POLITICAL ECONOMY OF STABILIZATION ANDSTRUCTURAL ADJUSTMENT IN CENTRAL AND EASTERN EUROPE
Lecturer: Attila Folsz
Winter, 1996
Department of Political Sciences
CENTRAL EUROPEAN UNIVERSITY





Course Description

The main goal of the course is to develop an understanding of the principles of the interaction between politics and economic policy making, focusing on specific problems, raised by the dual (political and economic) transformation of the post-communist countries.

The course is based on a careful explanation, and a critical understanding of some of the most relevant, current studies of the socialist system and the economic and political transitions in the East.

The course heavily relies on the analytical framework and concepts distilled from recent Third World economic and political reforms, and applies them to a comparative interpretation of the transition in our region. The topics include the most important and exciting issues concerning transition. Since post-communist transition is a "Learning by doing" process, it is not surprising that there are no definite answers to the questions, raised during the course. The selected literature also reflects this fact, most of the readings contain contrasting views which hopefully will provoke lively discussions in the seminars.

Requirements

Students are required to attend regularily and to participate actively in the course.

For every seminar some of the students will be requested to formulate comments and questions concerning the literature. These not more than half page long comments and questions (not longer than half page) will be distributed in the beginning of the seminar and serve as a basis for discussions.

Students will write a short test after every four or five lectures and an open-book in-class essay at the end of the course.

Grading
In class activity: 30 %
1st Short Test (Topic 2-5): 10 %
2nd Short Test /Winter Term Final Test (Topic 6-10) 10 %
3rd Short Test (Topic 11-14) 10 %
In-Class Final Essay 40 %


Tentative Calendar

1. (8 January)
INTRODUCTION

2. (15, 17 January)

HOW MUCH DOES COMPARATIVE ANALYSIS HELP?
(On the merits and limits of analogies, and of the comparative method in understanding systemic change in East-Europe)

Obligatory Readings
Nelson, Joan (1992) "The Politics of Economic Transformation: Is Third World Experience Relevant in Eastern Europe?" Overseas Development Council. Mimeo.
Killick, Tony, Stevens, Christopher (1992): "Economic Adjustment in E: Lessons from the Third World." In: Bird, G. (ed.): Economic Reform in Eastern Europe. Edward Elgar, 1992.

Readings recommended
Croan, Melvin - Skidmore, Thomas E. - Ost, David - Graham, Lawrence S. Hershberg, Eric, (1992) "Is Latin America the Future of Eastern Europe?" Problems of Communism May-June (1992) 44-57
Valerie Bunce, (1993) "Leaving Socialism: A 'Transition to Democracy'?" Contention, Vol. 3, No. 1, Fall 1993
Albert Fishlow (1986) "The East European Debt Crisis in the Latin American Mirror" in Ellen Commisso and Laura D'Andrea Tyson eds. Power, Purpose, and Collective Choice. Economic Strategies in Socialist States. Cornell University Press. Ithaca and London.

3.(22, 24 January)

HOW DID COMMUNISM WORK? (I)
(Planning, Bureaucratic Control, Money and Price)

Obligatory Reading
Kornai, Janos (1992) "The Socialist System. The Political Economy of Communism." Chapters 6., 7., 8., 9. Clarendon Press, Oxford 1992.

Readings recommended
Richard E. Ericson (1991) "The Classical Soviet-Type Economy: Nature of the System and Implications for Reform" The Journal of Economic Perspectives. Vol. 5. Nr 4. Fall 1991
Csanadi, Maria (1991) "Structure, Cohesion and Disintegration of the Hungarian PartyState System". in Democracy and Political Transformation. Theories and East-Central European Realities ed. Gyorgy Szoboszlai. Hungarian Political Science Association.

4.(29, 31 January)

HOW DID COMMUNISM WORK? (1)
(The logic of the shortage economy)

Obligatory Reading
Kornai, Janos "The Socialist System. The Political Economy of Communism" Chapters 11., 12. Clarendon Press, Oxford 1992.

Reading recommended
Kornai, Janos "The Socialist System. The Political Economy of Communism. Chapter 15. Clarendon Press, Oxford 1992.

5. (5, 7 February)

WHY DID COMMUNISM COLLAPSE?
(Various explanations for the decline of a World System)

Obligatory Readings
Maier, Charles S. (1991) "Why did Communism Collapse in 1989?", Harvard University, Program on Central and Eastern Europe Working Paper Series No. 7. 1-48
Bunce, Valerie (1991) Democracy, Stalinism and the Management of Uncertainty" Gyorgy Szoboszlai ed., Democracy and Political Transformation Hungarian Political Science Association, Budapest.

Readings recommended
Olson, Mancur (1992) "The Hidden Path to a Successful Economy" in Cristopher Clague and Gordon C. Rausser, eds. The Emergence of Market Economies in Eastern Europe. Blackwell Publishers 1992
McMillan, John (1995): China's Nonconformist Reforms. In: Lazear, E. P. (ed.): Economic Transition in Eastern Europe and Russia. Realities of Reforms. Hoover Institution Press, 1995.

