Winners Take All: The Politics of Partial Reform in Postcommunist Transitions

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1 Trustees of Princeton University Winners Take All: The Politics of Partial Reform in Postcommunist Transitions Author(s): Joel S. Hellman World Politics, Vol. 50, No. 2 (Jan., 1998), pp. 203-234 Source: Published by: Cambridge University Press Stable URL: http://www.jstor.org/stable/25054036 . Accessed: 30/12/2013 12:59 Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at . http://www.jstor.org/page/info/about/policies/terms.jsp . JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact [email protected] . Cambridge University Press and Trustees of Princeton University are collaborating with JSTOR to digitize, preserve and extend access to World Politics. http://www.jstor.org This content downloaded from 137.110.33.183 on Mon, 30 Dec 2013 12:59:15 PM All use subject to JSTOR Terms and Conditions

2 ALL TAKE WINNERS in Reform The Partial Politics of Postcommunist Transitions ByJOELS.HELLMAN* our is of of economic reform the based of analysis politics on an costs distribution of the about and bene the MUCH assumption as fits of the known reforms stated, reform, J-curve. informally Simply are worse to make In the before better. short get they things expected are term to costs in economic the reforms transitional believed generate form of and declines increases, price production high unemployment, as to the the tremendous institutional and economy adjusts policy an to of the achieve effec necessary gains efficiency changes long-term re costs of the of market. the Yet and benefits functioning tively timing a can serious initiate form how with presents they politicians problem: run severe sustain in and demand the reforms sacrifices short that for mere term will the the losers in short future of promise gains? Surely a at take and the first reformers revenge against opportunity spark in de backlash reform. this reaction, against politicians Anticipating are eco to mocratic reluctant undertake radical systems understandably as nomic reforms. The central of reform, challenge expressed political s traverse to in is therefore Adam Przeworski the apt "valley metaphor, to in of of the climb the hills,> transition" reformed order sys "higher a to tem.1 series of centered led has This prescriptions logic political same state of the the the insulate theme?to the from around pressures a win of until created losers short-term the have reforms constituency ners to sustain them.2 powerful enough * was to The National work from this the Council for funds paper supported provided by leading Kennan Russian for Advanced the East Institute and Research and Soviet Studies, which, European or was are at not contents the its for This however, paper presented findings. responsible originally of of annual 1996 the the the for and Advancement American Slavic Studies Association meeting to the I the annual Political like Association. 1997 would thank of Science American partic meeting as as at seminar in Harvard for those well their comments, very meetings ipants helpful participants not those of do here and views the St. The Oxford. represent College, Antony's expressed University and Bank for Reconstruction Development. European 1 and Market 138. the York: 1991), (New Przeworski, Press, University Cambridge Democracy 2 as on autonomous states virtues State of theme this "The have stressed the Variations Evans, (Peter in Structural and Embedded Problem and Solution: Pr?dation, Autonomy, Stephan Change," Haggard 203-34 Politics 50 World 1998), (January This content downloaded from 137.110.33.183 on Mon, 30 Dec 2013 12:59:15 PM All use subject to JSTOR Terms and Conditions

3 204 WORLD POLITICS cer in economic reforms the have countries postcommunist Though more ex fair than their created share the transitional of costs, tainly costs associated with have these normally dynamics pected political re most in been radical less much The the reform evident. programs most in and been introduced have sustained the gion competitive polit most to ical where have been electoral vulnerable systems, politicians cases voters backlash the in short-term losers. have many by Although in reform radical the first elections, governments rejected postreform some even in the have themselves reform endured cases, and, programs intensified. More the of economic surprisingly, politics postcommunist not has reforms the been dominated short-term losers of traditional by state economic former bureau resentful workers, transition?striking or armies of the crats, impoverished unemployed. pensioners, common re most to the the economic obstacles of Instead, progress come in have form transitions from different very postcommunist sources: new owners to from insiders who have become only enterprise their firms' from commercial bankers who have assets; strip opposed to macroeconomic stabilization their preserve enormously profitable in distorted financial local offi from markets; opportunities arbitrage to have cials market who into their entry protect prevented regions local of their share and from so-called mafiosi who rents; monopoly a mar have creation undermined of the stable for the foundation legal can as actors net ket be classified These short-term economy. hardly were ear in overall its losers the the On reform process. contrary, they net not winners. and liest initia winners did the These oppose biggest nor a tion the reform of have full-scale reversal of process, they sought to have reform. ad block Instead, they attempted frequently specific vances to in the that reform threaten eliminate the ad process special own and their which distortions market reform upon vantages early a were Instead in of ad based. of support gains constituency forming to winners short-term stall have often the the reforms, vancing sought a rents in that concentrated economy generates reform equilibrium partial R. Economic Politics Robert and Princeton The eds., Kaufman, [Princeton: Adjustment University of Political Robert executives and The Press, Kaufman, 1992]); powerful Haggard (Stephan Economy Democratic Transitions Princeton technocrats insulated Press, [Princeton: 1995]); (John University of a aIn in of Manual Search Pol Political The Williamson, Williamson, ed., forTechnopols," of Economy as International Institute for D.C.: and substantial external Studies, 1994]); Reform icy [Washington, "Western in sistance Financial and and Assistance Islam Russia's Sachs, Reforms," (Jeffrey Shafiq Michael Markets: Eastern Economic and in the Post eds., Mandelbaum, Transformation Making Europe on not York: Soviet States himself Przeworski does Council Relations, [New 1993]). support Foreign a to will the he which such believes in of lead consolidation view, Przeworski, problems democracy; "Economic in Eastern the Per Institutions: Political Public Poland and Reforms, Opinion, European in Luis C. B. M. Mario and Adam New Economic in Pereira, Maravall, Przeworski, spective," Reforms A Democracies: York: Social-Democratic (New Press, 1993). University Cambridge Approach This content downloaded from 137.110.33.183 on Mon, 30 Dec 2013 12:59:15 PM All use subject to JSTOR Terms and Conditions

4 WINNERS TAKE ALL 205 on rest costs for while the of themselves, society. imposing high are While conventional economic of the of models reform politics net driven incentives short-term the the of the losers, postcommu by more to to nist transitions have faced far serious obstacles the appear net economic winners. of reforms from the ob the Moreover, progress come ex to onset ante in less have the form stacles the of of opposition ex or in electoral reform the reversals of reform than post prolonged maintenance and their associated market distortions. reforms of partial the This that derived from conventional models suggests prescriptions to most institutions about the economic reform conducive political on to be in reexamined. concludes that the need This paper emphasis state the losers?the the focus short-term from of many sulating major a to models?needs be of the with impor existing replaced recognition tance the winners in of the of reform. stages early restraining to The the the paper begins by applicability testing postcommunist a on costs transitions of models and of based the distribution J-curve ex ex ante examines the It and of both reform. benefits post political ex on a ante constraints such As for the from reform model. predicted transitions from these that those the evidence constraints, suggests more countries with elections executive shorter and tenures, frequent most to those electoral that from short-term is, susceptible challenge more to reforms economic have been losers, likely comprehensive adopt are more states from than for As insulated the that electoral pressures. ex economic the of annual reform of constraints, progress post rankings re are to threat of electoral the the weakness demonstrate of examined in transitions. of reform versals the postcommunist a economic model of the of reform then The presents paper politics net winners in from derives the the which primary challenge political are to reforms in shown economic Partial reform the overall process. a of that concentrated market distortions pattern generate produce an term. incentive in have short and Winners losses the dispersed gains as as sources to rents to of these considerable preserve try possible long measures to evi Recent eliminate these distortions. any by blocking on in in concentration of incomes the the dence postcommu changes to losses. nist countries is this used and confirm of pattern gains economies have introduced reforms have that Transition partial only narrower con a a to income of redistribution higher experienced re more either with countries those have than stituency comprehensive an or at with alternative all. concludes reforms few The forms paper to most sustained conducive view of the institutions progress political winners. in the the economic reforms by given posed challenge This content downloaded from 137.110.33.183 on Mon, 30 Dec 2013 12:59:15 PM All use subject to JSTOR Terms and Conditions

