Political Transition

Although all post-Communist states were largely built on the institutional foundations laid by the republics under Soviet, Yugoslavian and Czechoslovakian rule, they can nevertheless be regarded as ‘new’ states.¹⁵⁰ The latter is due to the fact that the transition process involved fundamentally new definitions of the nature of the state, its functions and limits (Hare et al. 1999: 7-8). The nature and definition of the state itself, i.e.

as regards its boundaries, ethnic composition or the relationship between state and economy, has been called into question since the beginning of the transition process.

However, the CEECs are new in different ways. Thus, any analysis of the reform

149 The literature occupied with questions of state failure, especially in regard to developments in Latin American or African countries, had a significant influence on the reform strategies chosen by CEEC governments (cf. Krueger 1989). It posits a rather sceptical view of the role of the state in economic transition and sees the main task in reducing its capacity to intervene. Another perspective claims exactly the opposite and calls for an active role of the state in economic restructuring (cf. Nelson 1989).

150 In times of Communist rule, the republics exhibited the full set of characteristics of independent states, however without any de facto independence.

trajectories of these countries demands close consideration of their national histories, in both the pre-communist and communist period. This is important for the analysis of the factors that might have caused divergence of regulatory regimes across the CEECs.

With regard to political transition, Offe (1991: 869) claimed that most fundamentally, “a ‘decision’ must be made as to who ‘we’ are, i.e., a decision on identity, citizenship and the territorial as well as social and cultural boundaries of the state”. In other words, transition in the CEECs was and still is related to two different sets of constitutional issues: first, the de facto formation of a new state and, as a prerequisite, the definition of the political community which this state represents. And second, the definition of checks and balances through the establishment of an institutional framework which ensures the division of power within this new state. The demands of basic economic reform and upcoming nationalism in Central and Eastern Europe originally suggested the formation of a new centralized state. However, the resistance of ethnic minorities has thus far made this project rather difficult. The second constitutional issue therefore points to the question of institutional design at the centre and the balance between legislative and executive power to ensure fast economic recovery.

5.1.1. State Formation

The collapse of the three Communist federations offered a second chance for many countries in Central and Eastern Europe to regain sovereignty and to develop a distinct national identity.¹⁵¹ Of the ten countries analyzed in this study, the three Baltic Republics, the Slovak Republic and Slovenia are new in the sense that they did not take over much of the institutional structures of the former Communist federations.¹⁵² The Czech Republic, in contrast, inherited more of this institutional structure, i.e. the Czechoslovakian governmental system. And Hungary and Poland are two countries whose structure has

151 In Central and Eastern Europe, a ‘nation’ has in the past been understood mainly in ethnic and cultural terms.

152 The Baltic states enjoyed two decades of full independence between the two World Wars and could thus draw on legal continuity from the experience of these inter-war years. For these countries, state-building thus meant more of a restoration of the status quo ante. However, of these three countries, Estonia was able to base its reform initiatives on its inter-war heritage with much more determination than Latvia or Lithuania.

remained more or less intact throughout the transition period. As Hare et al. (1999: 2) argue, analyses of the economic restructuring process should therefore not take for granted the existence of a well-established state apparatus which is capable of conceiving, developing and implementing reforms. They point to the unique challenges these countries faced at the outset of transition as regards the definition and implementation of coherent policies for successful economic recovery.

The transition from a CPE to some type of market economy had thus to be accompanied by fundamental state restructuring. Institution-building had to take place in an environment in which the state itself had in many cases to be re-established (Hölscher and Stephan 2004: 323). The latter, however, is a highly complex political process. Some of the policies necessary for economic transition are only possible under the auspices of a strong and competent government, others can cause serious difficulties for a weak state, and again others can catalyze and assist the state formation process (Hare et al. 1999: 10).

What was needed was not simply a withdrawal of the state from the economy. Rather, state building and economic transition had to be tackled at almost the same time in order to facilitate the creation of markets and to carry out those functions which are necessary for the smooth operation of a market economy.

Initially set up to strengthen its rule, the Communist party promoted economic reforms based on greater flexibility, initiative and responsiveness of the system. This in turn demanded some decentralization of control and political reforms. As in consequence the role of the centre weakened and Communist rule began to decay, the republics were able to decide more autonomously about their future course. In the more homogenous countries, i.e. Hungary or Poland, economic reforms implied the delegation of political power to regional or sectoral lobbies. In the federal states, economic reform had significant implications for the interests of the republics, their relationship with the centre and with each other. The delegation of political power from the centre to the regions enabled the revelation of long-existing national resentments. The latter were mainly articulated in attacks against élites of the local Communist party which were accused of betrayal of the national interest vis-à-vis the centre. As a consequence, most of the Communist elites jumped on the nationalist bandwagon (Batt and Wolczuk 1999: 34-36).

