The Political Economy of Welfare Reforms in Eastern Europe and Central Asia

Abstract

This paper focuses on changing ‘welfare regimes’ during economic transformations. Welfare regimes and the role of formal welfare-state institutions were shaped by three principal processes. First, where formal welfare-state institutions failed to adjust to the new environment, ‘welfare-regime adjustments’ – that is, efforts to organize social protection – went through a continuing reliance on old institutions and informal provision. This was the development common in the CIS, with variation linked to the patterns of state collapse and consolidation. With states retaining institutional capacity in the context of transition shocks, countries in Eastern Europe adjusted their welfare-states, providing a social cushion for transition through formal institutions. Second, attempts at ‘neo-liberal restructuring’ were made to reduce commitments to formal redistributive arrangements created in welfare-regime adjustments. Neo-liberal restructuring thus aimed at dismantling the redistributive elements of existing welfare regimes. Neo-liberal restructuring appeared on the agenda in the late 1990s in Eastern European countries that introduced substantial welfare-state arrangements in welfare-regime adjustments. Third, the IFIs, the World Bank in particular, had a major role in helping to organize a policy campaign that led to a ‘silent revolution’ in pension systems, which was the crucial social policy field in the post-communist world. After outlining the patterns of employment, inequality, and poverty, this paper discusses the three processes and factors that conditioned them. Then, transformation of welfare regimes in Eastern Europe and the CIS and the variation within the country groups is analyzed in more detail. The final section sets out the variety of welfare regimes that took shape in these transformations.