5 206 WORLD POLITICS Curve The J are on of Most economic reform of the models based existing politics an a costs to the reform conforms of benefits of and that analysis eco in 1. The is idea that J-curve, Figure compelling depicted simple, costs term in the short transitional before reforms nomic generate they to economic of their The gains. produce begin magnitude promised costs to is be believed correlated with the these comprehen positively Inefficient siveness of reforms the radicalness) (or enterprises adopted. or must state must and social subsidies closed be restructured, spending must to raised be and be world levels?a domestic reduced, pro prices to term is in the short that gram generate expected unemployment, sharp econ in the when standards. and declines Only falling living production, new can one structure to to of incentives the omy expect begins adjust even some situation. the the of amelioration Indeed, any expect analysts resources to onset in increase the short the of of reforms misallocation as finan of absence the defined run, property rights, developed poorly of and continued the cial markets, presence insufficiently monopolies, to market distort the incentives.3 human response capital developed a as costs is of reform benefits the and The of J-curve par depiction a as a it from plausi standpoint, provides political compelling ticularly of of the for the ble central economy political explanation paradox a or a citi of all make if reforms reform: country's majority ultimately so are zens in de better contentious, off, especially why they politically are answer that reforms has been mocratic standard The systems? to actors a to time accept requiring inconsistency subject problem, mere term If the future of in the for short the losses gov gains. promise re a to cannot ernment maintain those commitment credible make are or to those insure arrive that benefits the forms until gains promised eco once not for it then be rational do confiscated arrive, may they ex to actors reforms ante.4 the nomic reject cre to costs is also assumed benefits of and distribution The J-curve eco to a ate obstacles that action collective generates political problem economic from the losses that is reform. It nomic argued commonly are who those concentrated reform among groups?namely, specific status or were the the subsidized previous quo?while by privileged 3 to or reform. economic one the radical made is of This the bang" arguments against approach "big see an case "The of a Role Gerard such For the review of Roland, economy approach, against political no. 1 Econom?a in Transition Transition Constraints Political (1994). 2, Economies," of 4 be discounted would of the reform benefits of function In the actor, any by utility given expected a to this of review For the of will benefits. the the reversed be that reform the receipt prior probability see Are "Where Andres Mariano and Tommasi in of economic the Velasco, reform, politics problem of Reform?" Political in We the 1995). Mass., Cambridge, (Manuscript, Economy This content downloaded from 137.110.33.183 on Mon, 30 Dec 2013 12:59:15 PM All use subject to JSTOR Terms and Conditions

6 WINNERS TAKE 207 ALL Consumption Transition 1 Figure The Curve J SOURCE: Przeworski (fn. 1). are more of reform Low benefits increased inflation, widely dispersed. a so of and stable and forth?these services, currency, availability goods accrue as a to nonexcludable thus have benefits and whole the society are If the of characteristics the and losses concentrated public goods. the losers should have incentives then selective greater dispersed, gains to in action the than collective the losers' winners.5 Thus, engage polit more to to economic is ical reforms be effective opposition expected even outnum than the winners' of if latter the reform, support political former. ber the are The time action collective and believed inconsistency problems ex ex to ante to both obstacles reform. Politi and post produce political to in cians will reluctant introduce reforms be democratic any systems not next be whose realized before the benefits will Since rad elections. are are to ical believed short-term if reforms costs, generate they higher as ex a are to face likelihood of reversal post they high adopted expected are to react costs. to losers the the Politicians therefore high expected more moderate favor reform programs. 5 Kaufman and (fn. 2,1995). Haggard This content downloaded from 137.110.33.183 on Mon, 30 Dec 2013 12:59:15 PM All use subject to JSTOR Terms and Conditions

7 POLITICS 208 WORLD ex ex on ante reform have led constraints and These post political to in of the benefits and reform many analysts emphasize practitioners at in least of the the reform from losers, pressures governments sulating on the literature In the earlier the reform of initial the process. stages was view authoritarian for the that the basis this of reform, gov politics an ernments in reforms. economic This had advantage implementing au on state an benefits of the been with has emphasis largely replaced executive of and the of concentration the power, tonomy, delegation to the Yet economic of technocrats for reforms.6 the power adoption same: to is need be institutions views the both for justification political state actors to of the short-term the shield from structured pressures neces creates the the reforms the from of realization until losers gains to sustain them. sary constituency political to the of of the the J-curve politics approach implications Although a num are on based been have reform economic they widely accepted, to not have been of ber that systematic empirical subjected assumptions assumes will economic reforms that tests.7 This generate approach costs to costs these that and benefits of realization the transitional prior more extensive reform of with the will be programs. greater adoption a to leads this On of the reforms, simple approach dynamics political more are to in reformers which systems susceptible political hypothesis: re are to extensive economic less the losers reaction the of likely adopt are measures more to such reversals if suffer reform of and forms likely an ideal transitions The opportunity provide adopted. postcommunist re costs test to transition the of behavior and about these assumptions cases. a new on set of formers recent from the of cross-national data reliable The post availability some us test to the economic transitions of allows communist assump on the data in the models inherent based tions J-curve.8 Though 6 see treatment in Political of this issue the classic Samuel earlier the On literature, Huntington, in review Haven: Yale the and in Order Societies 1968); (New Press, Hag Stephan University Changing Countries in the Politics Growth The the (Ithaca, Newly Industrializing gard, of from Pathways Periphery: on state recent and in work The the N.Y.: of Cornell 1990). Press, autonomy advantages University are "Eco and Evans voluminous. is sulation Some (fn. Kaufman, 2); Haggard examples prominent Kaufman idem in for and and the nomic (fh. 2,1992); Democracy," Haggard Adjustment Prospects to Williamson the contributions and (fn. 2). (fh. 2,1995); 7 to can the be this that Nelson transitions; Joan argues applied postcommunist directly approach in World East Relevant Is Politics of Economic M. Third "The Transformation: Nelson, Experience ern World Politics 45 1993). (April Europe?" 8 Transition Re transitions the include of cross-national EBRD, Broad, postcommunist comparisons Transition 1994 Bank Reconstruction for and idem, 1994); (London: Development, port, European for Reconstruction World and and 1995 Bank 1995); Bank, (London: Development, European Report, An 1996 include studies Other World D.C.: WbrM 1996). Bank, (Washington, Report, Development to Postcommunist the from "How Stabilize: Lessons Peter and Simon ders Boone, ?slund, Johnson, on and Martha Cevdet Economic de Denizer, Mel?, (1996); Countries," Activity Papers Brookings This content downloaded from 137.110.33.183 on Mon, 30 Dec 2013 12:59:15 PM All use subject to JSTOR Terms and Conditions

8 WINNERS TAKE ALL 209 1 Table in gdp_ _Change 1992 1993 1994 1995 1989 1991 1990 -9.29 -0.84 countries All -17.17 -4.50 -10.45 1.55 -7.74 war -3.20 -13.79 1.93 -6.67 -6.02 0.11 -10.65 Excluding ebrd Source: (fh. 8,1995). confirm economic that reforms entails substantial introduction of the the the transitional costs, challenge linking magnitude they assumption costs to 1 extensiveness these of the reforms of the Table pre adopted. on set rates sents entire for annual of the the data average post growth as as not transition countries well communist those affected for cases, as war. costs in reform reflected of transitional The declining growth by a rate to rates The for follow do J-curve average appear pattern. growth to to in in its lowest the 1990 level fall (-4.5) dropping region begins a 1992 then and However, (-17.7 recovery. gradual beginning percent), an extent the countries examination the of postcommunist grouped by an economic reveals of reforms their picture. unexpected ex measure a to set the indicators has World of Bank The developed areas tent in three broad reforms of (internal adopted liberalizing across sector transition the all and external entry) prices, prices, private economies transition these the basis of On the economies.9 indicators, can in main into advanced four be reformers, groups: high separated reformers.10 slow and intermediate low termediate reformers, reformers, rates each in for annual 2 the average compares change growth Figure not have the that suffered It is reformers the advanced group. sharpest as in the but the would real in declines GDP, J-curve predict, approach the lowest reformers have advanced the reformers. termediate Indeed, most recoveries.11 The the and overall declines average output rapid to in GDP reform 1994 1989 advanced level the in the ratio of real was to for the 65 ratio declined The 83 average percent group percent. re intermediate low the for 57 intermediate reformers, percent high the slow reformers.12 for the 72 and formers, postcom percent Among Research Bank to Plan From Market: Patterns World Alan Transition, Gelb, Working Paper, Policy of in no. Growth and and "Stabilization and Carlos 1564 Fischer, (1996); Vegh, Sahay, Rajiv Stanley The Economies: Transition 1996). D.C., Washington, Early (Manuscript, Experience" 9 Bank World 8). (fn. 10 war: countries affected those The exclude Croatia, Armenia, Georgia, Azerbaijan, groups by and Macedonia, Tajikistan. 11 of can with the World Bank economic reforms the be Similar obtained results ratings by replacing EBRD measure EBRD in of six that the transition indicators reform; categories progress by developed more EBRD measures in their variables institutional include The 8,1994). (fh. ratings. 12 Gelb and De 8). Denizer, Mel?, (fn. This content downloaded from 137.110.33.183 on Mon, 30 Dec 2013 12:59:15 PM All use subject to JSTOR Terms and Conditions