6. (12, 14 February)

THE ECONOMIC LEGACY OF COMMUNISM - AND THE LOGIC AND PERFORMANCE OF POST- COMMUNIST ECONOMIC REFORMS
(Macro tensions caused by reforms - in the reform-socialist, and the transition economies)

Obligatory Readings
Islam, Shafiqul (1993) "Conclusion: Problems of Planning a Market Economy" in Islam, Shafiqul and Michael Mandelbaum eds. Making Markets. Economic Transformation in Eastern Europe and the Post-Soviet States. Council on Foreign Relations Press. New York.
Csaba Laszlo (1994): "Commonalities and Differences in Transformation." In: Csaba, L. (ed.): Privatization, Liberalization and Destruction. Dartmouth Press, 1994.

Readings recommended
Laski, Kazimierz (1992): "Transition from Command to Market Economies in Central and Eastern Europe: First Experiences and Questions." In: Richter, S. (ed.): The Transition from Command to Market Economies In East-Central Europe. The Vienna Institute for Comparative Economic Studies Yearbook IV. Westview Press, 1992.
Kornai, Janos (1992) "The Socialist System. The Political Economy of Communism." Chapter 23. Clarendon Press, Oxford 1992.

7. (19, 21 February)


"PUSHY BEGGARS ANTE PORTAS"?
(Economics and Politics of Eastern trade reforms, and of the East's reintegration into the World Economy)

Obligatory Reading
Baldwin, Richard E. (1994): "Towards an Integrated Europe." Executive summary; Part II.: The Problem. Center for Economic Policy Research, 1994

Readings recommended
Steven, Christopher (1992): "The Implications for Developing Countries" In: Stevens, Ch. and Kennan, J. (eds.): Reform in Eastern Europe and the Developing Country Dimension. ODI Development Policy Studies, Overseas Development Institute
Dani Rodrik (1992) "Foreign Trade in Eastern Europe's Transition. Early Results" NBER Working Paper Series. Nr 4064
Nagy, Andras (1993) "Import Liberalization in Hungary" Institute of Economics, Hungarian Academy of Sciences. Discussion Papers No. 17
Head, Neil and Young, Stephen (1994): "The Internalization of Business and the Challenge of East European Development." In: The Economics of Change in East and Central Europe. Academic Press, London, 1994

8. (26, 28 February )

RADICALISM VS GRADUALISM
(Is it possible to overcome the issue of sequencing?)

Obligatory Readings
Roland, Gerard (1991): "Political Economy of Sequencing Tactics in the Transition Period." In: Csaba, L. (ed.): Systemic Change and Stabilization in Eastern Europe. Dartmouth Press, 1991.
Balcerowicz, Leszek (1995): "Common Fallacies in the Debate on the Economic Transition in Central and Eastern Europe." In: Socialism, Capitalism Transformation. CEU Press, 1995

Reading recommended
Leszek Balcerowicz (1993) "Economic Transition in Central and Eastern Europe." Second Annual Lecture Presented by the International Finance Corporation.
Murrell, Peter (1995): "The Transition According to Cambridge", Mass. Journal of Economic Literature Vol XXXIII. (March 1995)

9. (4, 6 March)


INSTITUTIONAL AND BEHAVIOURIAL CONSTRAINTS
(Human frictions, institutional bottlenecks and the transaction costs of transition)

Obligatory Readings
Etzioni, Amitai (1992) "A Socio-Economic Perspective on Friction" Paper delivered at the Fourth Annual International Conference of the Society for the Advancement of SocioEconomics, March 28, 1992, Irvine, California (mimeo)
Swaan, Wim (1994): "Behavioural Constraints and the Creation of Markets in Post-Socialist Economies." Mimeo. Institute of economics. Hungarian Academy of Sciences, Budapest, 1994

Readings Recommended
Murrell, Peter (1993) "Conservative Political Philosophy and the Strategy of Economic Transition", East European Politics and Societies vol. 6, no. 1, 1992
Lanyi, Kamilla (1991): "Market Economy without Trade?. Glosses on the nature of the Soviet economic crisis and the prospects of a market reform." Acta Eoconomica 43 (3-4)

10. (11, 13 March)

THE EVOLUTIONARY APPROACH TO SYSTEMIC CHANGE
(Critical views on the ideology, the political style, the pace, and the implemented policymix in the East European transition process)

Obligatory Readings
von Brabant, Jozef M. (1995): "Governance, Evolution, and the Transformation of Eastern Europe." In: Poznansky, K Z. (ed):The Evolutionary Transition to Capitalism. Westview Press, 1995
Brada, Josef C. (1995): "A Critique of the Evolutionary Approach to the Economic transition from Communism to Capitalism." In: Poznansky, K Z. (ed):The Evolutionary Transition lo Capitalism. Westview Press, 1995

Readings Recommended
Murrell, Peter (1990) "'Big Bang' versus Evolution: East European Economic Reforms in the Light of Recent Economic History" Plan Econ Report Nr .26.
Murrell, Peter (1992) "Evolution in Economics and in the Economic Reform of the Centrally Planned Economies" in Cristopher Clague and Gordon C. Rausser, eds. The Emergence of Market Economies in Eastern Europe. Blackwell Publishers

