Volume 7 Number 3

Summer 1998

Constitutional Reviews

Institutional Design in Post-communist Societies:
Rebuilding the Ship at Sea
By Jon Elster, Claus Offe, and Ulrich K. Preuss
(Cambridge University Press, 1997)
Reviewed by Joel Hellman

Though the collapse of communism may well have represented a “dismal failure of political science,” as Adam Przeworski has suggested in Democracy and the Market (1991), the transition to something else—presumably some form of democracy and market economy—has been nothing short of a godsend for the social sciences. At first glance, the transition appeared to be the closest thing we have ever had to a “Big Bang”; everything was being created anew—elites, institutions, markets, rules, states, nations, and even identities. What took generations to establish in other societies had suddenly been compressed into a few years. What made the transition so exciting from a research perspective is that all of this—the process and the initial outcomes—could be observed directly, in real time. The players could be interviewed. Researchers could occasionally sit in on the negotiations. A new, lively domestic press could be mined for insider accounts and analysis. A flood of opinion polls could provide up-to-the-minute indications of the popular response to the entire process. And if all this were not enough, the 27 countries that embarked on transition had, in the course of only a few years, shown a striking degree of variation in the methods of institutional choice, the types and designs of the institutions adopted, and the initial “success” of their transitions, thus providing the ideal conditions for developing and testing alternative hypotheses en route to developing robust theories.

The transition also coincided with a periodic pendulum swing in the social sciences back toward the study of institutions. While much work had been done to show how institutions lead to certain equilibrium outcomes (or, more often than not, to multiple equilibria), the transition provided an opportunity to analyze how the institutions themselves were chosen, a focus on what Kenneth Shepsle has referred to as “equilibrium institutions,” and to understand what separated institutional choices from day-to-day distributional conflicts. Again, the transition represented a chance to bring new empirical evidence to difficult theoretical issues that have been at the very top of the agenda in several disciplines. Given the promise of this research agenda and the sheer scale and excitement of the political, social, and economic changes occurring in the postcommunist countries, it was no wonder that middle-aged social scientists, who had never worked on the region previously, started appearing in Russian-language classes in ever-increasing numbers (while undergraduate enrollments strangely declined).

However, nearly a decade after the Autumn of the People in 1989, we would appear to be headed toward another “dismal failure”: this time, the failure to understand the dynamics of postcommunist transitions and to draw lessons from these transitions for the broader concerns of our respective disciplines. Perhaps with the exception of the economics of transition, the literature to date has not yet met the early expectations; truly comparative work is still rare. The experience of institution building in postcommunist systems has yet to be integrated into the broader theoretical work on institutions, nor has the study of transitions provided new breakthroughs in our understanding of the choice of institutions and the factors that determine their stability.

It is in this context that Institutional Design in Post-communist Societies is so welcome, so interesting, and so worthy of broad discussion and debate. Written by a collective of prominent authors new to the study of this region, the book is a highly ambitious, multidisciplinary attempt to develop a framework for understanding the dynamics of institutional choice in postcommunist societies, a process the authors describe as “rebuilding the ship at sea.” It is centered around a comparative study of the transition in four East European countries—Bulgaria, the Czech Republic, Hungary, and the Slovak Republic. The immediate goal is to explain the considerable variation in the design of a wide range of institutions in these countries, including the constitution, the political system, the market economy, social policy, and ideological cleavages. The broader goal is to explain why some countries are more likely than others to consolidate the emerging democratic and market institutions of the transition and thus create the necessary foundation for the stability and sustainability of a new political, social, and economic order.

The authors define a clear benchmark for assessing the trajectory of transition, namely, the extent to which the rules structuring conflicts are relatively immune from becoming themselves the object of such conflict. Without this consolidation of rules and institutions, they predict that some transition countries could fall prey to a “vicious circle” in which political control is permanently contested and precarious, leading to “a state of disorder and fragmentation so intense that the authoritarian impulse becomes irresistible” (p. 34). Indeed, they suggest that the absence of legitimating rules to which actors can refer, in resolving conflicts, could lead to political and social violence.