9 210 WORLD POLITICS 10 n J -25 2 Figure by GDP Reform Group countries munist the the evidence the that suggests preliminary deeper economic is reforms the less transition of the the steep adopted, valley terms costs. in costs In of transitional overall the other reform of words, are not with the extensiveness correlated the reforms of positively adopted.13 coun The of the among pattern unemployment postcommunist as a seen eco critical factor the of tries?generally shaping politics more to nomic the of reform?conforms the closely expectations on 2 data in Table J-curve presents approach. unemployment registered scores on the their the World countries, by postcommunist grouped liberalization index.14 Banks countries The do undertaken have reform exhibit that considerably than the slowest the but reformers, higher unemployment relationship unem extensiveness of between the and the level of reforms adopted no is less find and clear. Boone, Aslund, Johnson ployment statistically un extent of between the and reforms correlation economic significant once some are rates in basic included control variables the employment cases is from evidence In mixed. individual the addition, regression.15 one most and of introduced maintained the compre having Despite 13 eco no extent and direct statistical correlation between the find of 8) (fh. Boone, ?slund, Johnson some once nomic vari of cumulative declines the and basic control reforms output magnitude adopted are as a to not test nonlinear ables the for the existence of do added regression. relationship They Figure same case the 2 conclusion reach would Nevertheless, suggest. they comparative analysis. through 14 the and countries serious data from have reliability postcommunist Unemployment problems must therefore used be cautiously. 15 and (fn. 8). Boone, ?slund, Johnson This content downloaded from 137.110.33.183 on Mon, 30 Dec 2013 12:59:15 PM All use subject to JSTOR Terms and Conditions

10 WINNERS TAKE ALL 211 2 Table unemployment 1994 1992 1993 1991 1990 Advanced 16 13.6 11.8 6.1 16.4 Poland 11.1 14.5 14.5 4.7 8.2 Slovenia 12.3 10.9 12.1 8.0 2.5 Hungary 4.1 3.2 2.6 3.5 0.8 Czech Republic 11.8 14.4 14.8 10.4 Slovak 1.5 Republic 12.2 10.0 11.9 3.1 8.8 Average intermediate High 4.8 8.8 8.1 0.0 0.1 Estonia 11.1 16.4 15.3 12.8 1.5 Bulgaria 4.4 Lithuania 1.3 0.0 3.8 0.3 Latvia 0.1 2.1 5.3 6.5 0.0 28.9 8.6 19.5 7.7 Albania 26.9 3.0 10.2 10.9 8.4 0.0 Romania 3.9 9.8 12.3 10.3 1.5 Average Low intermediate 0.0 0.0 0.1 0.2 0.7 Kyrgyzstan 0.1 1.1 2.2 0.0 0.8 Russia 0.7 0.8 1.2 0.0 0.0 Moldova 0.6 1.0 0.0 0.1 0.5 Kazakhstan 0.0 1.3 0.1 0.7 0.5 Average Slow 0.3 0 0 0.1 0.2 Uzbekistan 0.4 0.4 0 0 0.3 Ukraine 2.1 1 1 1.5 0.5 Belarus n.a. 0 0 0 0 Turkmenistan 0.3 0.3 0.2 0.9 0.5 Average War 1 6.2 5.6 3.5 3.5 Armenia 0.7 0.9 0.2 0 0.1 Azerbaijan n.a. 8.4 0 0 5.4 Georgia 1.1 1.7 0 0 0.3 Tajikistan 18 17.8 15.5 17.5 9.3 Croatia n.a. 19 19 19 18 Macedonia 9.0 7.7 8.8 2.1 6.2 Average SOURCE: De Gelb and Denizer, (fn. 8). Mel?, its has reform the hensive Czech programs, kept Republic unemploy same rates ment less low. At the time, reformers, comprehensive quite as have suffered from such and Romania, Albania, relatively Bulgaria, have Union Soviet former the States of (FSU) unemployment. high Eu than those of Eastern lower maintained unemployment generally This content downloaded from 137.110.33.183 on Mon, 30 Dec 2013 12:59:15 PM All use subject to JSTOR Terms and Conditions

11 212 POLITICS WORLD most the FSU Baltic within the reformers but (the rope, comprehensive rates. the had have states) highest unemployment never model have been the The of J-curve political implications an are ex ante incentives If tested political systematically. impediment one to would the economic of reforms, expect comprehensive adoption ex a and shorter electoral pressures greater having facing politicians to tenure to As and initiate be such reforms. less likely Haggard pected se some of of the from Kaufman view, argue, degree point politicians success a to tenure of minimal be "would of appear requirement curity a and time since of ful shortens horizons reform, insecurity high degree to rate economic future discount the increases reforms]."16 [from payoffs on turnovers the and executive of the data 3 number Table presents ex tenure in the of states, average government postcommunist length are countries the affected those war.17 by Again, by grouped cluding scores. indicates the column first The Bank liberalization World their onset turnovers the from the of that has executive occurred of number inter and the of Both the advanced 1995.18 the end transition through over an executive half and three of have reformers mediate average just more no than reformers both of slow while turnovers, average groups one same one most turnover the of in celebrated the Poland, period. seven cases ministers and in had has of the reform radical region, prime which The 1997. 1990 Baltic and three between countries, presidents no most all had the of have the reformers been advanced have FSU, turnovers While since ministerial than four fewer independence. prime more of all had stable have reformers advanced other governments, some turnover the since in their ministers have them prime experienced transitions. slow the In their of contrast, reformers, among beginning are their that have countries the Belarus and Ukraine only changed onset the since of the transition. executives chief are turnovers reflected from another in executive differences The on tenure in the of the evidence govern vantage postcommunist point two ments had of the first reform countries The from 3.19 Table groups 16 156. and Kaufman 2,1995), (fn. Haggard 17 are more are turnovers war cases much because executive excluded Postcommunist affected by war. to of affected be the by dynamics likely 18 turnovers executive of the number the of times lead consist Executive country's policy-making are turnovers counted. In time has been the systems, presidential presidential period. during replaced are count of turnovers A counted. ministerial In and systems, prime semipresidential parliamentary was zero same communist still rule the under that executive the country governing governing signifies at no turnovers all. executive the thus the transition, indicating country through 19 which in executive the of the tenure of months number consists Government (president leading re has in and minister in and systems) systems semipresidential parliamentary prime presidential in mained office. This content downloaded from 137.110.33.183 on Mon, 30 Dec 2013 12:59:15 PM All use subject to JSTOR Terms and Conditions

12 WINNERS TAKE 213 ALL Table 3 Government Stability Government Executive Average Turnovers Tenure Months) (# Advanced 6 14 Poland 2 Slovenia 34 26 3 Hungary 2 Czech 35 Republic 14 Slovakia 5 24.6 3.6 Average intermediate High 4 Estonia 17 6 13 Bulgaria 4 Latvia 15 14 Lithuania 5 2 Albania 27.5 1 Romania 67 3.7 25.6 Average Low intermediate 1 62 Kyrgyzstan 1 Russia 54 61 1 Moldova 0 69 Kazakhstan 0.8 61.5 Average Slow 0 62 Turkmenistan 2 24 Ukraine 62 0 Uzbekistan 2 26 Belarus 1 43.5 Average an tenure months. of average government twenty-five approximately an two in countries of had the these eleven Six average groups govern some suc tenure ment most While less than the of of months. eighteen and Slovenia?have cessful reformers?the Czech Hungary, Republic, with had these individual tenures, govern governments long relatively not ments reform well do with of standard the fit necessarily image as with and autonomous, streamlined, governments strong, relatively to reforms and the bureaucratic despite through popular push capacity in which been Drnovsek has In the Slovenia government, opposition. an as office since transitional 1992, government began May explicitly in elections until the 1992. Since December elections parliamentary a has headed coalition has that Drnovsek government five-party fragile, This content downloaded from 137.110.33.183 on Mon, 30 Dec 2013 12:59:15 PM All use subject to JSTOR Terms and Conditions

