Download 4. Non-path dependent factors during post

Institutional reforms in South-Eastern Europe:
A comparative analysis during different periods of transition
Martin Mendelski
Abstract: Why did Ottoman successor states (Albania, Bulgaria, Macedonia) have a lower
institutional performance (governance) as compared to Habsburg successors (Hungary, Croatia, Slovenia) during post-communist transition? In order to solve this puzzle, the author examines the persistence and change of pre-communist institutions during different periods of
accelerated institutional change. After having identified elite and institutional (dis)continuities,
the author concludes that a combination of historical and recent factors is the most convincing
explanation for institutional divergence of post-communist countries. In particular, he underlines the impact of “negative feedbacks” (wars and economic crisis), which blocked institutional reforms in many Balkan countries.
January 2008
Contents
1. Introduction ............................................................................................................................ 2
2. Pre-communist legacies: Change or continuity of Habsburg and Ottoman administrative
and legal traditions? ................................................................................................................... 3
3. Communist administrative and institutional legacy ............................................................... 7
4. Non-path dependent factors during post-communist transition: Economic crisis, wars and
EU conditionality ....................................................................................................................... 9
5. Conclusion ............................................................................................................................ 11
1. Introduction
If the transition of post-communist states to market economy and democracy is understood as a form of
accelerated institutional change, then why did mainly Habsburg successor states achieve faster institutional change (i.e. higher institutional performance) than Ottoman successor states? Some scholars argue
that pre-communist legacies can explain the divergent institutional development during transition (Panther 1997; Winiecki 2004; Pejovich 1998; Goehrke 2000; Dimitrova-Grajzl 2006). The argument they
often use is that historical legacy1 of Habsburg Empire (Western Christendom) is more favorable for institutional and economic performance than the legacies of Ottoman Empire (or Eastern Christendom). Indeed, a first glance at world governance indicators (1996-2006, World Bank; see appendix) seem to confirm the importance of pre-communist legacies for South-Eastern Europe. The figures clearly show a
lower level of institutional development in Albania and Macedonia (Ottoman successors) as compared to
Hungary and Slovenia (Habsburg successors). The almost identical institutional development of Bulgaria
(Ottoman successor) and Croatia (Habsburg successor), however, makes the historical legacies hypothesis
questionable. Can pre-communist administrative and institutional legacies explain the (divergent) institutional performance in South-Eastern Europe during the 1990s?
We will try to answer this question by comparing the institutional development for the six abovementioned countries since their independence from the Habsburg or Ottoman Empire. The question of
institutional performance relates to two factors: The capacity of a state to adapt to new circumstances by
fostering beneficial institutional change and to the persistence of inefficient institutions. 2 Institutional
change is a consequence of the change in informal and formal institutions, as well as of an effective enforcement (North 1994, p. 8). Due to their slow-changing character, informal institutions are often the
basis for formal institutions (Roland 2004). Institutional change is a path-dependent process, i.e. institutional trajectories depend on historical choices which constrain currently made choices (North/Denzau
1993, p. 1; Pierson 2004). Economic or institutional development is shaped by historical events, reinforced by positive feedbacks (economies of scale, complementarities, and network externalities) and difficult to reverse (North 1990). Other scholars underline the importance of agency in the process of institutional change, trying to explain institutional change and persistence by elite (dis)continuity
(Higley/Lengyel, 2000) or change of power structures (Acemoglu/Robinson 2006).
In order to answer the research question, we have to explain how institutions, as well as bureaucratic and
legal elites, have changed and persisted over time. Although small institutional changes and adaptations
occur permanently, it is more interesting to have a look at critical junctures, where strong institutional and
personal breaks take place. Therefore the paper focuses on three periods of transition in which accelerated
formal institutional change and elite (dis)continuity occurred. The first transition period followed the dissolution of the Habsburg and Ottoman Empires, when former administrative and legal institutions were
replaced by newly imported institutions from the West (section 2). The second transition period of fast
institutional change was based on communist ideology and followed World War II (section 3). Although
the transition to communism triggered a strong institutional change, some structural differences could
persist and, together with different implementation of communism, explain the different starting conditions in the 1990s. The third period of formal institutional change followed the end of communism and is
still going on for some post-communist countries. In the forth section I argue that, additionally to the
“historical legacies” explanation of institutional performance, current factors should be considered, as
1
Historical legacy consists of accumulated common experiences during time that shape the minds of social actors and produce
common structural patterns (Sztompka 1999, p. 152). A legacy is based on institutions (formal and informal) or ideology. It is
reflected in mentalities, knowledge, orientations or political and economic culture.
2
Let us agree upon institutions as “the humanly devised constraints that shape human interaction” (North 1990, p. 3). North
distinguishes between two kinds of institutions, formal (constitutions, laws, property rights) and informal (values, traditions,
norms of behavior). Formal institutions have to be implemented and enforced effectively in order to bring about institutional
change.
2
well. The main argument is that institutional performance in Albania, Macedonia and Croatia was
blocked by non-historical “negative feedbacks”, such as wars and financial crisis. The absence of such
hindering factors in Hungary and Slovenia allowed for a better implementation of institutional reforms,
which produced a faster transition towards market economy and democracy. In the case of Bulgaria (to a
lesser degree in Hungary and Slovenia), the pre-accession process towards EU membership helped to
trigger institutional reforms.
2. Pre-communist legacies: Change or continuity of Habsburg and Ottoman administrative and
legal traditions?
