We are continuing with some reflections on the Fall of the Berlin Wall (read the previous post here).
Question: Did the speed of reforms matter in the transition period?
John Sullivan:
Yes, it most certainly did but in a quite complex way. Those countries that put off essential reforms like freeing prices, floating the currency, granting property rights, and balancing the budget had a very difficult time. After all, it was fundamentally the economic collapse of the Soviet system that was the trigger of the transformation (although not the only one).
So, in this regard countries like Bulgaria and Romania had a much more difficult time than the leading reformers such as Poland and Estonia. However, the reverse is also true. Countries that rushed into ill-considered reforms like mass privatization found that speed alone doesn’t make good reform. One of the best overall analyses of these comparative patterns is “Fifteen Years of Transformation in the Post-Communist World” by Oleh Havrylyshyn. Havrylyshyn carefully compares both the speed and the quality of the reforms and is well worth a careful read.
Andrew Wilson:
I don’t think speed in and of itself was as critical as the depth of reform. In countries that undertook shallow reforms the population experienced the perceived pain of reforms without much of the benefits. In countries like Slovakia or Romania this allowed populist/communists to return to power with the consequence that needed reforms were delayed and the reputation of democracy and markets questioned.
Quick reform combined with deep institutional change seems to have been more effective as was the case in the Czech republic or post-Meciar Slovakia.
Marc Schleifer:
The short answer is yes – the speed of reform mattered greatly for individuals’ lives. Pursuing some reforms quickly produced a lot of dislocation and suffering, but other reforms could only have been done decisively, or else they would have fallen short. We can ask, from a moral perspective, should more have been done to compensate the losers in the reform process, to alleviate that suffering? Certainly I would argue that, particularly in the case of privatization in Russia.
But overall, the debate about the speed of reform, and about the sequencing of particular reforms, to be seems like a red herring for the real conversation, about the depth and breadth of reform. Some countries were able to reform successfully – but that success seems to stem more from their level of commitment to reform than to the speed of those reforms. The speed seems to be more a function of the relative size of the countries in the region.
A college history professor of mine once remarked that the Central European countries were like rowboats – you lift up one oar and stick the other in the water, and the boat will spin around quickly, while Russia is an aircraft carrier – it takes ages to rotate slowly.
The problem is that if you start to rotate the aircraft carrier, you have to follow through. Trying to turn halfway around, or starting to turn and then stopping – say by allowing the sale of apartments but not land, or dropping price controls on consumer goods but not on electricity and gas, or removing certain administrative barriers to business but not actually slashing the size of the bureaucracy – has undermined the reform effort. This seems to be the problem plaguing the former Soviet Union – with the exception of the Baltic countries.
Published Date: November 11, 2009