Transforming Post-Communist Political Economies Joan M. Nelson, Charles Tilley, and Lee Walker (eds.)
Reviewed by Gene Shackman and Ya-Lin Liu
Teaching Sociology, 30(2), April 2002, 274-275.
Posted here by permission of Teaching Sociology

Transforming Post-Communist Political Economies (Washington, DC; National Academy Press. 1997. 514 pages. $54) is a valuable supplemental reading for any class on Social Change, or Political or Economic Sociology.  The majority of this book is specifically about changes in the post communist political, economic and social system.  The introduction also mentions that prevailing theories of change seem inadequate to deal with the abrupt and massive changes which occurred with the collapse of the communist systems.  Thus, a better understanding of change in the post communist system should also improve our general understanding of change.

The approach most emphasized in this book is Northís analysis of institutional change. Institutions are a society's "formal rules (constitutions, statute and common law, regulations, etc.), informal constraints (norms of behavior, conventions, and internally imposed codes of conduct), and the enforcement characteristics of each" (North, 1996, Section I).  Institutions are particularly useful in studying the transformation of the communist system because, as the introduction mentions, so many of the formal systems (e.g., laws and regulations) have collapsed, while many informal systems (e.g., relationships, norms, customs) have persisted, and are still influencing behaviors and expectations.  In addition, new formal and informal institutions are now being created, and may conflict with each other or with old institutions.

Each section of the book focuses on a different aspect of institutional change.  The first section addresses institutional change, property rights and corruption.  In the introduction of this section, Feige indicates that where informal institutions clash with formal institutions and favor noncompliance and distrust of government, the consequences are predatory behavior, significant underground economic activity, exploitation of property rights and organized crime.  Thus, the former Soviet Union, writes Leitzel (Chapter 5) was characterized by rule evasion, where people were forced by the rigidities of central planning to adopt informal or illegal activities to meet plans.  One result was a commonly accepted practice of theft of property.  The history of the Soviet system, that is, was a history of theft, corruption, and evasion of formal rules.  Leitzel indicates that such a history leads to highly problematic transition, as the institutions of rule evasion carry forward into the new post communist political systems.  Whether the informal institution of rule evasion will help or hinder the new states is too soon to say, but one outcome is the rapid growth of organized crime.  Benham and Benham (Chapter 1) give additional historical examples, reviewing the history of property rights in Russia, Italy and seventeenth century England.  They show that official hostility toward property rights can lead to organized corruption, while official support for property rights can lead to more successful cooperation and support for the governing system.  Benham and Benham point out that so much is now known about successful reform, e.g., on the importance of property rights among other factors.  Thus, hopefully, some of this knowledge can be used in the current reform.

The second section of the book deals with transforming management, labor and production.  In the introduction to this section, Thornton writes that the main approach has been to privatize firms, liberalize markets, deregulate market access, to get government to provide economic and social support, and to enforce property rights.  Successfully applying these methods largely depends on the states providing institutional infrastructure, that is, legal, financial and administrative institutions which support competitive non state market activities.  The central role of the state changes from being the main owner and allocator of resources to becoming a separate tax based organization that provides institutional infrastructure, social insurance and public goods. The main institutional barrier to adjusting the role of the state involves property rights, which involves a foundation of rule of law.  The problem was that in the soviet system, the formal legal system was controlled by a combination of the Communist Party and state administration. Party members were not accountable to the formal legal system, but to the party.  Further, party members and bureaucrats were charged with implementing party resolutions and instructions.  Thus, laws, regulations and enforcement were all subordinate to the bureaucracy.  Several Eastern European states have been able to successfully change their institutions, and are privatizing and developing new institutions which support competitive production and investment.  Other states, especially Russia and its former republics, did privatize to a great degree, but unfortunately do not have the supporting institutions, and so their transformation has not yet been successful.

The third section deals with social sector trends and policies.  There are at least two main issues covered in this section.  The first issue is the interrelationships among changes in political, economic and social sectors.  For example, in the introduction to this section, Nelson points out that the transformation of the political and economic systems has high social costs, and results in many emerging social needs.  Thus, social policies are now becoming central issues, dealing with such topics as how to change the social security, health and education systems to be compatible with mainly market economies.  A main concern with these policies, however, is how the changing social structure and social policies may affect the political systems.  The second main issue of this section is the mechanics or practicality of how to transform the current social policies to meet the new social needs.  For example, Kornai (Chapter 10) reviews the current state of welfare sector in the post-communist countries and then discusses several principles that he believes welfare sector reform should rest on.  Graham (Chapter 15) emphasizes the importance of overall social sector reform, which needs to go beyond social welfare sector (safety net) reform.  The challenges and dilemmas of future changes of social policies in general and health reform in particular were discussed by Ferge (Chapter 11) and Klugman et al (Chapter12).  In addition, Torrey et alís (Chapter 13) paper shows the changes in the relative income of young and old groups in three central European countries and implies that the existing social safety net programs minimized the adverse effects on the economic transition on pensioners.  However, Fox (Chapter 14) addresses the high economic and social costs of the pension system in the post communist countries, which forced the governments to work on pension reforms.  In sum, one main point of this section is that causes and consequences of social sector reform can best be understood in the context of changing political and economic sectors.  Second, political and economic reform can similarly be best understood when also considering how social sector reform can have consequences for the political and economic systems.
A main strength of this book is that it demonstrates how inseparable social, political and economic process are.  For example, economic reform cannot occur in isolation, but must include considerations of social and political reform.  Another advantage of this book is that it is available on the web for free, from NAP, at http://stills.nap.edu/html/transform/.  A major problem, though,  is that some of the data used in the third section are, at the least, open to question.  For example, according to Kornai (Chapter 10), the poverty rates in 1993/95 for Estonia, Romania and Moldova were 37%, 59% and 66% respectively.  According to the World Bankís Poverty Monitor (World Bank, no date), though, the comparable 1995 poverty rates were 9%, 22% and 23% respectively.  Such large differences in estimates do raise questions, at the least, about definitions, measures, and analyses of poverty, and conclusions drawn from research about poverty.

Overall, however, this book is a very useful case study on transforming political economies, and can add much to our understanding of the change process.  Thus, it could be very helpful in any class on social change, or related topics.  In addition, this book demonstrates the usefulness of the institutional approach, and indicates that this approach could probably be useful in understanding change in other countries as well.
 

References

North. DC. 1996. Economic Performance Through Time: The Limits to Knowledge. Retrieved from http://econwpa.wustl.edu:8089/eps/eh/papers/9612/9612004.html

World Bank, Global Poverty Monitoring, http://www.worldbank.org/research/povmonitor/, accessed 9 September 2001.
 

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