In order to narrow the scope of analysis, I use a “separate spheres approach” towards historical legacies
(Todorova 1996, p. 47) and concentrate only on the aspects related to bureaucratic and legal heritage, and
less on the cultural ones (language, food, architecture). Thus, historical institutional legacy includes administrative and legal institutions which are covered by three different areas: Government Effectiveness,
i.e. a quality of the bureaucracy and the competence of civil servants, Corruption, i.e. administrative corruption and state capture, and Rule of Law, i.e. respect of the rules of society (legislative effectiveness and
enforcement).3 The aim of this section is to compare Habsburg and Ottoman successor states along these
categories during the transition after their independence (turn of 19th century). Before doing so, I shortly
sketch the institutional and economic differences of the two empires in their final years.
The specific characteristic of the Ottoman administrative system was a low share of non-Muslims in the
state service (Inalcik 1996, p. 24). Cultural and political elites were not tolerated and, with the exception
of the Romanian vassal states (boyars, Phanariots 4), first and foremost the Patriarchate composed the
small Christian elite (Todorova 1996, p. 58). Ottoman state administration and bureaucratic quality deteriorated in the last centuries of its existence (Lewis 1958, p. 113). High inflation, high foreign debt and an
inefficient salary system worsened the living standards of the officials (Findley 1989, p. 293ff). In order
to strengthen the state, centralization and bureaucratization reforms were launched under Selim III (17891806), which were accelerated during the Tanzimat period5 (1839-1876) (Heper 1976, p. 511). Because of
the gradual character of administrative reforms and a bad economic situation, old practices and methods
survived for many years. The 19th century administration reforms did not succeed and corruption became
a general characteristic of the whole administrative system (Findley 1989, p. 332). Whereas in the West
economic power was needed to buy political power, for Ottomans political power was a prerequisite to
buy economic power (Lewis 2002, p. 63). Wealth was not of economic, but of political or fiscal origin,
obtained through the holding of a public office (Lewis 1958, p. 123).
Overall economic hardship, increasing burdensome taxation, decentralization tendencies and a weaker
government were responsible not only for low government effectiveness, but also for a less efficient legal
system (Jelavich 1983a, p. 166; Sugar 1977, p. 288). At the turn of the 19th century the Ottoman state had
become weak and disordered and local rules were observed more than state laws (Sugar 1977, p. 208).
During the Tanzimat period the Ottoman reformers introduced secular Western legislation (Heper, 1976,
p. 510), which was oriented mainly towards the continental-style system of France or Prussia. However,
the introduction of new European style institutions did not create a liberal state based on the rule of law,
but an “Ottoman Prussia”, where law served the interests of the State (Findley 1996, p. 159). Although
reforms were conducted in the formal legal system, the new legislation was not sufficiently implemented
and only poorly enforced (Sugar 1977, p. 208).
3
For all components of governance see Kaufmann/Kraay/Mastruzzi 2007.
On Phanariot rule in Wallachia and Moldavia, see Jelavich 1983a, p. 53 ff; Sugar 1977, p. 132ff.
5
A closer look at figures from the state services reveals the increasing importance and power of the Ottoman bureaucracy. The
number of civil officials expanded from about 2000 at the end of the 18th century to approximately 35,000 in 1908 (Findley
1996, p. 167f).
4
3
In contrast to the Ottoman Empire, the Habsburg Empire had strong local nobility and a comfortable
middle class, who limited the powers of Habsburg monarchs (Jelavich 1983a, p. 129f). The lower degree
of power concentration may have constrained the discretionary behavior and the abuse of power (Roland
1994, p. 122), and the overall better economic and living conditions in the Habsburg Empire (for income
levels see Lampe 1989, p. 196)6 may have contributed to the development of more efficient institutions.
At the beginning of the 19th century the Habsburg Monarchy had a more developed bureaucracy than any
other state in Europe. According to Taylor, the Austrian bureaucracy was “fairly honest, quite hardworking, and generally high-minded” (Taylor 1948, p. 38). Although corruption also existed in the Habsburg Empire, the Austrian state bureaucracy was relatively honest and efficient. Law and order used to be
maintained (Jelavich 1983a, p. 167). The Habsburg Empire had an effective and uniform legal system
(Code of Civil Law), which was established in late 18th century under the rule of Joseph II, and was revised only once during the 1920s (Kann 1974, p. 239). These structural conditions and a better overall
economic situation may have ensured higher rule enforcement and less administrative-institutional problems in the Habsburg Empire.
Habsburg rule allowed for more independent bureaucracy and judiciary. Hungarian administration, for
instance, escaped the centralization reforms under Maria Theresa and so remained autonomous (Taylor
1948, p.16). Since the county’s autonomy in 1867, the Hungarian bureaucracy was operated mainly by
Hungarian bureaucrats. At the beginning of the 20th century, 95 % of state officials, 92 % of the county
officials and 90 % of the judges were Hungarian (Taylor 1948, p. 86 and p.185). The Hungarian-Croatian
Compromise of 1868 gave Croatia autonomy in general administration, education and judicial affairs
(Kann 1974, p. 363; Jelavich 1983b, p. 151f). However, public administration autonomy was limited, as
Hungarian officials had administrative posts and the governor was Hungarian (Taylor 1948, p. 186). During the era of Prime Minister Taaffe (1879-93) more “administrative autonomy” was created. Bureaucracy was recruiting its state servants from many different nationalities (Taylor 1948, p. 158). Although
there was autonomous legislation and judiciary in all parts of the Habsburg Empire, the Austrian legislation had a decisive impact on the rule of law in Hungary, Croatia and Slovenia (for Croatia see Cepulo
2006, p. 47; for Hungary see Giaro 2006, p. 304; for Slovenia see Kresic 2007, p.155)
To sum up, the Habsburg administrative and legal system was more efficient than the Ottoman system
and the successor countries of both empires had different starting conditions at the turn of the 19th century.