13 214 WORLD POLITICS sur to votes been continued and whose no-confidence subject frequent In An of been has the vival often tenuous.20 Josef government Hungary to economic the radical reform secure, tall, quite rejected though approach an from that benefited and strategy Hungary's explicidy pursued gradual eco case of radical of The communist-era reforms.21 only prior history se a a nomic of with stable reform government degree by high pursued the in Klaus Czech is the and autonomy government curity Republic.22 the with leaders slow have The reformers longest political generally secure tenures most in With the of Belarus the and region. exception ruled all reformers have been the slow and of Ukraine, by continuously same start since the their of transitions.23 the presidents respective a sim Romania had intermediate the advanced and reformers, Among recent in the until Ion Iliescu rule ilar unbroken of defeat presidential 1997 November election.24 the presidential more turn executive with countries The postcommunist frequent most overs tenures far have been the and shorter government generally time with shorter Politicians economic reformers. expected reaching re more to economic far have nevertheless been horizons likely adopt tenure of have the with leaders Those forms.25 greatest security political 20 to Studies see Road Sabena Petra "Slovenia's On 45, Ramet, Slovenia, Democracy," Europe-Asia no. "Political Reform D. Economic and Pleskovic and 5 Boris and Sachs, (1993); Independence Jeffrey in Transition D. A The and in Kenneth in Oliver Sachs, eds., Froot, Blanchard, Slovenia," J. Jeffrey 1. of Eastern Press, 1994), University Chicago (Chicago: Europe 21 see Political The Econ Reform: L. and David On "Stabilization, Bartlett, Adjustment, Hungary, the Bruszt David and in Laszlo Transition of Stark, 1995); omy "Remaking (Manuscript, Hungary" to in the Ivo Politics of the of Confrontation From Politics in Political Field Competition," Hungary: and N.Y.: Valerie in Revolution Cornell Eastern 1992); Press, (Ithaca, Banac, ed., University Europe in Eu East in Mario the Transition: Post-Communism and Bunce Csanadi, Hungary," "Uncertainty no. 2 and Politics (1993). 7, ropean Society 22 as in evidenced his has electoral Klaus Even faced Vaclav poor pressures, by strong performance s share its and coalition lost Klaus' elections. the 1996 majority government three-party parliamentary see a of as Mitchell "Out coalition. On Czech the has been Orenstein, minority Republic, governing Univer Yale in Post-Communist the and Red: (Ph.D. diss., Europe" Democracy Capitalism Building 1996). sity, 23 measure a as of communist not former the continued dominance for be taken should This proxy era. rule former all the have faced slow reformers continuous of in Not the rulers by postcommunist chief to continue be did and Uzbekistan communist leaders. Turkmenistan, Kazakhstan, governed by to were transi communist the their secretaries of first who former executives parties prior respective was of Ukranian the second Leonid tion. leader of first The Kravchuk, Ukraine, secretary formerly were new chief and executives In Communist elected, Russia, Moldova, Belarus, Kyrgyzstan, Party. not communist the the most of held whom parties positions?in leading previous positions?though to transition. the their of prior respective republics 24 a shares considerable in elected is which the Romania system president popularly semipresidential an ministers a with has 1990 had three Romania Since with prime government. powers parliamentary see Gail and Katherine tenure On of each. months Romania, Kligman, twenty-one Verdery average in Banac Communism?" "Romania Postcommunist Ceausescu: after (fh. 21). 25 I that a on stabilization recent show in of In the stabilization systems, paper postcommunist politics a moment in of to as are be elections?the before introduced insecurity greatest programs just likely see Advan S. after tenure?as electoral Hellman, victories; Joel "Competitive immediately politician's Transitions" in Economic Reform Post-Communist and Political 1996). (Manuscript, tage: Competition This content downloaded from 137.110.33.183 on Mon, 30 Dec 2013 12:59:15 PM All use subject to JSTOR Terms and Conditions

14 215 TAKE ALL WINNERS or to reforms have introduce reforms economic tended delayed partial even to the weakest have faced would appear they though altogether, more or to reforms. of electoral threat comprehensive challenge popular a cannot link executive between evidence causal this support Although it economic does and turnovers, reform, government stability, challenge short-term the that threat the of electoral notion the revenge against a ex to ante costs the substantial obstacle of is economic reform adop in transitions. reform of the tion postcommunist ex to then is reform If economic the threat post, primarily political or see we to mod reversed otherwise economic reforms would expect initial Przeworski their in the electoral erated following adoption. cycle an are to costs of reform short-term the that argues likely spark high or reforms. of and moderation reversal backlash electoral subsequent a in creates economic transition of familiar This pattern stop-and-go and in which reforms spurts: stumbling, retreating advancing, "proceed have countries The expe certainly postcommunist advancing again."26 In three of backlashes reform. of electoral the rienced pressures against in five the reform the countries advanced Poland, group?Hungary, out of voted have been Slovak the and governments Republic?reform more to reforms. moderate office be by advocating parties replaced in the of three have occurred of reform reversals Similar governments Esto in intermediate reform the six countries group?Bulgaria, high ac not been have reversals electoral Lithuania. these and However, nia, course in economic in reform of the reversals any major by companied countries. these on scores 4 the of three the the annual Table presents categories s six countries that listed above index for the liberalization Bank World the end reform backlashes electoral have had governments. By against were two in instances which liberalization these 1994 of there only on scores scores to liberaliza In the from declined year. year Bulgaria in 1993 0.9 from declined external and tion internal of prices slightly non as as a to 1 the 0-1 1994 scale with 0.8 in liberalized), (on fully was after Berov Luben led technocrats of party government replaced by a modest A Socialist election the similarly Party. by Bulgarian general was to score on 0.8 0.9 from in external liberalization the decline prices in the 1993 1992 Slovak the and between recorded following Republic to Bank World the there of Czechoslovakia. scores, According breakup no were in the reforms of of reversals substantial other any liberalizing backlashes countries that electoral against experienced postcommunist 26 179. Przeworski 1), (fil. This content downloaded from 137.110.33.183 on Mon, 30 Dec 2013 12:59:15 PM All use subject to JSTOR Terms and Conditions

15 216 POLITICS WORLD 4 TABLE cu scores Selected 1991 1990 1992 1994 1993 Hungary 0.9 0.8 0.9 0.9 0.9 Internalprices 0.9 0.9 0.9 0.7 0.9 Externalprices sector Private 0.6 0.7 0.3 0.5 0.8 entry Poland 0.7 0.7 0.9 0.9 0.9 Internal prices 0.9 0.9 0.9 0.9 External 0.9 prices sector 0.6 Private 0.5 0.9 0.8 0.7 entry Lithuania 0.3 0.9 0.5 0.9 0.8 Internalprices 0 0.2 0.9 1 0.5 Externalprices sector 0.1 0.3 0.4 0.6 Private 0.8 entry Estonia 0.3 0.9 0.5 0.9 0.9 Internalprices 0.7 0.1 0.3 1 1 Externalprices sector 0.2 0.4 0.2 0.8 Private 0.6 entry Slovakia 0.9 0.9 0.9 0 0.9 Internalprices 0.8 0.8 0 0.8 0.9 Externalprices sector 0.4 0.8 0.7 0.8 0.8 Private entry Bulgaria 0 0.9 0.9 0.9 0.8 Internalprices 0.5 0.9 0.9 0.9 0.8 Externaiprices sector 0.1 0.2 0.3 Private 0.3 0.4 entry Bank World Source: (fn. 8). out set reform of the entire of Indeed, governments. postcommunist were re two two minor the above described countries declines the only scores to in 1989 versals reform from 1994.27 rate in backlashes did slow Electoral the of progress par occasionally areas economic ticular of of reform. The speed large-scale privatization in Lithuania slowed Poland after the and victo electoral considerably successor ries of in communist countries. Voucher those parties privati was zation in also the Slovak the after of delayed Republic breakup cases there also been have Yet in Czechoslovakia.28 electoral which were an reform-oriented backlashes followed governments against by 27 EBRD's transition in economic the indicators six reform in progress measuring Similarly, categories on not scores 1994 in in nine and the in reform do of 1995 reflect any any categories backtracking EBRD (fn. countries; 8,1994,1995). postcommunist 28 accounts see For of in the Central detailed and the Baltic states, process privatization Europe and Process in The Privatization Roman 2 Central vols. (Bu Frydman Andrzej Rapaczynski, Europe, Central 1993). dapest: European University, This content downloaded from 137.110.33.183 on Mon, 30 Dec 2013 12:59:15 PM All use subject to JSTOR Terms and Conditions

16 217 TAKE ALL WINNERS some areas. in Russia made reform of the intensification greatest in after the reform progress government large-scale only privatization was out im of and Lithuania Gaidar of forced office.29 Egor Hungary macroeconomic stabilization after electoral programs plemented tough its Estonia socialist continued has of victories pace rapid by parties.30 economic the of reform reform the government following replacement more far moderate Vahi Laar of the Mart government. by cases most economic in the of introduction comprehensive Though at ballot box reform the did reform revenge programs spark against re not reversals did the the electoral generate governments, expected reverse to would be forced that form notion The reversals. politicians to reaction in transitional the reforms response against high popular to costs not in transitions.31 the has evident been date postcommunist a in the countries The present paradox political postcommunist In reforms reform. conventional of the view, economy comprehensive ex react ex ante losers from who obstacles and face post against political costs ben of the the of transitional short-term reform, promise despite more com term. in in the Yet the efits transitions, postcommunist long to transitional have inflicted lower reform appear programs prehensive or term costs More reforms. in slow have than intermediate short the in which leaders countries the it those has been over, political precisely to most that losers the short-term demands of have the vulnerable been of economic reform. levels and have the sustained highest adopted that and insulated been electoral that from have Governments pressures a tenure have level have of traditionally security?which high enjoyed eco as most seen but of the been necessary, costly initiating capable to in the the be nomic reforms?have proven postcommunist laggards so countries have economic transitions. many postcommunist Why costs course a in the short with social of reforms chosen higher partial to term in term? If the the and lower pressure long gains expected not course a the tradi derive from of reform does suboptimal adopt tional workers, superflu pensioners, impoverished losers?unemployed are so ous state the on?what and bureaucrats, dynamics political reforms? driving partial 29 Ibid. 30 see in sections in the assessments and For macroeconomic of Lithuania, country policy Hungary EBRD 8,1995). (fn. 31 nor it not is advan in the reversals reform such does Of this course, future, necessarily preclude concern a that electoral the Przeworski stable creation of for the 2) (fh. expresses democracy. tageous can on not to be reform economic lead reformers do backlashes that politically backtracking against not are in votes their reflected to voters that continue find If democracies. in emerging destabilizing au more to attracted be and in the confidence democratic could lose then process they policy changes, thoritarian solutions. This content downloaded from 137.110.33.183 on Mon, 30 Dec 2013 12:59:15 PM All use subject to JSTOR Terms and Conditions