11. (25, 27 March)

INTEREST REPRESENTATION AND ECONOMIC POLICY-MAKING
(Trade Unions, Business associations and Political Parties)

Obligatory Readings
Pedersen, O. K., Ronit, K., Hausner, J. (1994): "Emergence of New Forms of Associability and Collective Bargaining in Post-Socialist Countries." EMERGO Vol. 1. No. 2. Autumn, 1994
Greskovits, Bela (1993) "Dominant Economy, Subordinated Politics. The Absence of Economic Populism in the Transition of Central-East Europe" Central European University, Political Science Department. Working Paper Series. No. 1

Readings recommended
Comisso, Ellen (1991) "Political Coalitions, Economic Choices" Gyorgy Szoboszlai ed., Democracy and Political Transformation) Hungarian Political Science Association, Budapest., p 122-138.
Geddes, Barbara (1991) "The Effect of Political Institutions on the Feasibility of Structural Adjustment." Prepared for the World Bank Project on the Political Economy of Structural Adjustment in New Democracies. mimeo

12. (1, 3 April)

THE HARDEST CASE: GOVERNMENT REFORM
(How can the state reform itself? The orthodox paradox revisited)

Obligatory Readings
Campbell, John L. (1995): "Institutional theory, State Building and Fiscal Reforms in PostCommunist States" EMERGO VOL. 1, No. 2. Winter, 1995
L. C. Bresser Pereira (1993) "Economic Reforms and Cycles of State Intervention" World Development Vol. 21. Nr. 8. August 1993
O'Donnell, Guillermo, (1993) "On the State, Democratization and some Conceptual Problems (A Latin American View with Glances at some Post-Communist Countries)" World Development Vol. 21. Nr. 8. August 1993

Readings recommended
Dabrowski, Marek (1994): "The Role of Government in Postcommunist Economies." In: Csaba, L. (ed.): Privatization, Liberalization and Destruction. Dartmouth Press, 1994.
Greskovits, Bela (1993) "The Loneliness of the Economic Policy Maker. An Approach Based on Reviewing the Literature on the Politics of Economic Transition in LDCs and East-Central Europe." mimeo. (Paper prepared for the workshop Institutionalizing Social Transformations" Organized by the Section on Institutional Analyses of The Institute of Philosophy and Sociology, Polish Academy of Sciences, Radziejowice November l 8-19. 1993)

13. (10, 15 April)

CHANCES FOR RECONCILING ECONOMIC REFORMS WITH DEMOCRACY
(Transitional costs of reforms and political consequences. Strategies to sustain economic liberalization under democratic conditions

Obligatory Readings
Przeworski, Adam (1991) "The Political Dynamics of Economic Reform". In: Democracy and the Market. Political and Economic Reforms in Eastern Europe and Latin America. Cambridge University Press 1991
Diamond, Larry (1995): "Democracy and Economic Reform: Tensions, Compatibilities and Strategies for Reconciliation". In: Lazear, E. P. (ed.): Economic Transition in Eastern Europe and Russia. Realities of Reforms. Hoover Institution Press, 1995

Readings recommended
Laurence Whitehead (1993) "On 'Reform of the State' and 'Regulation of the Market'" World Development Vol. 21. Nr. 8. August 1993

14. (10, 15, 22 April)

TRANSITION TO WHAT?
Adaptation of alternative models of capitalism, a birth of a new model or a non-system

Obligatory Readings
Barry, Norman (1993): "The Social Market Economy." In: Paul, E. F., Miller, F. D. Jr., and Paul, J.: Liberalism and the Economic Order. Cambridge University Press, 1993
Gray, John (1995): "From Post-Communism to Civil Society: The Reemergence of history and the Decline of the Western Model". In: Paul, E. F., Miller, F. D. Jr., and Paul, J.: Liberalism and the Economic Order. Cambridge University Press, 1993
Urban, Waltraut (1992): "Economic Lessons from the Newly Industrialized Countries in the Far East?" In: Richter, S. (ed.): The Transition from Command to Market Economies In East-Central Europe. The Vienna Institute for Comparative Economic Studies Yearbook IV. Westview Press, 1992.

Readings recommended
O'Donnell, Guillermo, (1992) "Delegative Democracy?" The Helen Kellogg Institute for International Studies, Working Paper 172., March 1993.
Bunce, Valerie - Maria Csanadi (1992) "A Systematic Analysis of a Non-System: Post-Communism in Eastern Europe" Gyorgy Szoboszlai, ed. Flying Blind. Emerging Democracies in East-Central Europe. Yearbook 1992, Hungarian Political Science Association.
Stark, David (1993) "Recombinant Property in East European Capitalism" Collegium Budapest, Institute for Advanced Study, and Department of Sociology, Cornell University, Ithaca, NY. mimeo

29 April:
Third Short Test, In-Class Final Essay and Farewell


CRC-Curriculum Resource Center
CEU Budapest, Hungary
Modified: May, 1996


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