Intangible Factors in the Eastern European Transition: A Socio-Economic Analysis

Abstract

Transition has generally been conceived of as a substitution of the organisational structures and the legal, financial and political relationships of capitalism for those of socialism, a replacement of 'hard' features. This conception leaves out 'soft' factors such as attitudes, behavioural orientations, values and beliefs which, for successful socio-economic performance, must mesh with the hard elements. When all the hard features are changed quickly without attention to the soft features, as in the neo-liberal radical reform strategy, the result is inevitably a deep shock greatly retarding the transition process. To avoid this, sufficient attention should be paid to intangible capital formation that creates new soft features. The socio-economic theory developed here (1) explains the differing degrees of transition success in Eastern Europe and (2) suggests alternatives to neo-liberal transition strategy.