17 218 WORLD POLITICS of Partial Reform Politics The on net in The the losers focus reform exclusive the of economy political incentives the interests attention from of has and deflected analyzing to net economic winners. of the the conventional The politics approach on a that is uncontroversial reform based assumption, simple, seemingly ex create in winners and stakes who economic reforms gain defending cre to those is of One of the reforms. therefore, reform, tending goals a to ate winners efforts that will of support constituency ongoing a to most transition market the advance The frequently economy.32 on term is the in the that winners short of the cited relying problem are entire while the reform from economy, throughout gains dispersed are losses The within concentrated the groups. efficiency particular with associated economic inflation, normally gains reform?reducing a the and fiscal stable deficits, currency, increasing lowering creating as be services?can considered of and goods. public availability goods to collective face these barriers beneficiaries of the Therefore, policies term costs the in short face the concentrated losers action. contrast, By to action in incentives have collective selective thus and engage strong are winners winners and the the reforms.33 potential Though against a seen as the for best the of reform, pattern constituency creating hope term to their ef is in assumed weaken from the short reform of gains a as force. fectiveness political a not in the been raises that has This investigated political question reforms?34 economic Partial reform: of who from economy gains partial an into mechanisms the market of introduction selected reforms entail 32 are to in is models that This economy high designed important political assumption especially to is of reform that the best reforms. Roland the of strategy argues political gradual advantages light a term that in measures the reform stake who short in start the winners with that process gain produce measures to more once the to road. down See Ger be will need defend continue costly adopted they in Laszlo in the of Transition Tactics "Political ard Csaba, ed., Period," Roland, Economy Sequencing and Dartmouth in Eastern U.K.: Stabilization and 1991); (Aldershot, Press, Europe Change Systemic Peter reform of the of shock is the also Murrell's This idem (fh. 3). program; therapy spirit critique Euro East Economic the the and of Political "Conservative Transition," Murrell, Strategy Philosophy no. Re in in Economic the 1 Economics and "Evolution Societies and Politics and idem, 6, (1993); pean The C in Planned and Gordon form of the eds., Rausser, Economies," Clague Christopher Centrally Mass.: in Eastern Market Economies 1992). Blackwell, (Cambridge, Europe Emergence of 33 in the action this collective dilemma Kaufman and 1, 2,1995), (fn. po chap. emphasize Haggard of reform. litical economy 34 An Kevin M. is of work reform examines the The that Murphy, partial dynamics explicitly only a to Partial of Market Pitfalls Transition "The and Robert drei Reform," Shleifer, Economy: Vishny, on no. his in issue this I. 3 McKinnon touches Ronald Economics (1992). 57, Journal analy Quarterly of see Liberalization: Economic The Order economic of sis different of McKinnon, reform; sequences of a to Market in Transition Financial the Control Press, (Baltimore: Johns University Hopkins Economy context the of the in costs the of social reforms Ericson Richard discusses E. 1991). specific partial not distribution from of he the does from transition economies, gains explore centrally though planned and Nature see of the Classical "The such Ericson, reforms; Implica System Economy: Soviet-Type no. 4 Economic for tions (1991). 5, Reform? Journal Perspectives of This content downloaded from 137.110.33.183 on Mon, 30 Dec 2013 12:59:15 PM All use subject to JSTOR Terms and Conditions

18 219 take WINNERS all in which economic still substantial of economy operate activity spheres was to It alternative coordination. of mechanisms according recognized sta to in transition that the the threatened reforms early partial disrupt the and economic limited?of effectiveness?however bility existing without the associated system efficiency necessarily generating gains were a with As markets.35 reforms result, pre fully partial functioning com to term costs in the dicted both social than short generate higher same status the maintenance the At of reforms and quo. prehensive were to reforms time, generate opportu rent-seeking expected partial sectors nities differentials between the of from liberalized arising price and those still nonmarket the coordinated mechanisms.36 economy by activities in been of such have the ubiquitous rent-seeking Examples in transitions. trade with liberalization postcommunist Rapid foreign state to has liberalization allowed managers enterprise complete price resource sell natural their oil and subsidized (for highly example, inputs to at with market Price liberalization world buyers gas) prices. foreign or mo out in concomitant market up progress entry opening breaking earn some to has created for nopolies opportunities producers rents. the Privatization of mechanism credit reform without monopoly state to to subsidized has credits earmarked allowed divert managers at into interest markets short-term money high production uphold rates. rents In have each these case, opportunities arbitrage generated a to to in those take Yet of market distortions. these position advantage a com resources to rents the in leads of redistribution misallocation of a more that the be from with efficient parison expected rationing might market. fully functioning re some these exist To should extent, opportunities rent-seeking com a the transition The from reform of strategy adopted. gardless a an set to market extensive mand of economy economy requires policy time and of which have institutional different horizons. many changes, more can can liberalized far than be Clearly, quickly prices monopolies can more new rates be be broken Interest than up. quickly changed can created. be banks loan commercial of requests evaluating capable more can on domestic and be lifted trade Restrictions quickly foreign can contract than for be into mechanisms enforcement put adequate 35 Ericson 34). (fn. 36 not actors to able that that will exist The take does such be fact distortions market ad guarantee a state is them in reformed that It of economies. restrictive these could vantage partially highly possible ac more of build between walls liberalized the controlled and the economy, highly preventing spheres tors suc access to This for from is the the often these opportunities. rent-seeking explanation gaining cess within of of of China's reformed levels economy, press reports corruption partially though high sector state to are to that such limits state's the Chinas enforce there restrictions; suggest capacity and 34). Shleifer, (fn. Vishnay Murphy, This content downloaded from 137.110.33.183 on Mon, 30 Dec 2013 12:59:15 PM All use subject to JSTOR Terms and Conditions

19 POLITICS 220 WORLD in time of the differentials horizons of various These components place. to market distortions similar reform temporary comprehensive produce of reforms. with introduction the the associated gaps partial explicit winners Both and reforms economic produce partial comprehensive rents or in the short determined with term, gen by wholly gains partly econ in existence market the the erated distortions of developing by are rents in those these concentrated, Moreover, omy. benefiting highly a sectors to of and unreformed between the reformed position arbitrage the economy. over to then If economic continue the market reforms time, progress rents should be these concentrated distortions that produce gradually Further liberalization eliminated. undermines opera arbitrage price sec state sector tions and the between the export free-price fixed-price tor. constraints of The progressive hardening budget enterprise state of subsidies. Privatization the misallocation eliminates coupled an structure reduces effective of creation with the governance corporate measures asset ef While these insiders. produce by stripping enterprise flow the of for also alter the economy, gains they private ficiency gains a to winners initial the winners The of concentrated reform. up give a rents stream for the market share of distortions initial of by generated a As further market reforms. with the associated overall efficiency gains in the could reduce of market reforms result, progress implementation over to initial winners while effi the the time, increasing private gains as a for the whole. economy ciency gains re is the the traditional From the of winners, J-curve perspective as as term in the 3. rise in incomes short Their versed, rapidly Figure over rents. Yet the initial concentrated distortions market generate the those of reforms eliminates distortions, time, progress gradually rents from the this of of reform. The initial the stages shape dissipating on curve the the winners reform of would comprehensiveness depend over at start the the reforms the of of transition continued and pace curve W In time. line the winners' the 3, represents consumption Figure a in the transition that line with The reforms. country Wc partial began a curve more a with in income that winners' denotes the country began curve that The flatter reform compre program. suggests comprehensive rents in the winners concentrated the less reforms hensive for generate as term reforms income the declines and less short progress. steep a curves to different the traditional winners' these J-curve, By adding in transitions of the reform of economy postcommunist picture political costs in short the social If reforms emerges. generate higher partial This content downloaded from 137.110.33.183 on Mon, 30 Dec 2013 12:59:15 PM All use subject to JSTOR Terms and Conditions