Another important difference was the employment of local civil servants and judges in Habsburg lands, as
compared to the Muslim-dominated bureaucracy and judicial system in the Ottoman Empire. Whether
these institutional differences survived or disappeared during the subsequent decades is the relevant puzzle, which is revealed in the following.
The outcome of institutional persistence depends upon the degree of institutional break with the former
ruling empires, a process which started at the turn of the 19th century. All Balkan countries decided to
break with the Ottoman Empire and introduced Western institutional and administrative structures after
their independence. In the first years of independence, institutional persistence was weakened gradually
by the change of political power and reforms of institutional-administrative structures.
6
However, it would be incorrect to assume that a low economic development prevailed only in the Ottoman regions. Habsburg
borderlands (Vojvodina, Slavonia, Southern Hungarian lands), which served mainly as a barrier against Ottoman offensives,
did not profit from the 19th century economic growth in the Monarchy. These peripheral regions lacked self-government, control over tax-revenues and the ability to attract foreign capital (Lampe 1989, p. 192ff). According to the GDP per capita levels
in the period 1870-1910 as presented by David Good, the Habsburg Empire had both wealthy (Austria, Bohemian lands and
lower Western Hungary), and poorer regions (Transylvania, Eastern Hungary, Slavonia and Dalmatia). See tables 1 and 2 in
the appendix.
4
Bulgaria: Bernard Lory analyzed the period of self-governing in Bulgaria (since 1878) and came to the
conclusion that Bulgarians did not inherit any political and administrative competences from the Ottomans. He argues that there were hardly any Bulgarian public officials working in Ottoman Bulgaria and
thus the continuity of officials was disrupted (Lory 1985, p. 63). Bureaucratic discontinuity is confirmed
by Rothschild, who observes that after independence, the alien Ottoman nobility was eliminated and the
new bureaucratic and political elites were recruited from Bulgarian artisans (Rothschild 1974, p. 331).
Although Bulgarian bureaucratic and legal elite discontinuity does not guarantee institutional change per
se, the rupture with the old political and administrative elites was accompanied by structural and institutional reforms. Initial institutional reforms were conducted mainly by the Russian transitory government
(Lory 1985, p. 63). In order to strengthen the national unity and to concentrate power and control, the
newly established state was centralized and bureaucratized (Höpken 1991, p. 200f). The number of officials was increased from 2862 to 20509 in only 17 years (from 1879-1896) and the subsequent “run for
official positions” engendered a huge and insufficient educated bureaucracy in which the old negative
Ottoman patterns like corruption and politicization reappeared (Lory 1985, p.67f). Thus lack of sufficient
education and training enabled the persistence of inefficient patterns of behavior.
There was a big lack of qualified jurists (Karagjozova-Finkova 2006, p. 131) after Ottoman religious
judges (qadis) left the country. The small Bulgarian elite educated in academia were lacking proper judicial experience. Because of the shortage of qualified people, even foreign specialists were employed as
prosecutors in Rumelia (Lory 1985, p. 74). As Bulgaria did not have an own institutionalized constitutional history, Ottoman legislation remained partly in force. However, its application was difficult, as the
newly recruited judges were not familiar with it. Although the Turnovo Constitution of 1879 laid down
the foundations of the rule of law, it was only after two decades that the Bulgarian judiciary had enough
qualified jurists to establish their own legal system, often based on models from abroad: penal law (1888,
Russia), family law (1890, Italy and France), commercial law (1898, Germany), property law (1904) (Lory 1985, p. 75f). Although the basis for a Western-oriented legal system were laid, Bulgaria suffered from
initial implementation problems, such as legal instability, long bureaucratic delays, corruption and partiality. The administrative and legal transition turned out to be more difficult than expected. Besides the lack
of qualified people, one reason for an insufficient implementation and enforcement of the new institutions
was the lack of financial resources (Lory 1985, p. 77).
Albania: Albania’s population was mainly Muslim (70 %), that is why most of the Albanians were more
privileged under the Ottoman Empire than their Christian counterparts. Although there was a wish for
local self-government and a reduction of taxes, the majority of Albanians preferred to remain within the
Ottoman Empire (Jelavich 1983b, p.84) and after independence in 1912 chose a gradual transition (Todorova 1996, p. 52 and 56), which was reflected in the fact that graduates of Ottoman administration schools
became high ranking officials, ministers or prime ministers in the young Albanian state in the interwar
period (Clayer 2005, p. 289). In other words, a bureaucratic elite, who was educated in the Ottoman educational and administrative system, continued to influence Albanian political life. Despite elite continuity,
new formal institutions gradually replaced Ottoman legislation. A constitutional democracy was established in 1920 on the model of the Belgian and Italian constitution (Shehu 2007, p. 187). In 1925 a new
constitution, based on Western models, was established; however, the new constitutional orders did not
allow for a stable parliamentary system. The Civil Code, the Penal Code and the Commercial Code were
introduced between 1928 and 1932 and replaced former Ottoman legislation or customary law. The new
legislation was based on French, Italian as Swiss models (Shehu 2007, p. 188f). It is nevertheless questionable whether the new institutions could be observed and implemented as since the first election in
1921, Albania had underwent a period of political instability, with frequent changes in government, serious insurrections and regional mutiny (Rothschild 1974, p. 363). Due to its late unification and violent
first years, Albania could not catch up with other states in the region and remained politically and economically a primitive country (Jelavich 1983b, p. 182f).
