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been borne out in the post-communist world, and the explanation is that civil society limits rent seeking.


The outcomes of the post-communist transformation have varied greatly, and it is obvious that they were not predetermined. The orientation and quality of economic policymaking during these first few years is likely to remain of fundamental importance for all these countries for decades to come. At the outset of the post-communist transition, a large number of possible economic models were discussed. Today, the number has shrunk considerably.

Only a few countries had sufficiently strong states to be able to opt for a more complex model. The Visegrad countries are adopting much of the Western European model, not least because they are preparing to enter the EU. Yet complexity is not entirely a good thing. These countries are also facing the danger of limited economic growth and the entitlement trap most clearly developed in Sweden as a result of taxes that are too high and social transfers that are too large. The entitlement trap is particularly evident in Hungary, but social transfers are of about the same size in Poland. Poland is frequently compared with post-war Italy—corrupt and messy, but highly dynamic.

Most of the countries have undertaken substantial reforms, but these have not been at all as far-reaching as they should be. The result has not been collapse, but corruption and crony capitalism, as in the old protectionist and interventionist Latin American model. Most countries in the New Independent States fall into this category.

It may be hoped that this state of affairs will not be permanent. As has been done by many Latin American countries, several of these former communist countries are likely to opt for a new liberal economic model with low taxes, limited social transfers, few regulations, an open economy, and far-reaching privatization. To date, Estonia has most clearly made such a choice, but several other countries appear to have started moving in this direction, including Latvia, Lithuania, Moldova, Georgia, the Kyrgyz Republic, and Kazakstan. This model is more reminiscent of the old U.S. model. More countries are likely to follow as they try to control their economic and social problems.

There are also countries that have done little and who may ultimately fail not only as economic reformers, but even as states. They could end up in a terrible economic situation reminiscent of parts of Africa, without a functioning state or economy. Tajikistan is currently in such a condition. Because of the combination of excessive state intervention and poorly functioning governments and markets, neither an East Asian model nor a well-functioning Western European model appears to be a plausible option for these countries.

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