20 WINNERS TAKE ALL 221 c .2 Oh e wp C O O wc Time 3 Figure The Curve Winner's rents to the then the concentration winners should of term, increasing a in entail In of decrease the losers. corresponding consumption Figure a curve in losers' the is reformed 4, economy, partially consumption Z^, to mirror the of the winners' the the As curve, image gains private Wp. as costs to winners reform increase the from losers the increase, partial are over If well. distortions of the eliminated reform partial gradually a winners the in then while their reduction face losers the rents, time, in the share of fiirther thus market reforms, efficiency gains narrowing curves. more two the between that the Countries gap compre adopt a narrower at start hensive reforms have income the between the gap curves re costs winners the transitional of and of losers, Lf.The W^and are term in short form the lower under than and the reform partial an to see at losers in from reform the earlier process point gains begin a at and level. higher are to In the the standard if elections called J-curve prior approach, ma at to the the which have benefits for reforms point begun produce voters react to costs will of the the short-term voters, jority casting by or a their ballots for addi the Yet reforms. the of moderation reversal a to tion of the winners different obsta the suggests political approach to is cles reform. economic reform The of economic usually politics a as set choices between omnibus reform of (radi programs portrayed versus at in cal the process junctures key (namely, political gradual) This content downloaded from 137.110.33.183 on Mon, 30 Dec 2013 12:59:15 PM All use subject to JSTOR Terms and Conditions

21 222 WORLD POLITICS Time 4 Figure voters in which the Yet role. the elections) process deciding play might more as a be of distinct choices sequence many depicted realistically over on an time overall of reform separate components plan?liberal nec not and more?that do ization, stabilization, many privatization, a In coincide with calendar. electoral the the such process, essarily more a to winners their with would be concentrated expected play gains their their smaller decisive and resources, number, role, greater given to is action. incentives it collective reasonable selective their for Indeed, assume an veto that have in winners the the deci power implicit might over sions of economic those reform, components separate especially streams. rent affect that their existing a to consists of if the of reform 4, process sequence Returning Figure over to continue of winners the decisions will the then time, support an of until reforms incen the winners have advance Beyond ^, time/r more move veto to tive that reform the toward any economy proposals measures to since will such decrease the reforms, comprehensive begin rents at of the the reform the earlier Thus, stage process. they gained some to in winners freeze the market economy par emerging prefer to rents state concentration maximizes the of reformed that tially a at cost. social While the chal themselves, political though significant was to the of maintain reforms the of the J-curve valley through lenge This content downloaded from 137.110.33.183 on Mon, 30 Dec 2013 12:59:15 PM All use subject to JSTOR Terms and Conditions

22 WINNERS ALL TAKE 223 to momentum is sustain the the reform of transition, challenge partial at fur which the that the of reform of is, transition," past point "peak to rents winners from the distortions the ther reforms threaten accruing earlier reforms. created by differs economic reform of model the of This stylized highly politics as While the standard the from J-curve approach approach. sharply are sumes are costs the and benefits reform concentrated of the that this with the The model assumption. dispersed, gains opposite begins a narrow are winners within of concentrated reform from group highly over are term time in if the and the reform short process only dispersed en across are costs the of The contrast, reform, progresses. dispersed by assumes start. the that tire the from The J-curve economy approach are term costs in the reforms short of transitional comprehensive more this while than those reforms, greater gradual accompanying assumes charac The conventional the model approach opposite. again re a as choice between omnibus economic of reform terizes the politics voters at in the made form calendar. programs political key points by on a as of decisions reform the model This sequence process portrays over in is time which continuous that and of reform separate components voice. have the decisive decisions from earlier winners who the gained reform the alternative the basis of these On assumptions, partial a the of characterization different here model very suggests presented transitions. to in the economic reform obstacles postcommunist political to not how sustain is reform reform economic of dilemma The political net how but in short the the losers from in of the face term, opposition to net winners the to of efforts in face the reform advance preserve by term. in short the their that the distortions market gains produced Evidence coun is that alternative of this the One of approach key predictions a con exhibit should reforms maintained tries have that greater partial a to level of transitional winners and the of centration higher gains re more costs that have countries those than comprehensive pursued to to is examine reforms of the One forms. gauge way degree partial are that in the each of of levels different components separate progress a to reform constitute considered program. comprehensive generally de and Reconstruction Bank for The (EBRD) Development European reform the dimensions nine of fines process: privatization separate and liberalization, small-scale), restructuring, price enterprise (large- secu trade reform, liberalization, banking policy, competition foreign This content downloaded from 137.110.33.183 on Mon, 30 Dec 2013 12:59:15 PM All use subject to JSTOR Terms and Conditions

23 224 WORLD POLITICS a EBRD rities The reform.37 and market of reform, rating legal provides on a 1-4 scale. each dimension the cumulative progress By along taking around the these of the variance for mean) (that is, ratings dispersion a we measure of each the obtain countries, very rough postcommunist across in level the of of imbalances the dimensions.38 progress separate are in vari 5. first The the column variances Table of Higher reported ances more across the dimen unbalanced indicate different progress a sions economic of reform of hence, and, greater partial degree variances reforms. each the of four of for countries The groups average a show Both the and curvilinear the advanced groups. among pattern across reform have the slow their low reform variances scores, groups variances while the have intermediate sug groups higher considerably more uneven in economic reform. progress gesting most If of the intermediate the have maintained the countries groups or uneven a should demonstrate economic then reforms, they partial so of concentration from with overall reform higher along gains higher on costs. recent in and data cial inequality incomplete, highly Though some across come economies transition concentration the show in transition countries has the trends.39 The postcommunist interesting an income. Since of the redistribution extremely begin sparked rapid in risen the the level income of has of transition, every ning inequality of the Slovak with The the country postcommunist exception Republic. measures of the standard Gini of coefficient?one average inequality? to in in the 32 from 24 1987-88 entire for one-third, by region jumped a a in time In era.40 the 1993-94, pace postwar unprecedented virtually 37 are not these of but the Of do course, reform, encompass components comprehensive they only EBRD are to what be the of See considered reform. elements (fh. 8,1995). key generally 38 a assumes measure 1-4 that the the the within each thresholds of Such scale distance separating are case. across not the all which the be dimension dimensions, may direcdy necessarily comparable a measure the reform this be of with considerable caution. should As Given result, interpreted partial error use to not measurement in it in these be would data reform, appropriate gauging partial potential more are are at tests. this the of that statistical trends data Rather, any stage suggestive sophisticated further of worthy investigation. empirical 39 on has World the in of data collected concentration and the The detailed Bank inequality only on are comes not the in economies based transition because household data surveys. Unfortunately, on on set tests to transition the it is entire make of this available statistical economies, any impossible an Branko Milanovic small the and countries. of of data presents interesting analysis sample provides Social between the in and and See Milanovic, poverty. Poverty\ inequality relationship Policy Inequality no. Bank Transition World 1530 Research In and Economies? idem, (1995); Policy Working Paper, Economies the and Transition Division Research Se come, Transition, Paper Poverty during Inequality on more 11 ries countries Data than the standard (1996). among require postcommunist inequality to at caveats from this levels. incentives in income taxation the Gini hide coeffi all field, strong given on re from cients the the be constraints should biased downward, given ideological period prereform numerous to kind in the in of the and socialist forms available systems perquisites inequalities vealing as to are in coefficients transition the be biased In nomenklatura. Gini downward, likely higher period come to access in income outlets for income than do those lower have groups. greater groups hiding 40 4. Milanovic (fn. 39,1996), chap. This content downloaded from 137.110.33.183 on Mon, 30 Dec 2013 12:59:15 PM All use subject to JSTOR Terms and Conditions

