Social Policies and Structures: Institutional Frictions and Traps in the Czech Republic after 1989

Abstract

This paper compares the standard economic and a complementary socio-economic approach to the transition. While the economic approach looks at social problems from the outside and views them as costs of transition, the socio-economic approach looks at these problems from the inside and views them as a part of the changing social structure. Both approaches are used to analyze four frictions which appear in contemporary Czech society. The first friction concerns the pension system which produces direct intergenerational dependence and turns pensioners into a socially needy population. It produces a socio-political redistributional trap, strengthening political support for further redistribution. The second friction concerns the relation between low market wages and a higher guaranteed subsistence minimum. It opens a socio-cultural trap and leads to a benefit dependency. The third friction concerns the impeding development of the middle class. Here, a socio-economic trap appears: a socially polarized society cannot take full advantage of its human capital and entrepreneurial spirit. The fourth friction involves tensions between various sections of the middle class. The socio-structural trap of unbalanced dynamics inside the middle class may cause an autonomous corporatization of individual groups to the detriment of citizenship principles and social integration.