The major task for post-Communist governments was the implementation of a capitalist ‘revolution from above’ in which the state played the leading role (Offe 1991: 866 ff.). In contrast to efforts of Western governments to roll back the state through programmes of liberalization, privatization and deregulation, the restructuring process in the CEECs is of a qualitative different nature. For the latter, what was required was “not so much a less powerful state as one that plays different roles and does so more effectively”, because “weaknesses of the larger adminsitrative setting will frequently hamper reforms and constrain their effects” (Nelson 1989: 10). The prerequisites of economic transition seem at first glance to call for a unitary and centralized state which offers authoritative leadership, coherent and stable policy-making and uniform and reliable policy implementation. The argument for a concentration of forces at the centre was further catalyzed by the absence of qualified administrative personnel.¹⁵³

Problematically, the alternative to an unitary state, federalism, has proved ineffective for managing national diversity in the post-Communist era. The responsible politicians were extremely reluctant to adopting a federal state structure because of the likelihood of secession of national units equipped with constitutional rights to paralyze the federal government. Thus, the challenge for most CEECs was to find a balance between demands of economic transition, which seems to require a strong, unitary state, and the demands of managing multinational societies, which seem to call for a more pluralistic, federal state structure (Batt and Wolczuk 1999: 39).

We can identify two different developments among the CEECs. The struggle for self-rule in countries like the Slovak Republic was paralleled by the reluctance to adopt a radically new and liberal economic system of the Western type. These countries searched for a third way of economic organization instead. In the Baltic States or Slovenia, in

153 However, a centralized state model does not automatically produce a strong state and does thus not guarantee effective economic transition. One fear at the outset of reform was that an unitary state structure might preserve the problems of Communist rule and lead to an exploitation by the established political elites.

And in fact, the most formally centralized CEECs tended to show the least progress in economic transition.

As Gibson and Hanson (1996: 307) put it, “the avoidance of substantive devolution may be rationalized as a means of pushing through economic reform, in countries where reform is not, in fact, being successfully pushed through”. In addition to the fact that a centralized state can help to preserve Communist legacies, an unitary state structure makes ethnic conflict likely if we consider that many territories have in the past usually been inhabited by more than one nation.

contrast, the creation of a new state was closely linked with a strong nationalist rhetoric that was much more favourable to the adoption of a consistent reform strategy. This commitment to the market economy in many of the CEECs can be seen as a first signal towards their announced return to Europe. A final concern of nation-building was ethnic diversity in the new countries. Resolving ethnic conflict and granting rights to minorities was an important prerequisite for successful economic transition because prolonged ethnic conflict would divert energies and attention away from the major reform tasks.

5.1.2. Central Institution Building

A key question that needed to be solved at the beginning of the transition process was how much power should be granted to Parliament. Most CEECs committed themselves to the West European model of Parliamentarism, based on democratic, consociational and liberal values. As the cornerstone of the consensus model of democracy, parliamentarism based on proportional representation was assumed to be particularly well suited to govern multi-ethnic societies, precluding a possible domination by the majority group (Lijphart 1999). In reality, however, the emphasis of parliamentarism as the highest representative state institution has proven to be less successful as in some countries ethnic majorities began to dominate legislatures, turning the new states into “exclusive republics or nationalizing instruments” (Batt and Wolczuk 1999: 40). This development was especially obvious in Estonia and Latvia, and in the Slovak Republic, in which parliamentary majorities have been used against to suppress the interests of ethnic minorities.¹⁵⁴

Despite the problems associated with presidential systems, i.e. zero-sum elections, polarization of the electorate or hampering of the democratization process, the newness of most CEECs and the fragility of its established institutions seem to have legitimized the delegation of authority to individuals, i.e. the President. And indeed, except for a few

154 The old party and state nomenclature ensured their influence upon politics by joining the national strive for liberation from Communist influence. Thus, despite the emergence of multi-party systems in the CEECs, some states witnessed the continued existence of societal groups that were already powerful under the old regime, i.e. state enterprise directors or representatives of regional and local state apparatuses.

negative counterfactuals, there is only limited evidence that directly-elected Presidents have exploited their power to the disadvantage of certain societal groups.¹⁵⁵ Most characteristic, however, in the majority of CEECs there is no clear separation of powers neither along institutional nor along partisan lines. In other words, the system of checks and balances that characterizes Western style democracies is neither existent in a functional mode between executive Presidency and legislature nor in a political mode between government and opposition.¹⁵⁶