24 225 ALL TAKE WINNERS Table 5 and Reform Partial Inequality in Change Income % Variance Gini Gini Change EBRD GDP 1993-94 Gini in Share Top Coeff Coeff GDP 1988-89 1988-94 1993-94 Scores 1988-89 Quint Advanced 31 0.19 3.43 26 0.25 Poland 84 28 3.76 0.17 24 0.36 Slovenia 81 1.07 23 0.28 0.10 21 Hungary 81 0.42 19 5.77 27 0.28 Czech Republic 79 -0.10 0.00 20 20 0.19 Slovakia 82.6 2.79 0.18 25.8 0.27 22 Average intermediate High 73 13.61 0.70 23 0.44 39 Estonia 0.48 69 7.78 34 23 0.53 Bulgaria 60 4.01 0.17 27 23 0.75 Latvia 44 9.75 36 23 0.57 0.69 Lithuania n.a. n.a. n.a. n.a. 74 1.25 Albania 69 0.26 4.08 29 23 0.78 Romania 64.8 0.43 7.85 33.0 23 0.74 Average Low intermediate n.a. 61 26 0.35 0.94 35 Kyrgyzstan 57 20.02 1.00 48 24 0.53 Russia 53 8.89 24 36 0.50 0.53 Moldova n.a. 57 0.27 26 0.36 33 Kazakhstan 57.0 0.53 38.0 25 0.59 Average Slow n.a. 69 36 0.38 26 0.11 Turkmenistan n.a. 56 23 0.43 0.19 33 Ukraine n.a. 89 0.18 33 28 0.25 Uzbekistan n.a. 73 28 23 0.22 0.11 Belarus 71.75 0.30 32.5 25 0.17 Average 58. Milanovic SOURCE: (fn. 39,1996), seven from moved to have economies transition the five of years span in several OECD most countries of those below levels to, inequality coun OECD most or on a than the with levels cases, par unequal higher are in 5. Table listed coefficients Gini tries. The across the reform extent differs redistribution the of The groups. two in the in to increased coefficients Gini 1987-88 From 1993-94, 53 and 43 reform termediate intermediate) groups percent (high by as 18 the with intermediate), (low among percent compared percent The reformers. the slow 30 and reformers advanced among percent are low the in economies the transition coefficients Gini among highest This content downloaded from 137.110.33.183 on Mon, 30 Dec 2013 12:59:15 PM All use subject to JSTOR Terms and Conditions

25 226 WORLD POLITICS EBRDvar O 5 Figure and Reform Inequality most main intermediate the while have reformers advanced reformers, out tran of Russia stands tained the the lowest levels among inequality. sition economies its doubled for of the during inequality having degree period. across in the the relates 5 reform average Figure inequality changes on EBRD to the transition variances indicators. their The average groups cannot this is similar. evidence curvilinear sup pattern roughly Though an it does be causal claims, any port suggest relationship interesting tween with and imbalances the associated reforms increasing partial countries. levels of the among postcommunist inequality in in transitions The has increase the been postcommunist inequality a in concentration the incomes income of substantial driven by highest are on less for than concentration income data group, complete though 5 the overall of Table (in percentage reports change points) inequality. income for the income share and between 1987-88 total top quintile in in in 1993-94. the increase the income share for The top quintile with the reformers the advanced of that reformers termediate exceeds interme in the the The Czech of top high quintile Republic. exception an 7.8 of income share its increased diate reformers average by points, in increased while advanced reform the the share group average by only two for countries intermediate low the The 2.8 group among points. con are in increases the also show substantial which such data available a out with remarkable 20 Russia stands income. of centration Again, With the in increase income share of the the top quintile. point This content downloaded from 137.110.33.183 on Mon, 30 Dec 2013 12:59:15 PM All use subject to JSTOR Terms and Conditions

26 227 WINNERS TAKE ALL Advanced Low Slow High Intermediate Intermediate GDP Gini | O change growth FIGURE 6 and gdp Growth Inequality of and the Slovak of the all postcommu Republic, exception Hungary a countries in nist have of redistribution regressive highly experienced come start since transition. the Yet the evidence the that of suggests a in reached redistribution this those considerably magnitude higher that countries have reforms. maintained partial in the The of variation and concentration among pattern inequality is the reform matched declines cumulative groups output by closely measure costs standard of the the the of reform. The transition, during to GDP GDP 1989 1993-94 of ratio column last the of lists 5 for Table GDP in countries. The cumulative the decline average postcommunist two the the for exceeds both advanced reform intermediate and groups an GDP fallen 1994 43 the slow had reformers. of average percent by By countries the intermediate reform 35.2 the lower and of group among intermediate countries of the the ad The among group. percent high a at GDP 19.4 reformers suffered vanced loss much lower average per an reformers fell of 28.3 As while the slow cent, average percent. by across GDP in 6 reform the declines the average groups suggests, Figure as in the increases the measured match average percentage inequality by coefficients for each reform Gini group. on con in the available limited evidence The inequality, changes across GDP countries the and centration of incomes, postcommunist This content downloaded from 137.110.33.183 on Mon, 30 Dec 2013 12:59:15 PM All use subject to JSTOR Terms and Conditions

27 228 WORLD POLITICS the the of reform model. postcom supports predictions Though partial costs economic munist have in the short reforms clearly generated high have the concentrated have been term, gains highly they produced a narrow that have winners. Countries of and among group adopted maintained had the of concentration have these reforms partial highest same at costs time the the short-term while gains, experiencing highest more net winners economies. have the transition The among gained to in the relative economies losers have reformed than their partially or the advanced slow the either reformers. More among counterparts as EBRD the variances of the transition indicators over, demonstrate, re in these with imbalances have the associated of been adoption gains create. the If distortions of and forms the correction market these they rent to distortions further market reduce the reforms threatens through to to flows short-term should be the then winners, op expected they as as measures such share of the their pose gener gains efficiency long rent not winners The exceed the lost further flows. reforms does ated by an a to to in maintain have order reform incentive partial equilibrium rents maximize in the concentration of While the economy. existing assume to net the the of that reform tend of economic analyses politics a winners constitute in favor of and constituency political sustaining market the reform that these model reforms, suggests partial advancing a to winners constitute obstacle could the advance of powerful steady the reform process. The main the is of model clear: if reform political partial implication over a veto winners the from then the reforms have power policy, partial a concen in transition result reform that should partial equilibrium a trates at winners the social cost.41 the Therefore, among gains high to net in restrain is model of this reform the primary political challenge more concentrate winners. in Political the that hands of power systems are more over to the winners time. reforms preserve likely partial By more to the of the losers contrast, open systems participation political a in the should of process generate greater policy-making dispersion are rents in the of If the reform. initial of reform the stages gains early more winners find then the thoroughly dissipated, might efficiency more re to from attractive be than reforms the gains comprehensive a rent duced flows reform from partial equilibrium. 41 not are start the that immune economic from Countries reforms radical very adopt necessarily are most from the this elements reform Even radical of each programs composed problem. multiple a to time market rise horizon with different distortions and temporary opportunities giving arbitrage not a term. in short of the Since the reform sin that consist does concentrated process gains produce on a numerous is of of choice choices but dimensions reform rather of sequence separate programs, gle over are to reform there still for winners short-term the scale back the in time, many opportunities of tentions radical reformers. This content downloaded from 137.110.33.183 on Mon, 30 Dec 2013 12:59:15 PM All use subject to JSTOR Terms and Conditions

28 WINNERS 229 TAKE ALL to measure It is difficult with the concentration of any power precision in the in winners short-term transition economies. One of the the hands measure to to is of the the continued communist former power try option are as to those?such believed benefit reforms since elite, precisely partial state bureau farm ministerial collective chairmen, managers, enterprise a are to in between and officials?who crats, party position arbitrage state sector less the and the subsidized constrained and highly regulated measure sector. to is It market free the political possible remaining successor its the and Communist former of power Party organizations extent of the in institutions. per Alternatively, postcommunist political or sectors turnover in from economic sonnel the posts government key era to could be the transition communist However, surveyed. period measures the other from miss influence would of such groups benefiting are not to their linked whose those reforms, po necessarily gains partial as new commercial communist such in the sitions system, previous en a of and investment fund whole bankers, range managers, private actors have also these In many systems trepreneurs. postcommunist in the from distortions made short-term developing gains extraordinary are to substantial wield believed market and economy political power.42 measure extent to to is the this Another problem possible approach are to to from which pressures open systems political postcommunist assumes of the the that losers. the This short-term greater participation more the be will constrained in the the the losers process, political ex can be the losers winners. of Greater the of power participation measures veto to that to winners reform the of the check power pected not interests. the latter short-term More with 's do coincide impor elections face who may competitive genuinely regular, tantly, politicians nar a to concentrate that from constrained be gains policies pursuing costs. row social electorate while the of segment high generating to a the of level the 7 presents democracy relating scatterplot Figure eco extent The countries. in the reforms economic of postcommunist s on are scores EBRD in transition cumulative the based nomic reform on measure is the based of for 1994.43 The dicators average democracy score on index of House Freedom the annual each of political country's over course index House Freedom The of the the transition.44 rights 42 rents to a banks created commercial et the of al. Dmitriev detailed direcdy newly analysis provide a context financial to liberalized the in of stabilization lack macroeconomic of the related system highly et as Dmitriev to E. rents Mikhail See stabilize. the declined those and how economy began quickly eve on of stabiliza financial banks the Stabiliaztsii Finansovoi Nakanune Banki Rossiiskie (Russian al., 1996). Norma, (St. tion) Petersburg: 43 EBRD 8,1994). (fn. 44 Freedom York: 1993-1994 in the Freedom Freedom 1994). World, House, (New House, This content downloaded from 137.110.33.183 on Mon, 30 Dec 2013 12:59:15 PM All use subject to JSTOR Terms and Conditions

