Social Market Economy as an Alternative to the Washington Consensus in the Western Balkans

Abstract

Nearly three decades after the beginning of transition from communism to democracy and open market economy in Central and Eastern Europe (CEE), the Washington Consensus in general received the mark as a failure. While the experience from the CEE apart from common results showed considerable variations, the package of reforms is questioned even in the long-term perspective, especially for producing high social costs. Recent mass emigrations from the Western Balkans due to poor economic conditions and from the Middle East, have brought to attention the credibility of exporting or imposing the American type of democracy, and with it, the Washington Consensus as a model of economic transformation and development. But is there an alternative? It already existed even before the systemic changes in CEE began, and can be more preferable even now to the countries that have to undergo a considerable economic transformation. That is the social market economy, which still can be applied in some countries that have lagged behind in transition. This paper explores the perspective of introducing and implementing such a model in the Western Balkan countries, with a reference to the role by the state, taxes, income distribution, and business development.