5
Yugoslavia: After the creation of the Kingdom of Serbs, Croats and Slovenes (Yugoslavia) in 1918, the
new created country was organized in a centralistic way (Jelavich 1983b, p. 147 and p. 151). Interwar
Yugoslavia was characterized by a domination of Serbs in the executive, administrative and legal system.
Only the Slovenes could maintain “a virtual administrative autonomy and were thus able to protect their
provincial culture from Balkan pollution” (Rothschild 1974, p. 279). While the hard-bargaining Slovenes
remained administratively overprivileged and autonomous, the Croat civil servants had fair representation
in education and judiciary (Banac 1984, p. 220) Macedonia was considered as “Southern Serbia”
(Jelavich 1983, p. 154) and was attempted to serbianize (Poulton 1995, p. 90) Although after unification
Yugoslavia had the chance to inherit the more favorable Habsburg administrative institutions by incorporating Slovenia and Croatia, this chance was missed because the former Austro-Hungarian administrative
apparatus was thoroughly destroyed (Banac 1984, p. 219). The centralization actions of the Serbian government and the dismissal of Croat, Slovene, Hungarian and German civil servants hindered elite continuity in the public administration. Overall dominance of the Serbs was challenged only in the areas of education and judiciary. “In large part, the concentration of Serbians in the bureaucracy was a result of the
patronage dispensed by the Serbian political parties, and as these parties became entrenched, the bureaucracy grew larger and larger and rife with corruption” (Banac 1984, p. 219). Similarly negatively, Yugoslav interwar civil service was described by Rothschild: “Confusion, delay, waste, corruption, as well as
political favoritism and personal nepotism became the modus operandi of an overcentralized, overly expensive, but underpaid and well-nigh irresponsible civil service” (Rothschild 1974, p. 279). Despite unification attempts of the different legal systems inherited from the Habsburg and Ottoman Empire, progress
was slow (Dragnich 1983, p. 15) and six different prewar legal codes remained in force.7 Although some
law branches could be unified, complete unification was not achieved in the interwar period. Different
cultural, political and economic traditions, as well as economic instability are regarded as the main reasons for an unfinished unification of law (Kresic 2007, p. 156; Sarkic/Kulauzov 2007, p. 180). Thus legal
continuity persisted in some branches of law even until 1946 (Cepulo 2006, p.51)
Hungary: As Hungary had mainly Magyar civil servants, administrative continuity could be maintained.
Also formal legal continuity could be uphold in Hungary until 1945 (Giaro 2006, p. 304). According to
Giaro, this persistence was facilitated by the fact that Hungary did not have a written constitution and no
codification of civil law. Like other states Hungary had a turbulent and revolutionary interwar period,
with autocratic and even communist rule (see Rothschild 1974, p. 136ff) in which despite some continuities also institutional changes occurred.
During the interwar period all South-Eastern European countries (SEECs) copied and imported administrative and legal institutions from Western Europe. However, they were often not able to implement them
fully. This is why it is claimed that the SEECs imported “forms without content” (Sundhaussen 1993, p.
25). An outcome of these transplantation efforts in a short period of time, under still difficult economic
conditions, lack of infrastructure and qualified staff (Lory 1985, p. 77), was an insufficient implementation of newly imported institutions and no deep modernization in the Balkans (Sundhaussen 1993, p. 25).
Scholars argue that institutional reforms were more successful in former Habsburg regions than in Ottoman successor states (Elster et al. 1998, p. 39; Giaro 2006, p. 313). The intended institutional reforms
were an attempt of few elites and did not change the archaic and rural mentalities in the countryside
(Höpken 1991; Sundhaussen 1993; Lory 1985). This makes it probable that, especially in rural areas, informal institutions and former administrative practices could persist during the first decades after independence. However, one has to take into consideration the fact that the initial formal ruptures with autonomous and Ottoman law in Bulgaria and Albania were more and more combined with education of lawyers and judges, which guaranteed a reproduction of institutions.
7
Austrian law (ABGB), Ottoman, Hungarian, Serbian, and autonomous regional law was in force. See Kresic 2007, p. 154.
6
Besides the cultural inertia in the countryside, the main reasons for a superficial institutional change in the
Ottoman successor states must be seen in a lack of economic positive feedbacks. Balkan wars, the First
World War and the 1929 depression had strong negative effects on GDP growth rate and hindered an
economic catch-up. Structural and economic differences between Ottoman and Habsburg successors persisted during the interwar period. Albania, Bulgaria and Macedonia remained economically more backward than Croatia, Slovenia and Hungary (Rothschild 1974, p. 204; table 3 in appendix). The structural
difference between the more urbanized Habsburg successors and the more agrarian Ottoman successors
was reflected in illiteracy rates, which strongly differed across the regions in the year 1920/1921 (see table 5). Besides illiteracy rates, urban-rural population ratios did not change considerably among Ottoman
and Habsburg states during the interwar period (Turnock 2006, p. 229).
The economic instability of South Eastern Europe was reflected in political instability. The interwar era
was described by Rothschild as a period with a large number of political parties, frequent changing of
cabinets and a “swollen, nepotistic, underpaid, callous, routine-ridden bureaucracy that was open to corruption” (Rothschild 1974, p. 20). The national, political and economic tensions were intensified in 1929
by the economic depression. Therefore, the interwar period became one of intense economic and political
nationalism (Jelavich 1983b, p. 134 and p. 137). The period of political and economic instability paved
the way for authoritarian systems (royal, military or political dictatorships) in all countries of South Eastern Europe, which represented “a qualitative break rather than a simple extension of pre-First World War
trends” (Good 2003, p. 147).