While none of the four cases examined in this volume has reached this benchmark, the authors propose a ranking of the countries based on their potential for effective consolidation of a democratic political order and market economy. Not surprisingly, the Czech Republic and Hungary come out on top, though the authors continually point out the remaining weaknesses that could undermine institutional stability. Bulgaria and the Slovak Republic are described as politically and institutionally unstable, facing a potential future of unstable governments, intensive political infighting, erratic coalitions, and low levels of cooperation and trust, all of which could lead to a regression to populist, authoritarian rule.

How can this variation among the transition countries be explained? The authors develop a synthetic approach that allows for a complex interaction among three levels of analysis—legacies, institutions, and decisions. Legacies refer to the path dependency associated with the past, including the communist past and the “deep” past of the precommunist era. Institutions refer to the configuration of actors and rules that emerged on the scene in the short period after the breakdown of the old regime, as well as the mode of breakdown itself. Decisions refer to the strategic actions of key political and economic actors.

The interaction among these levels can be based on both forward and backward linkages. In the former, structures dominate by selecting the agents and initial institutional settings, which, in turn, shape choices and decisions. In the latter, transitions enable strategic choices that put new agents and institutional settings in place that can, in turn, alter the influence of structural legacies rooted in the past and even replace them with new legacies. Thus the authors try to navigate among structural, institutional, and strategic models not only to explain the variation in the trajectories of the four countries but to propose a new approach to analyzing transition.

The book is brimming with interesting ideas and illuminating insights. The empirical analysis, though not fully integrated in a systematic way into the proposed theoretical structure, nevertheless illustrates the subtle interaction among legacies, institutions, and decisions. But for all its ambitions and strengths, the book represents just the beginning of the debate, and, in my view, there is much in it that is debatable.

My main concern is that the book presents a more complete and more compelling explanation of the obstacles to institutional consolidation than of the conditions for success. This creates a certain bias toward failure in the analysis, which may not be warranted given the experience of transition to date. Based on their analysis of Bulgaria and Slovakia, the authors develop an explanation for the failure of consolidation that is perhaps overdetermined, focusing on factors as broad and diverse as the nature of the precommunist agrarian past, the role of religion and the Church, the degree of ethnic divisions, the pace of industrialization during the communist era, the extent of popular hostility toward the communist regime, and the degree of ideologization of political and social conflict. Though they hesitate to draw any direct causal interpretations from this long list of variables, they suggest that there is a “consistent pattern” linking the precommunist and communist pasts of these countries with the low degree of consolidation observed in their transitions.

While consolidation is said to be more advanced in Hungary and the Czech Republic, the authors spend as much time highlighting their institutional weaknesses as their strengths. Indeed, there are many passages throughout the book that appear to suggest that stability in these two countries is resting on a precarious perch. In the Czech Republic, the analysis suggests that political stability has been based on the personal qualities of Klaus and Havel (since the book’s publication, the former has already been deposed and the latter is suffering from severe health problems). The authors remain unsure whether stability and even social peace (!) will persist if the booming Czech market loses its vigor (which it already has, to some extent, following deep concerns about the flawed ownership structure and its implications for enterprise restructuring). In Hungary, they see signs of institutional fragility and weaknesses in the democratic structure. The continued success, there, is said to rely on the good economic performance presided over by the government (which, in the recent past, has varied quite considerably across governments). From their analytical perspective, recent events would appear to dim the prospects that successful consolidation will take root even in these countries.

While the threats to consolidation are clearly delineated, the dynamics underlying successful consolidation are less obvious. In the conclusion, the authors briefly discuss the possibility of a “virtuous circle,” in which new institutional arrangements create their own foundations within society and alter the habits, routines, and expectations of citizens who come to rely upon them. But what generates this virtuous circle? Here they turn to the characteristics of the institutions themselves, focusing on their fairness and their potential for performance. In other words, institutions would appear to earn their own legitimacy through a demonstrated record of impartiality and effectiveness. Yet is it possible to assess easily the fairness and impartiality of institutions? How should we determine the potential for performance of different institutions? At this stage of transition, when the agenda is still extremely overloaded with challenging tasks, and the redistribution of income and wealth is still ongoing, can we really expect to see institutions that meet these criteria? Given these standards, it is not surprising that even the Czech Republic and Hungary do not fully pass the test, much less Bulgaria and Slovakia. If the conclusions are so pessimistic for these four countries—themselves among, or not far from, the top-tier performers of the region—think of the prospects for the rest of the 23 transition countries.