29 230 WORLD POLITICS 14 12 16 EBRD Transition Indicators 7 Figure and Economic Democracy Reform EBRD House SOURCES: Freedom (fn. (fn. 44,1990-94). 8,1994); measures to in individual the process, political participate rights freely on the of the electoral inclusiveness system. focusing political especially a The correlation reveals between strong positive scatterplot political = inclusive and reform More economic (r 0.78). regimes rights political levels of economic and reform than have sustained adopted higher more with restrictive Given those that losers outnumber rights. political can a assume more we in winners the inclusive short that term, politi of economic cal the losers the reform process op greater gives regime a to outcomes inclusive less than influence regime. portunities political more measure the of the Another inclusiveness of proxy po specific on num size of litical coalition As the focuses the system governments. a in the ber coalition number of increases, government parties political must actors whose for of effec be and coordinated groups agreement concen as to increases tends tive well.45 This weaken the policymaking or in of tration of the hands any power group. party single political a lower risk of should have coalition Broader governments cap being 45 num a the the in number increases coalition Tsebelis of that argues government parties increasing see veto of ber in the in Political Tsebelis, process; "Decision-Making points George policy-making in British Veto Multieameralism and Presidentialism, Parliamentarism, Jour Systems: Multipartyism,* nal 25 Political Science (1995). of This content downloaded from 137.110.33.183 on Mon, 30 Dec 2013 12:59:15 PM All use subject to JSTOR Terms and Conditions

30 WINNERS TAKE ALL 231 12 14 16 22 EBRD Transition Indicators 8 Figure and Coalition Government Reform Economic net tured the winners of reform should than governments exclusively by a measure to dominated One size the of coalition way party. single by a is scale and Roubini in Sachs their governments simple developed by of studies coalition coun and in OECD deficits governments budget a 8 tries.46 shows of the between size the Figure scatterplot relationship sum of coalition of EBRD and the 1994 the in transition governments a each for dicators cor is There country. postcommunist strong positive relation coalition between and economic reform. (r= 0.72) governments more are As forces into the process, political brought policy-making to more to com more be and sustain appear governments likely adopt economic reforms. prehensive extent Neither of or the variables?the of freedoms proxy political measures of size the coalition the relative power governments?directly over winners of the and economic losers of reform government policy 46 is a scale The to the for modified countries include for slightly category postcommunist single = as that restrict au scale is The 1 follows: governments party party explicidy one-party competition. ? or thoritarian 2 government restricted); government one-party (competition majority parliamentary - or united 3 coalition divided government; two-party government presidential govern presidential = = or more 4 three- 5 and coalition ment; government; party government. govern minority Monthly scores ment were each for or coded the with free the first election country postcommunist beginning of scores formal declaration A of the is in scatter the used average independence. weighted monthly See Nouriel and Roubini "Government and the in Deficits Sachs, plot Jeffrey graph. Budget Spending Industrial Economic 8 and Economic idem "Political and of Determinants Countries," (1989); Policy in the Industrial Deficits Economic Review 33 Democracies," (1989). Budget European This content downloaded from 137.110.33.183 on Mon, 30 Dec 2013 12:59:15 PM All use subject to JSTOR Terms and Conditions

31 WORLD POLITICS 232 measure of extensiveness the do However, par they political making. alter in could Political inclusion the process. policy-making ticipation two in the of reform the First, ways. process greater possible dynamics a rents to from of the lead inclusion could greater dissipation political more as the their share short-term of demand reforms, groups partial to the the As decrease, groups advantages specific gains private gains. are over also reduced. Sec reforms reforms of comprehensive partial in decision the inclusion the of the ond, greater making degree political to on is winners will be it that the able less the economic reform, likely a cost. at benefits social them that high bring private policies impose on as a can act constraint the inclusion Political winners, undermining a to in reform the hold their economy equilibrium. partial capacity Conclusions countries tremendous have made of the many postcommunist Though a a in short market of creation the toward strides economy remarkably even costs been transition have this the of of substantial, time, period some cases. has faced in each To of best the country varying degrees, real in combination of inflation, declining unemployment, high high state mix of and comes, services, increasing uncertainty?a decreasing rever a and of advances familiar has that pattern produced hardships in the Yet other of world. and economic reforms sals of regions political re to contrast in economic reform these of in the dynamics political not in constituted have transitions the losers the gions, postcommunist to has reform. This the main of obstacle the progress paper political in have which countries is those it that shown governments precisely an to most backlash threat of electoral the losers' vulnerable been most the sustained that and have reform comprehen adopted against electoral from insulated In reform sive contrast, programs. governments at in their have made, best, progress pressures reforming only partial once have economic economies. Moreover, reforms, rarely adopted, even that initiated them when the reform been reversed, governments been ousted. have not have suffered the standard transitions postcommunist Though ex an ex to ante obstacles have faced and reform, post they political source. an set Actors from of difficult unexpected challenges equally re a of distortions the from who extraordinary gains partially enjoyed to those have formed economy preserve gains maintaining by fought over who Bankers time. from reforms of imbalances the gained partial a macroeco have force financial been liberalization opposing powerful This content downloaded from 137.110.33.183 on Mon, 30 Dec 2013 12:59:15 PM All use subject to JSTOR Terms and Conditions

32 TAKE 233 ALL WINNERS were nomic State the stabilization. who turned owners, managers private winners from the of effective have creation big privatization, prevented en structures and much needed thus have governance corporate delayed recon financial-industrial terprise Rising restructuring. conglomerates, on to stituted have used their securities markets, power newly emerging new have New market who block entry. entrepreneurs-cum-mafiosi, from liberalization of and the domestic foreign tremendously gained a to of have viable undermined the formation trade, system sup legal case an the winners the market from In earlier each economy. stage port to in incentives reform that of reform have block further advances were on correct their the which initial distortions would very gains to to of reforms seek In the based. effect, they partial period prolong a cost. at considerable social of their initial flow rents, preserve though is winners has the shown the that This paper by challenge posed on a costs set of reform and benefits of the about based assumptions conventional of the differs from the that J-curve pattern assumptions most of reform of the which models economy upon political existing con assumes are economic reforms The that based. J-curve generate over term costs in the benefits short and the centrated long dispersed term. transi in has that the demonstrated This paper postcommunist to concentrated economic tended have reforms tions, highly produce tran to the while in short the term, groups dispersing gains particular costs the the Over of reform sitional time, economy. throughout concen to the initial is reform economic of progress dissipate expected a as rents of elements market tration of the economy complementary an a are winners have while the As into all result, put acquired place. a in stake in have also reform the stake process, developed they early the of that the realization distortions the very efficiency gains impede a market. of functioning fully is threatened economic of reform The the that process recognition net net winners than has the less the losers important implica by by or our enable institutions that of the for tions political understanding mod reform. economic While conventional economy political impede state the from the of the have els insulating importance emphasized state the various forms of the losers of autonomy, pressures through to in stresses winners the restrain need the reform model by partial to or their with other groups ability restricting by competition creasing measures veto In this reform view, par political unilaterally. expanding could to in the losers the include process place policy-making ticipation on and winners the of concentrated the limits prevent power political a has reform This from them paper equilibrium. sustaining partial This content downloaded from 137.110.33.183 on Mon, 30 Dec 2013 12:59:15 PM All use subject to JSTOR Terms and Conditions

33 234 WORLD POLITICS a shown that level of with systems par postcommunist higher political more to maintain been and have and able ticipation competition adopt states economic reforms insulated than from comprehensive largely mass and electoral pressures. politics an a The for reform number of model offers puz explanation partial some transitions. It of the aspects why zling postcommunist explains even over have the countries reforms maintained time, though partial are are costs than short-term overall those the lower and gains higher more with It reforms. associated postcom comprehensive explains why net winners in munist countries of the reform the which process appear never over to economic have power significant policy-making political a in mired have it reformed remained theless economy. Finally, partially a for link between the strong democracy provides explanation possible that transitions economic the reform and among postcommunist stresses the from that the the suffer of very groups including advantages costs reform. transitional of tenets economic of the of reform the One fundamental of politics a sus a create to in stake winners with of has been constituency always common a been has and This reform the process. taining advancing the for reforms irreversible and for both up strategy building making a the Yet reforms. of further for necessary support comparison political can transitions that the winners do far the suggests postcommunist a more to As economic reform losers. the than of the progress damage on success win reform both economic of the result, creating depends means ners on most the effective them. and Paradoxically, constraining in been transitions has winners the of the postcommunist constraining most to the that of the inclusion very guarantee constituency political to short-term the losers seek models exclude: economy existing political of reform. This content downloaded from 137.110.33.183 on Mon, 30 Dec 2013 12:59:15 PM All use subject to JSTOR Terms and Conditions

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