3. Communist administrative and institutional legacy
Did pre-communist administrative and institutional legacy from the Ottoman or Habsburg Empires survive during the communist period or was it rather absorbed and replaced by communist legacy (Jowitt
1992, p. 284)? To answer this question we have to examine the personal and institutional continuities and
ruptures after 1945. During the first years after World War II many personal and formal changes occurred.
Between 1944 and 1949 communist regimes were establish in SEECs and a common uniform model of
communism was adopted. National constitutions were modelled after the Soviet constitution (Elster et al.
1998, p. 40). Former elites (politicians, administrative and judicial bureaucrats) were abruptly eliminated8,
and this sudden elite change triggered a change in power relations and led to new institutional choices.
There was also a formal institutional rupture. The hitherto followed institutional transfer from the West
was replaced with an institutional transfer from the East (Soviet-Union) in all SEECs. One of the consequences of communism was the politicizing of law making, and a deprofessionalization of jurists (Giaro
2006, p.323). Another consequence was the all-embracing role of the state (communist party), which used
the administrative system as “implementation machine” for its decisions or for the suppression of citizens
(Verheijen 2003, p. 490). Communist public administrations were characterized by political influence, no
consequent separation of competencies, high centralization, no precise career patterns, autocratic style,
corruption, overall low quality of bureaucracy (Vanagunas, 1997, p. 10; Coombes 2001, p. 36f; Lippert/Umbach 2005, p. 71ff; Brunner 1998, 161ff).
Did communism change informal institutions, too? Since the transition to communism, communist ideology influenced for decades the institutional framework in CEEC and changed profoundly the habits, attitudes and behavior of their citizens (Elster/Offe/Preuss 1998, p. 158). Indoctrination and totalitarian control led to defensive and reverse effects, such as non-obedience of rules, non-respect of laws, distrust and
double standards of talk and conduct (Sztompka 2000, p. 6). The profound transforming power of communist rule in almost every part of human life, with an emphasis on industrialization and education, involved not only formal institutions, but the whole society structure. Therefore it can be argued that many
8
Higley/Lengyel term this process replacement circulation. See Higley/Lengyel, 2000, p. 6.
7
behavioral patterns of the pre-communist period were replaced by communist ideology. Nevertheless, as
communist legacy upheld and reinforced similar structural and behavioral patterns (such as a strong bureaucratic and centralistic state, corruption and the evasion of law), it can be at first glance argued that
Ottoman legacy persisted in the Balkans. However, as inefficient institutions appeared not only in the
Balkans, but also in Central and Eastern Europe, it seems that these negative patterns of behavior are less
the consequence of persistent institutions from the pre-communist period, but rather the effect of a failed
communist political system and less beneficial economic conditions, especially in the last decade of
communism (table 3 in appendix).
Nonetheless, communism was not a uniform experience (Clark/Soulsby 1995, p. 223; Ekiert/Hanson
2003, p. 29) and a “return to diversity” occurred after Stalin died in 1953 (Rothschild/Wingfield 2000).
The different implementation of communism is reflected in the different economic and administrative
systems. The less strict version of Hungarian communism was reflected in enterprise autonomy and market economy elements after 1968 (Rona-Tas 1997, p. 130). The existence of a small-scale private sector
(“second economy”) parallel to the large scale planned economy stimulated market-related and entrepreneurial skills and modernized the country’s services and infrastructure (Szalai 2005, p. 9). In 1971/1972
Hungary started administration reforms. The subordination of national soviets was abolished and local
administration competencies were divided (Brunner 1998, p. 174; Lippert/Umbach 2005, p. 74). The Yugoslav Republic of Macedonia, Slovenia and Croatia distinguished themselves from other communist
states. They were less integrated in the (de)centralized system of Yugoslavia. Under Tito’s rule until 1980,
Yugoslavia followed the principle of economic, political and administrative decentralization. Nevertheless, Serbia achieved to preserve its former domination (Goldman 1997, p. 332). Bulgaria or Albania,
whose communist leaders remained strongly committed to central planning and authoritarian rule (Elster/Offe/Preuss 1998, p. 47), experienced fewer reforms and fewer possibilities to acquire skills for the
transition to market economy and for the establishment of effective governance. Bulgaria and Albania had
relatively centralized economies. As a consequence of more favorable or less favorable communist legacies, post-communist countries entered reforms with diverse starting conditions.9 These different structural and economic conditions played a major role especially at the beginning of transition (Havrylyshyn/van
Rooden 2001).
Communist structural legacy is reflected in the EBRD initial conditions index10 (see table 7 in appendix).
This index shows mixed results for South Eastern European states. While low structural initial conditions
prevailed in Albania (2.1) and Bulgaria (2.1), Hungary (3.3) and Slovenia (3.2) had clearly more favorable starting conditions. Interestingly enough, Macedonia (2.5) and Croatia (2.5), two states with a different pre-communist legacy, have the same value. The EBRD indicator, a smaller gap in literacy rates (table
5) and rural-urban ratios11, as well as the accelerated economic growth rates in Bulgaria in the 1960s and
1970s (especially when compared to lower growth in Hungary and Albania) suggests a structural catch-up
for Ottoman successor states during communism. However, the development of the relative ratios in Yugoslavia’s total GDP indicates that the pre-communist income difference between Macedonia and Croatia/Slovenia persisted and even widened during communist rule (table 4).
What about governance catch-up during communism? Governance data from the International Country
Risk Guide (ICRG) points to similar levels of corruption or the rule of law for states with different pre9
On the role of initial conditions see Fischer/Gelb 1991; De Melo et al. 1998; Berg et al. 1999; Havrylyshyn/van Rooden
2001; Berta/Murrell 1999; Falcetti et al. 2000.