My skepticism is based on the view that there may be other factors, not explored in the book, which can promote consolidation other than “the sedimentation of the spirit of supportive orientations and attitudes” behind new institutions (p. 296). By examining the incentives individuals have to maintain newly created institutions despite their flaws, the unequal distributions of power that often underlie the sustainability of institutions, and the existing range of alternative choices available on the institution-building agenda, we might gain a better understanding of the process of institutional consolidation that could encompass a broader range of scenarios for success.

One factor that would appear to have a tremendous influence on institutional design and the possibilities for successful consolidation in the transition countries is given surprisingly little attention in the analysis—the role of integration into the global economy and, more specifically for the countries examined in this book, accession into the European Union. To some extent, these exogenous opportunities and constraints are common to all the transition countries and, therefore, would not be a primary explanation for the variation in outcomes. In practice, however, the opportunities for integration differ for each country, due to a range of fixed factors, such as geographical position and cultural and historical affinities. While some of the empirical chapters demonstrate that transition countries have tended not to adopt, wholesale, existing institutional models from other countries (for example, and especially, in the framing of constitutions), the potential of EU accession is having a tremendous impact on the creation and design of economic and regulatory institutions, even in those countries not included in the first wave of potential applicants. Moreover, the desire for closer integration into the global economy and various international institutions could exert an important influence on the process of institutional consolidation. Certainly, in the Czech and Hungarian cases, these external factors should be incorporated into any explanation of the likelihood of success; they would appear to be increasingly more important in Bulgaria as well. A fuller account of these factors might give some additional grounds for optimism.

In addition to its predictions about future transition paths, this book should provoke serious debate about the explanation of variation in progress to date. Though the synthetic approach adopted by the authors, combining different levels of analysis—legacies, institutions, and decisions—provides a more complex and subtle approach to explaining variation in the transition, it also makes testing alternative theories more difficult by co-opting competing explanations. No one would deny that each of the levels of analysis provides some insight into understanding the transition, but how are we to assess their relative importance? The book provides mixed messages.

Some of the empirical chapters—especially on constitution making and the choice of electoral rules—tend to rely more heavily on strategic decision making and the configuration of actors and rules, immediately following the breakdown, in explaining variation in institutional design and initial transition outcomes. Other chapters—on economic reforms and social policy—place more emphasis on the inheritance of the communist past and the way this inheritance shaped policy and institutional choices. The chapter on ideology and identity focuses on both aspects, in the distant and less-distant past, with strong emphasis on structural factors, in explaining the variation in identity-based and ideological conflict among the four countries.

The conclusion, which outlines the authors’ approach to the study of transition in the broadest terms and ranks the countries according to their success in consolidation, places primary emphasis on different levels of analysis in different countries. In Bulgaria and Slovakia, the authors stress the importance of the incomplete modernization from agrarian societies, which allowed Soviet-type communism to take firm root and created powerful institutional legacies that have stymied efforts to consolidate new democratic and economic institutions. In the Czech Republic, skillful political leadership by a group of like-minded, liberal technocrats is highlighted as critical to the engineering of new institutions and the consolidation of a new order. In Hungary, the authors emphasize the importance of the previous legacy of economic reforms under communism in shaping government behavior during the transition and influencing the prospects for consolidation.

However, despite the diversity in the levels of analysis employed in different parts of the book and in explaining the transition of different countries, the book ends on a rather puzzling note: “[W]e submit that the most significant variable for the success of the transformation is the degree of compatibility of the inherited world views, patterns of behavior and basic social and political concepts with the functional necessities of a modern, partly industrial, partly already post-industrial society. Thus, what matters most is the social and cultural capital . . .” (p. 308). This variable would appear to be the least subject to change by institutional design and strategic action in the course of transition.

While the book does not resolve any of the difficult debates in explaining the postcommunist transitions, it is a fascinating effort to understand the dynamics of institutional design in these societies. Country specialists will undoubtedly find much with which to quibble in the interpretations of the various processes and events in the four countries examined; this is inevitable when scholars new to the region take on such a challenging set of tasks. Yet this should not diminish the book’s major contribution, both to the study of postcommunist transitions and to our understanding of the choice of institutions.

 

Joel Hellman is Political Counsellor at the European Bank for Reconstruction and Development and an editor of its Transition Report. He was formerly Assistant Professor of Government at Harvard University.

A Quarterly Published by New York University Law School and Central European University