Greatest Failures of Transitions

We are continuing to reflect on the fall of the Berlin Wall – for previous posts, read here, here, and here.

Next Question: What do you think have been the greatest failures of transitions?

John Sullivan:

Across the board, the countries of Central and Eastern Europe faced the challenges of building functioning political systems and market economies. For most of the Central European countries strong national systems were built, albeit with significant challenges. To this day, Hungary faces considerable difficulty in creating transparent budgets and strong governments. However, it was the Balkan states, especially the former Yugoslavia, where the greatest difficulties were faced.

In Serbia, in particular, Slobodan Milosevic’s post-communist regime employed tools of populist policy and nationalist rhetoric to create an authoritarian regime that survived for many years, even in the face of significant economic hardship and embargos. Today, Serbia, Croatia and the other states in the region seem to be on a path toward democratic development which was hard won. Obviously, the story is very different in the post-Soviet republics.

Andrew Wilson:

The failure to deal with corruption has been the most troubling aspect of the reform process.  While much emphasis was placed on laws and reform, little work was done to examine the importance of checks and balances within government and strengthen other institutions that can prevent corruption.  As a result sophisticated webs of both business-government corruption and criminal-based corruption emerged in the region, in effect corruption has become institutionalized in many places.  By ignoring the problem early we have allowed the phenomenon to become deeply entrenched, finding a way to address these complex relationships and structures has become more difficult.  I think this is the most pressing issue facing the region now, and requires both business and government to find the will to address it.

Marc Schleifer:

Generally, one thing stands out as a failure in transition – the underestimation of inertia in the Communist system in the region, with two key illustrations – latent nationalism, and the persistence of bureaucracy and the corruption it has bred.  The euphoria of 1989-1991 left the world ill-prepared for the disaster about to unfold in the former Yugoslavia, for certain.  But we have also seen the emergence of nationalist movements in Russia, Ukraine, and of nationalist rhetoric and politicians in Central and Eastern Europe.

In many ways, this reflects a failure to understand that there would be losers in the reform process, and to ensure that there were adequate measures in place to try to stem some of the effects of social and economic dislocation.  In the case of corruption, we have seen very clearly how European Union membership does not make the corruption problem go away – in Bulgaria and Romania in particular.  The post-Communist countries grew out of societies where people developed very elaborate ways, to evade official systems just to “get things done,” and to enrich themselves illicitly, along the way building complex, informal networks of connections and “friends.”  Those networks, and modes of behavior, don’t just fade away with brand new passports.