10
The initial conditions index is a weighted average of different indicators (GDP per capita in 1989, pre-transition growth rate,
urbanization rate, rate of over-industrialization, endowment with natural resources, years spent under central planning, distance
to the EU, trade dependence on the CMEA, macroeconomic disequilibria). See EBRD Transition Report 1999, p. 29.
11
While in 1900 rural population was 62.0 % in Hungary and 80.9 % Bulgaria, a stronger urbanization during communism led
to a decrease of rural population in Bulgaria (34.1 %) as compared to Hungary (40.8 %). See Turnock 2006, p.229.
8
communist legacies during the last years of communism (see figures 1-3 in the appendix). ICRG data
shows that between 1984 and 1989 Bulgaria and Hungary had the same level of corruption and rule of
law. According to the corruption indicator, Albania was on the same level as Bulgaria and Hungary in the
1980s. Despite such similar levels, the quality of bureaucracy indicator suggests that some pre-communist
differences must have survived. The quality of bureaucracy between 1984 and 1989 was higher in Hungary than in Bulgaria, Albania or Yugoslavia.12 Unfortunately, lack of institutional indicators for the communist period is missing. Thus, snapshot data from a certain year (such as the EBRD indicator) or in a
short period of time (ICRG data) does not allow me to draw conclusions about institutional performance
during the communist period. Nevertheless, the indicators are helpful to understand that in certain periods
and certain areas during communism the institutional gap decreased between Ottoman and Habsburg successor states.
To sum up, the analysis has shown the relevance of communist ideology for administrative and institutional structures during the communist period. Communist legacy (initial conditions) has also the potential to explain the institutional performance in the first transition years. Nevertheless, communist legacy
cannot explain why Macedonia or Croatia, despite a more favorable communist legacy, performed quite
disappointing during post-communist transition.
4. Non-path dependent factors during post-communist transition: Economic crisis, wars and EU
conditionality
The role of historical legacies can be questioned by emphasizing the role of critical junctures or “historical moments” (Elster et al. 1998, p. 36). Such ruptures with former institutional trajectories are reflected
in national extrication processes (Stark/Bruszt 1998) or selection choices (Vachudova 2005) and provide
“windows of opportunities” (Lipton/Sachs 1990; Roland 2004, p. 36) for new institutional choices, which
can influence decisively speed and direction of institutional performance. On the other hand, critical junctures can be the result of economic crisis and wars. The subsequent analysis tries to identify such critical
moments with the help of World Bank governance indicators for the period 1996-2006 (see figures 4-6 in
the appendix).
Governance indicators for Habsburg and Ottoman successor states show a clear divide between the frontrunners Hungary and Slovenia and the laggards Macedonia and Albania. As far as government effectiveness, corruption and rule of law are concerned, quite high levels (around 75 %) were achieved by Hungary and Slovenia, whereas Macedonia and Albania had strongly volatile development ranging from around
10 % to 50 % (see figure 4-6 in the appendix). Pre-communist legacy is obvious in the case of these four
countries. However, the similar institutional performance of Croatia and Bulgaria does not allow for such
general statements. Also the different institutional performance of Macedonia, Albania and Bulgaria
demonstrates that similar pre-communist legacies can produce different institutional trajectories in the
future and vice versa.
Basically, the different levels of government effectiveness, corruption and the rule of law can be attributed to different initial conditions, different starting points (the will) and a different degree of implementation (the capacity) of reforms. Thus, we can explain divergence either by path-dependent structural factors (history), by political resistance and elite configurations (agency) or by the prevailing economic situation (current factors). Although these factors are interrelated, scholars tend to focus mostly on agency
and history in explaining divergence.
12
See International Country Risk Guide (ICRG) from the Center for Institutional Reform and the Informal Sector (IRIS) and
Ahrens 2002, Figure 6.8, p. 202. Corruption, rule of law, bureaucratic quality range in value from 0-6, with higher values
indicating “better” ratings, e.g. less corruption, more efficient bureaucracy and stronger rule of law.
9
Scholars who explain institutional performance by focusing on elite (dis)continuity argue that in such
countries like Hungary, Slovenia, Croatia, where the opposition won the first elections, more rapid institutional and economic reforms took place. However, this is also true for an Ottoman successor state,
Macedonia. The possible link between elite continuity and pre-communist legacy is further weakened by
the fact that, despite the initial persistence of communist elites in Bulgaria and Albania, these were replaced just after one year of rule. Furthermore elite change during transition to capitalism was not complete as cultural and economic elites persisted in all SEECs (Ahg 1998, p. 70). It seems that other factors
than elite discontinuity must have hindered institutional reforms in Bulgaria, Croatia, Macedonia or Albania.
