Criteria of Success of Market-Oriented Reforms

Eastern Europeans are generally convinced that their legacy is “postcommunist” and as such it has some features that distinguish it crucially from the “postauthoritarian” heritage found elsewhere (Bruszt, 1989; Comisso, Dubb, and Metigue 1991). The basic argument is that while in other parts of the world the establishment of capitalism preceded the transition to democracy, in Eastern Europe the transition to democracy launched the transition to capitalism. Hence, the argument continues, the problems facing Eastern European countries are qualitatively different from those confronting other parts of the world. Specifically, Eastern European countries do not have either market institutions or the bourgeoisie.

Yet the issue is whether, at least in the economic realm, these labels do not hide some essential similarities. If one delves beneath the labels, one sees that the state was weak as an organization in Eastern Europe and in Latin America, that the relation between the state and the public firms in Eastern Europe was not qualitatively different from that between the state and large private and public firms in Latin America, and that the differences in state regulation of prices and allocation of resources were only of degree (Przeworski 1991). Both Latin American and Eastern European countries were characterized by overgrown bureaucracies and weak revenue-collecting systems, and both sets of countries experienced a fiscal crisis that in some places expressed itself in hyperinflation.