled book, published by Palgrave Macmillan 2012, brings together contributions from a conference that took place in Helsinki in September 2009. The conference involved a group of top scholars who have done research on the process of transition from socialism to capitalism over the last twenty years. Instead of looking back and reflecting one more time on transition policies from twenty years ago, as was the case for many commemorations, the conference focused instead on the long-run view of transition.

As time goes by, it seems clearer and clearer that the transition countries are following very different evolutions, not only in their economic performances but also in their institutions. Central European countries have become stable democracies and entered the European Union. Russia and most countries in the former Soviet Union have failed to become democracies. The quality of institutions also varies very strongly across countries: corruption, the quality of legal systems and the business environment differ markedly among former communist countries.

Different perspectives are offered on these questions in the book. Daniel Treisman, political scientist at UCLA presents empirical evidence showing that countries that had lived longer under communism were less successful at introducing democracy. What could explain why a longer life under communism makes a country less successful at democratizing? Gur Ofer, professor emeritus from the Hebrew University of Jerusalem, argues that life under an authoritarian regime has engendered more private cynicism and a lower sense of civic morality. People could only trust a narrow circle of friends and distrusted the rest. Individuals felt completely alienated from the state and were happy to bypass the laws when the opportunity arose. These attitudes remained when communism collapsed. The observation of widespread theft and corruption by the new leaders comforted people in their view that others cannot be trusted, and politicians even less. For Ofer, this legacy of the communist period explains the institutional weakness observed in Russia today. If people do not trust each other and feel justified in not abiding by the law, i.e. if the social norms do not adapt to the new institutions and legal rules, then the latter cannot be made to function well. The laws on the statute books will not be respected and there will not be rule of law.

Following on that theme, Leonid Polishchuk of the University of Maryland, shows how in Russia formal institutions are misused. For example, bankruptcy law has been misused by unscrupulous creditors to raid companies that are actually financially sound. Intermediaries which are supposed to facilitate transactions have been used as cover to hide corrupt activities and make detection  more difficult. Courts and sub-national governments have been captured by powerful interest groups. The public tends to be indifferent to misuse of institutions because of weaknesses in collective action, low social capital and the limited history in non-despotic government in their country.

If people stay confined to their private sphere, there will be little collective action and pressure from below to make  government democratic and accountable. The contribution by Laszlo  Bruszt (European University Institute), Nauro Campos, Jan Fidrmuc (both at Brunel University) and Gérard Roland (University of California, Berkeley) examines empirically the link between the development of civil society and collective action on one hand and the choice of political institutions in transition economies on the other hand. Countries that had a higher frequency of dissident activity under communism in the eighties were more likely to end up with a parliamentary democracy while those countries that had a lower level of dissident activity ended up with strong presidential regimes concentrating strong executive powers.

While the number of years spent under communism may have negatively affected social capital, trust and civil society development, the difficulties to adopt institutions of advanced democracies can also be traced back to differences in cultural values and beliefs. Gérard Roland shows using various questions from the World Values Survey over the last twenty years, that despite the massive institutional changes taking place in transition countries values and beliefs of citizens in those countries have not changed much. Compared to the USA and the European Union, in transition countries there are stronger preferences for authoritarian forms of government and for more government intervention in the economy. These preferences have hardly changed since the fall of communism. They are not necessarily the result of life under communism and might even go back much further in time. The EU provided an institutional anchor for Central European countries and allowed them to adopt modern European institutions, but citizens in those countries still have more authoritarian values than in Western Europe. Since cultural values change slowly, the institutions that have developed in transition countries may not change very quickly.

Gérard Roland is a professor of economics and political science at the University of California at Berkeley.

 

WIDER Angle newsletter
January 2012
ISSN 1238-9544

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http://creativecommons.org/

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