What about the role of economic crisis and wars as hindering factors to institutional reforms? In Bulgaria,
for example, the significant decline of governance indicators in 1996 can be attributed to the effects of a
financial crisis in Spring 1996 (Verheijen 1997, p. 2). The economic crisis helped to break the monopoly
of the ruling party and, under the pressure of the EU, administrative and institutional reforms were
launched in 1998 (Vachudova 2005, p. 33). Since then Bulgaria has improved government effectiveness
and control of corruption, though less the rule of law. Similarly, Albania and Macedonia faced financial
crisis which delayed institutional reforms. In 1997 Albania experienced a considerable decline of government effectiveness after the break down of the pyramid investment schemes, which were followed by
violent riots with many deaths and further violence in February 1998 (Vickers 2002, p. 70). In the case of
Macedonia, the impact of the Kosovo war (1999/2000), UN sanctions on Serbia and the economic embargo of Greece between 1994 and 1995 had adverse effects on its economy and institutional reforms (Dyker
2002, p. 415f). Furthermore, the heavy influx of refugees put a heavy burden on Albanian and Macedonian economies (World Economic Outlook 1999, p. 25). The consequences of civil war (Kosovo, civil war
in 1991, military operations in 1995) affected also Croatia and impacted negatively on its economic and
institutional trajectory. War also strengthened the authoritarian and nationalist tendency in Tudjman’s
Government (Tanner 2002, p. 180), which postponed EU membership and the benefit of the pre-accession
process. Croatia’s GDP decline in 1998/1999 results from the consequences of the Russian financial crisis.
The end of violence in 1996 and the replacement of Tudjman’s authoritarian and corrupted government in
2000 improved institutional quality in Croatia. Economic crisis and/or violent conflicts seem to have delayed institutional reforms in Albania, Macedonia, Bulgaria and Croatia. These countries had to focus on
economic, financial and political stabilization and not on the full implementation of administrative and
legal reforms. Economic crisis and violent conflicts are reflected in the more volatile governance indicators as compared to the stable development in Slovenia and Hungary where after an initial decline, GDP
per capita never declined (see table 6). Slovenia and Hungary were not affected by detrimental economic
crisis and wars and could focus on institutional reforms already at the beginning of the 1990s.
Was there a beneficial effect of EU membership? From 1997 onwards, the impact of EU-legislation on
institutional performance should be taken into consideration for Slovenia, Hungary and Bulgaria. It is
argued that EU leverage helped EU candidates to adapt and improve their political, economic, institutional and administrative frameworks (Dimitrova 2002, p. 178; Vachudova 2005). However, Slovenia’s and
Hungary’s almost stable development of governance indicators shows weak impact of EU conditionality
in this area. Yet, the positive influence of EU membership on institutional performance seems to be more
convincing for the institutional laggards, such as Bulgaria, Croatia and Macedonia. Bulgaria’s corruption
and government effectiveness indicators have considerably improved since the start of accession negotiations in 1999. However, the rule of law indicator for Bulgaria did not change much and it is also possible
that institutional performance increased only “islands of excellence” (Pridham 2005, p. 120f).
10
5. Conclusion
The institutional trajectories of six different South Eastern European countries were analyzed during three
different periods of transition. The analysis of the first transition period (interwar period) has shown that
Ottoman successor states differed from Habsburg ones in terms of the length of the transition period, elite
(dis)continuity, as well as economic and structural features. Despite a change of elites and formal institutions, socio-economic differences persisted in the interwar period and deep modernization was not
achieved in Ottoman successor states. The analysis of interwar Yugoslavia confirmed the persistence of
some pre-communist institutions and structural differences until 1945, but exposed also significant elite
and institutional discontinuities. The second period of transition (transition to communism since 1945)
demonstrated a strong personal and institutional break in all SEECs. In terms of selected structural features (literacy, industrialization, urbanization), Ottoman successors could close the gap with Habsburg
successor states, though income differences between Yugoslav states continued to persist. In particular,
Bulgaria’s economic and institutional catch-up during communism indicates that even long periods of
inefficient legacies can be abandoned. The examination of the third transition (after 1989) shows that precommunist legacies do not sufficiently explain divergent institutional performance. They do not fully
explain either similar institutional performance of Bulgaria and Croatia, or divergent performance within
the Ottoman group. What then explains lower institutional performance in Albania, Macedonia and Croatia during the 1990s?
Governance indicators suggest that external shocks (wars, economic crisis) had a negative impact on institutional performance in the Ottoman group and Croatia. In the case of Bulgaria, the European Union
membership perspective provided a window of opportunity for institutional reforms. In contrast, Slovenia
and Hungary seem to have been less affected both by EU conditionality and by negative external effects
of wars and financial crisis. Given these results, systemic transformation cannot be reduced to a change of
political elites. Elite change could not solve Albania, Bulgaria’s and Macedonia’s social and economic
problems. Looking only at the personal dimensions in power structures bears the danger of neglecting
structural continuities (Agh 1998, p. 70). On the other hand, although structural conditions facilitate institutional reforms, they cannot fully account for short-term divergent institutional performance. The case of
Croatia has shown that during unstable political or violent times, influencing elites can hinder institutional reforms even in a situation of relatively high GDP per capita. As the relationship between institutions,
elite (dis)continuity and structural/economic conditions is interrelated, the most convincing explanation
for divergence of post-communist countries is to be found in a combination of these historical and futureoriented factors. This interrelation is not static in nature and becomes even more complex as every single
factor has different explanatory power during different periods of time. Nevertheless, in times of difficult
socio-economic transitions, institutional reforms seem to be more successful when negative feedbacks
(wars and economic crisis) do not occur, two basic requirements which were missing in the case of most
Balkan countries.
