The Political Economy of Transition: Coming to Grips with History and Methodology

Part I

Except at the creation or in the laboratory, the remit of policy making is rarely the quintessential tabula rasa permitting virtually any option to be carried out upon simple choice. The Olympian heights of economic theory are far removed from the world in which economic agents must make decisions, are compelled to reveal their options and preferences fairly quickly, and normally have to justify their choices and actions. When democratic circumstances do not prevail but policy makers aim precisely at eliciting the emergence of such a pluralistic polity, a window for “extraordinary politics,” as Leszek Balcerowicz (1993, 1994), the architect of the Polish shock therapy, termed it, may open. By its very nature this has a rather confined time dimension, perhaps up to twelve months.

This window of opportunity certainly applies to the transition economies that form the main subject of this inquiry. It is also valid mutatis mutandis for the economies that have thus far eschewed political transformations paralleling those experienced in the eastern part of Europe. Variations across countries and over time, as a rule, derive from the differentia specified of these societies. That is to say, some of the “national” features are more deeply rooted in the history (to be defined) of each of these countries. Inasmuch as managing the transition can realistically be envisaged only in a concrete setting, it is important to be clear about the main starting conditions for effectuating the envisioned societal turnaround. Some will be short-lived, and they should be of concern only if they could inhibit transformation managers from holding on to their precepts on what needs to be done. Very often, such concrete circumstances prevent even the implementation of the “optimal course” of transformation designed by the best economic and legal brains. Others are much more deeply engrained, and so there will not only be hysteresis in the true sense of that term in physics, but also a lingering effect of the past in shaping the future. Path dependency is unavoidable.

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