By all counts, state socialism in the eastern part of Europe provided cradle-to-grave social security. The policies followed in the other countries with state socialism were less generous, but contained major components of an eventual cradle-to-grave security blanket for particular categories of people—those employed in the state sector in particular. Though the latter countries, excepting perhaps Mongolia, have thus far been able to contain the impact of transformation on social-security provisioning, that has not been the case elsewhere. Many reasons help to explain this dichotomy.
In this chapter, I first examine the nature of the social-security blankets inherited from state socialism and why a large number of its components need to be thoroughly restructured and partly wound down. Thereafter I detail how best to reach a sociopolitical consensus, not just on the economics of transformation but also on the widely feared impact on social cohesion and well-being. Such a sociopolitical consensus has also to be sustained in spite of adverse developments, such as crime, corruption, nepotism, large unemployment, sizable income and wealth differentiation, ravaging inflation, and other emerging inequalities. This leads to a discussion of societal governance. Then I look at the unemployment conundrum seen against the backdrop of the legacies of labor markets under state socialism. Next I scrutinize the social services that SOEs used to provide and how best they can be organized under the new conditions. Pension reform forms a daunting task that I look at briefly thereafter. The relationship between budgetary stringency and social-welfare provisioning I consider before concluding with some tangents of corruption, crime, and personal insecurity under transition.
State socialism, especially in the more mature countries, eventually provided cradle-to-grave security to virtually the entire population. This blanket comprised a guaranteed job for life, fairly early retirement with dependable pensions (if low in real terms), large social transfers, generous maternity leave, comprehensive