The New Political Economy of Emerging Europe. Second revised and extended edition by László Csaba (review)

Abstract

586 SEER, 87, 3, JULY 2OO9 notoriously corrupt, evenbypost-Soviet standards. Kupatadze,GiorgiSiradze and GiorgiMitagvaria examinetheprogress ofpolicereform, and againthe recordis mixed.There have been some dramaticreforms - in 2004,the notorioustraffic police were abolishedand fora monththe streets were empty ofofficers untila newpatrolpolicewas constituted - butthisisvery mucha workinprogress. As Londa Esadze's short closing chapter concludes, thiscouldbe thecentral theme ofthebookas a whole:'Whilethere havebeen manymeaningful successes,manyGeorgiansfeelthattheyhave replaced a corruptgovernment witha government thatcannotfulfil its campaign promises' (p. 117). Corruptionand organized criminality have deep roots in Georgian culture.As thisunique collectiondemonstrates, thereis a clear appetite forchange,butprogress willtakeplace notovernight but overyears,even generations. Department ofHistory Mark Galeotti Keek University Csaba, László. The New PoliticalEconomy ofEmerging Europe.Second revised and extended edition. AkadémiaiKiadó, Budapest,2007.396 pp. Notes. Index.€40.00:$50.00. László Csaba's TheNewPolitical Economy ofEmerging Europeis one ofthe major volumessummarizing theCentraland EasternEuropeaneconomictransition ofrecenttimes.Bylookingat thepastseventeen years,Csaba putstogether statistics (chapter three) and formulates hisowntheoretical approach(chapter four) first. Thislaysdownthefoundations ofsubsequent chapters dealingwith specific aspectsof thetransition process,discussedin globaland European contexts. The last chaptersummarizes the most important arguments of thevolume,providing a theoretically well-founded, state-of-the-art political economyapproachto the 'greattransformation' of the late twentieth and earlytwenty-first centuries. Csaba's theoretical approachisembeddedinsomeempirically underpinned normative assumptions abouttheprinciples ofpolitical democracy, an externallyopened ,globalizedmarket-economy, as wellas theprocessofEuropean integration. Analytically, hisapproachcan be characterized as an institutionallyoriented political economyapproachbased on a broadsetofstatistically collectedmacroeconomicdata. Methodologically, Csaba is firstof all a comparatisi: judgementsand conclusionsare systematically embeddedin comparisonsof national and regional economies throughout time and geographical location.He himself, describing hisownapproach,arguesthat 'the empirically based comparativemethodology evolves toward a neoinstitutionalist synthesis' (p. 393). Csaba diligently documents thevarying transition pathsof Centraland EasternEuropeand comparesthedivergent institutional and economicconsequencesofpolicydecisions . He leaveslittle doubtabouttheprincipal role REVIEWS 587 of externally reinforced requirements of the global economyand the EU. Transition paths,at leastin theluckier and moresuccessful cases,havebeen determined bysuchexternal anchors. Yet,he alsoemphasizes theimportance ofdomestic ownership ofpolicyreforms ifstructural adjustment is to prevail in thelongrun.Comparingnew CentralEuropeanEU-memberstatestells a greatdeal about this:whereasmosteconomiesof the regionhave been growing fastand catching up impressively, others - mostnotably Hungary since2001/2002 - havegotoff thefast-track convergence pathbecauseofan unreasonable degreeoffiscal expansion andthelackofinstitutional safeguards againstit.Whichis to say,in otherwords,thatexternal anchorscan onlybe effective ifdomesticactorslearnto interiorize them.Or, as Csaba putsit, 'transnational processes themselves arenotdecisive. It isthewaylocalpolitics interacts withthesethatshapetheoutcomesin thelongerrun,and notonly intheeconomy'(p. 109).Hence,localpolitics (understood as nationalpolitics by Csaba) have to ensurethe decouplingof businessand politics, provide opportunities forforeign direct investments, and introduce efficient corporate governanceregulations, hard budgetconstraints and the rule of law. To achievethis,a country has to allowan important roleforstrategic investors duringprivatization, invitingtransnational corporationsand establishing institutionally well-designed marketstructures. The bettera country is in adopting sucha policymix,thefaster itcatchesup withWestern coreeconomies .The onlyquestionthatremainsis whether or not thereis any room for institutional variationwithinthese essentially uniformdevelopmental rules. Csaba's institutionally informed comparative politicaleconomyapproach can certainly explain a lot, but of course it cannot explain everything. The uniqueexampleofSlovenia,whichhas been thefirst - and so farthe only - CentralEuropean memberstateof the Economicand Monetary Union,cannotbe described as a particularly open country vis-à-vis FDI and external institutional influence. Contrary to thedominantregionalpattern, forinstance,the Slovenianbankingsectorhas stillbeen overwhelmingly controlled by domestic shareholders, principally thegovernment. Moreover, the degree of domesticcontrolin Slovenianmanufacturing industries is comparatively veryhigh.(A number ofstrategically important manufacturing firms havenotbeen takenoverbystrategic investors.) Could thisimplythat a relatively developedstatecan afford to resistglobalizing pressures much morethanthelessdevelopedones?Perhapsyes. Another questionrelates totheproblemofex-Soviet states, apartfrom the threeBalticones. In thesecases,externalanchorsof theEU do obviously playa muchmorelimited roleand theirpoliticaleconomiesare stillmostly determined by theregionally dominantRussia. Transition pathways under suchcircumstances are certainly shapedin another way.As we knowfrom a sizeablescholarship, an abundanceofnaturalresources is usuallymoreofa curséthana blessing from thepointofviewoflong-term economicdevelopment ,and thequestionremainshow to breaktheviciouscircleofunderdevelopment without Western-type external anchors.We do notknowexactly, answersCsaba, but theexperience of successful late industrializers, suchas 588 seer, 87, 3, July 2009 Mexico,Korea orIsrael,reinforces theroleofexternal openness, thestrategic importance of internationally competitive manufacturing sectors, as well as the necessity of Western-type institutional endowments such as security of ownership rights and theruleoflaw. A key part of such a developmental strategy is a statecharacterized bystrong administrative and legalcapacities, and exhibiting majorregulatory functions as emphasizedby theliterature on policyreforms. Such a stateis able toresist attempts at capturing itbyprivate actorsorvestedinterests, yet keepsitself out of mostmarkettransactions. This is labelleda core...