Transforming Post-Communist Political Economies (1998) / Chapter Skim
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Social Costs, Social-Sector Reforms, and Politics in Post-Communism Transformations
Social Costs, Social-Sector Reforms, and Politics in Post-Communism Transformations
Pages 245-271
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IV Social Trends, Household Behavior, and Social-Sector Policies
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At the same time, I would like to thank Harley Balzer, Nick Barr, Valerie Bunce, Carol Graham, Janos Kornai, Vladimir Mikhalov, Branko Milanovic, Dena Ringold, and Irena Topinska, as well as my colleagues on the Task Force on Transition Economies, for valuable comments and data.
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Its goal is not to describe or analyze in detail, but to provide an overview and perspective on major trends in social costs, social-sector policies, and their political implications in the course of transformation. THE EVOLVING SOCIAL-SECTOR AGENDA Initial Policies: Selective Gradualism and Safety Nets When most of Eastern Europe and much of the former Soviet Union began to transform their economic systems from command to mainly market models after 1989, few anticipated the scope and depth of economic disruption and social costs that would result.
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More 1In some Eastern European countries, there may also have been widespread expectations of generous Western aid, comparable to the Marshall Plan in Western Europe after World War II (personal communication from Valerie Bunce)
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, but not to the poor within those groups. As market reforms increased inequality, the lack of targeting to the poor made transfers still less effective in reducing poverty.3 At best, selective gradualism and compensatory programs could only partially mitigate the costs of the initial period of adjustment.
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Most Eastern European countries had brought inflation to or below 30 percent by 1995; six of ten grew 5 percent or more in that year (World Bank, 1996a: 173, Table A.2~. Growth remains fragile in some Eastern European and several Soviet successor states, and a few, including Bulgaria, Belarus, Serbia, and Bosnia, show little progress.
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By 1995, long-term unemployed were more than 40 percent of total unemployed in all Eastern European countries except the Czech Republic, and exceeded 60 percent in Bulgaria and 87 percent in Macedonia (Allison and Ringold, 1996:27-28~. In most of the Eastern European countries for which data are available, roughly a fifth of the long-term unemployed are under 25 years of age, while two-thirds to three-quarters are between 25 and 60; substantial portions are unskilled or have comparatively limited education (supplementary tables provided by Dena Ringold)
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As these are dismantled, privatized, and/or streamlined, they are shedding their social functions. Moreover, more mobile labor forces and the growing importance of small firms necessitate entirely different arrangements for delivering social services and benefits.
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. Altered perspectives and increased sophistication are difficult challenges in established market democracies; they may prove still more wrenching in Eastern Europe and especially in the Soviet successor states.
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. In contrast to Central Europe, in Russia the need is not for cuts in mandated or actual social spending, but for restoration of state capacity to collect taxes and administer public programs, including social services and transfers.
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to the shedding of social service functions by state enterprises, devolution of responsibilities from higher levels of government, dwindling tax revenues, and other trends. This scenario is not unique to post-communist countries.
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· The beneficiaries of social services and transfers often view them as entitlements to which they have a moral claim. · Major social service reforms are particularly complex organizationally.
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The lack of templates also reflects the strong public goods component of social services. The latter fact implies a major role for the public sector, but the division of responsibilities among public (national and subnational)
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Indeed, for Eastern Europeans, the vision of "joining Europe" probably includes not only an array of consumer goods, better housing, and other material gains, but also muchimproved education and health services assumed to be provided by the state. At the very moment when the insecurities and inequalities of market economies are becoming ever clearer, radical revision of these expectations or, put differently, a radical renegotiation of the social contract may be particularly difficult.
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Teachers' unions have been formidable opponents to proposed reforms in education systems in a number of Latin American countries and in Poland, Hungary, and Russia. Effective reforms in organization, financing, administration, and program norms must usually be negotiated, at least to some degree, with the service providers themselves.
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At the beginning of the transformation, social safety net provisions especially with respect to unemployment compensation and pensions were indeed viewed as urgent and were rapidly enacted, but they did not entail basic changes in existing systems. In those countries with large and rapidly increasing elderly populations, the costs of failure to adjust existing pension systems can be fairly precisely predicted and timed, but in most cases, massive shortfalls remain some distance in the future.
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First, protracted crises tend to weaken vested interests and lower aspirations. Labor unions in much of Latin America are much weaker in the mid1990s than they were a decade or more earlier; structural economic changes have also undermined union power in much of Eastern Europe.
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. These agencies can make extremely important contributions to the internal debates now beginning in Eastern Europe.
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argues that such conflict has been largely unconnected with overall economic performance, and is much better explained by whether leaders and citizens tend to define the political community in ethnic rather than residential terms and by specific actions of political leaders toward ethnic minorities (Bunce, 1996~.12 Starting with the parliamentary elections in Lithuania in November 1992, formerly communist politicians and parties that were fairly clearly descended 12In contrast, Woodward (1995) argues that stabilization and liberalization efforts guided by the International Monetary Fund were a major factor in the complex causes of Yugoslavia's disintegration after 1990.
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Within individual countries, age and education quite rationally influence whether one focuses on the costs or opportunities of transformation. For instance, Eastern European opinion surveys indicate that younger people in particular prefer unaffordable to unavailable goods.~3 Even if hardships are attributed to the current government and the future looks bleak, political protest is only one of a wide array of possible responsesand by no means the most probable.
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Bolivia, Mexico, and several other countries adopted stabilization programs and market-oriented reforms in the mid-1980s, several years before the beginning of the transformation in Eastern Europe; Argentina and Peru launched particularly draconian reforms at roughly the same time as Central Europe. Since Latin American economies were largely market economies, despite extensive government intervention, structural adjustment has been far less profoundly disruptive there than in the post-communist world.
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Social services in most countries continue to deteriorate (see Schrieberg, 1997; for more careful empirical evidence, see Londono and Szekely, 1997~. Similar but more intense trends are all too obvious in Eastern Europe and the former Soviet Union.
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A growing (though not yet conclusive) body of crossnational evidence suggests that over time, more equal access to education and to credit is associated with more rapid economic progress, while markedly unequal income distributions are associated with slower growth, perhaps in part because they generate populist policies and/or political unrest.l4 More 14For an excellent review of theories and empirical research, see Benabou (1996)
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Moreover, in much of the world, but particularly in the post-communist countries, ensuring reasonably high-quality social services is viewed as a prime responsibility of a legitimate state whether that responsibility is discharged directly through public programs or through combinations of public and private provision and finance. Under state socialism, universal entitlement to state-provided services was viewed as a major force for equity and social cohesion.
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The very fact of growing concern about the character of emerging postcommunist societies, together with the embryonic but growing realization that considerable redesign of social services is unavoidable, may create a climate for a broad public debate, rather than one dominated mainly by vested interests. In short, both the process of social-sector reforms and their specific design can make major contributions to shaping livable societies and legitimate political systems or can fall short of that potential.
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1994 How market reforms and democratic consolidation affect each other. In Intricate Links: Democratization and Market Reforms in Latin America and Eastern Europe, J.M.
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