11
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16
Appendix
Bureaucracy
6
5
Albania
4
Bulgaria
3
Hungary
Yugoslavia
2
1
0
1984
1986
1988
1990
1992
1994
1996
Figure 1: Bureaucracy
Source: International Country Risk Guide (ICRG)
Corruption
6
5
Albania
4
Bulgaria
3
Hungary
2
Yugoslavia
1
0
1984
1986
1988
1990
1992
1994
1996
Figure 2: Corruption
Source: International Country Risk Guide (ICRG)
Rule of Law
7
6
5
Albania
4
Bulgaria
3
Hungary
2
Yugoslavia
1
0
1984
1986
1988
1990
1992
1994
Figure 3: Rule of Law
Source: International Country Risk Guide (ICRG)
17
1996
Figure 4: Government effectiveness in Habsburg and Ottoman successor countries
Figure 5: Control of Corruption in Habsburg and Ottoman successor countries
Figure 6: Rule of Law in Habsburg and Ottoman successor countries
18
Table 1: Levels and growth rates of GDP per capita in selected regions of the Habsburg Empire, 1870-1910
(in 1980 international dollars)
Growth
Rate (%)
1870
1880
1890
1900
1910
Region
Lower Western Hungary
Danube Right Bank
444
531
670
818
1,008
2.07
640
821
949
1,248
1,506
2.13
505
576
721
848
1,037
1.83
483
547
695
864
1,034
1.98
Eastern Hungary
Tisza Left Bank
404
464
560
687
845
1.87
Tisza-Maros
411
492
590
725
884
1.92
Transylvania
369
448
526
621
816
1.92
Croatia-Slavonia
312
408
448
514
697
1.84
Dalmatia
348
389
443
493
622
IMPERIAL AUSTRIA
759
854
978
1,183
1,347
1.48
IMPERIAL HUNGARY
450
549
657
806
1,011
2.00
HABSBURG EMPIRE
642
734
858
1,038
1,218
1.63
Danube-Tisza
Upper Western Hungary
Danube Left Bank
Tisza Right Bank
1.40
Source: Good 1994, p. 877.
Table 2: Levels and growth rates of GDP per capita in the successor-state territories of the Habsburg Empire,
1870-1910 (present-day boundaries; 1980 international dollars)
Successor State 1870
Austriaa
1,045
Hungarya
532
Yugoslaviab
432
Sloveniaa
584
Croatiaa
377
Serbiab
444
1880
1,161
661
510
683
446
528
1890
1,334
789
587
785
506
626
1900
1,623
1,022
695
913
595
764
a
1910
1,813
1,253
885
1,137
786
923
Growth Rate
1.44
2.15
1.74
1.62
1.76
1.83
The entire territory of the present-day state fell completely within the boundaries of the Habsburg Empire.
part of the territory of the present-day state fell within the boundaries of the Habsburg Empire. The GDP per
capita levels and the growth rates are for the Habsburg portion only.
b Only
Source: Good 1994, p. 879.
19
Table 3: Levels of GDP per capita in South Eastern Europe, 1910-1989 (1990 international Geary-Khamis dollars)
1870
1890
1900
1910
Albania
446
598
685
780
Bulgaria
840 1.131 1.223 1.456 1.534
Hungary
1913 1920 1929
811
-
1937
926
909
-
1950
1955
1960
1965
1970
1975
1980
1985
1989
1.001 1.181 1.451 1.675 2.004 2.289 2.347 2.413 2.477
1.180 1.567 1.651 2.148 2.912 3.850 4.773 5.831 6.044 6.226 6.216
1.092 1.473 1.682 2.000 2.098 1709 2.476 2.543 2.480 3.070 3.649 4.410 5.028 5.805 6.306 6.557 6.903
Yugoslavia
599
843
902 1.057 1.057 1054 1.364 1.273 1.551 1.797 2.437 3.071 3.755 4.836 6.063 6.297 6.193
Source: Maddison 2007; GDP data for the year 1920 by Good 2003, p. 138.
Table 4: Indexes of real GDP per capita in Yugoslavia 1952-1989 (1972 prices, Yugoslavia=100)
1952
1960
1965
1975
1980
1985
1989
121
71
182
119
64
181
121
67
184
125
69
204
127
67
198
126
65
201
127
66
198
Croatia
Macedonia
Slovenia
Source: Akhavan/Howse 1995, p. 81.
Table 5: Illiteracy rates
1920/1921
1950
1991
Slovenia
Hungary
Croatia
Bulgaria
Macedonia
Albania
8.8
2.6
0.4
15.2
6.0
1.1
32.3
15.6
3.3
50.2
24.2
2.1
83.8
40.4
7.0
80.0
25-30
7.9
Source: Rothschild 1974, p. 276; p. 166; p. 359 and UNESO 1957.
Table 6: Levels of GDP per capita in Ottoman and Habsburg Successor States, 1990-2003 (1980 international
dollars)
1990
Ottoman
Successor
States
Albania
2.499
Bulgaria
5.597
Macedonia
3.972
Habsburg
Successor
States
Croatia
7.351
Hungary
6.459
Slovenia
10.860
1991
1992
1993
1.776 1.632 1.775
5.198 4.882 4.932
3.713 3.429 3.125
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
1.907
5.074
3.041
2.147
5.283
2.978
2.333
4.842
2.988
2.087
4.624
3.009
2.343
4.866
3.094
2.567
5.028
3.212
2.741
5.350
3.341
2.925
5.627
3.176
3.009
5.962
3.194
3.173
6.278
3.295
5.758 5.137 4.735 4.986 5.342 5.699 6.113 6.301 6.261 6.439 6.679 6.961 7.233
5.694 5.528 5.507 5.678 5.772 5.861 6.146 6.466 6.760 7.136 7.432 7.712 7.947
9.852 9.312 9.569 10.071 10.474 10.826 11.322 11.735 12.399 12.877 13.220 13.654 13.995
Source: Maddison 2007
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Table 7: EBRD Initial Conditions Index
Index
Country
Value
Hungary
3.3
Slovenia
3.2
Croatia
2.5
FYR Macedonia
2.5
Albania
2.1
Bulgaria
2.1
Source: EBRD Transition Report 1999, p. 29.
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