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VI
Research Priorities for Post-Communist Economies



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Transforming Post-Communist Political Economies VI Research Priorities for Post-Communist Economies

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Transforming Post-Communist Political Economies This page in the original is blank.

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Transforming Post-Communist Political Economies Research Priorities for Post-Communist Economies Task Force on Economies in Transition INTRODUCTION Ends of empires tempt observers and participants into teleological explanations. In retrospect, the previously unpredictable becomes inevitable. A similar determinism is characteristic of thinking about the future of the post-communist successor states: it is widely presumed that their political and economic systems will evolve into close approximations of those of the most powerful members of the existing state system. Characteristically, there were many for whom Central and Eastern Europe and the New Independent States seemed to constitute a slate on which, once rubbed clean, leaders and planners could draw the designs they preferred. Now, after years of effort, conflict, change, and scrutiny, both the legacies of state socialism and the requirements of vigorous, viable alternative political-economic systems look much more formidable. This section proposes a program of research into the factors shaping the transformation of the post-communist world. The U.S. government has an interest in promoting prosperity, democracy, and stability in Eurasia. In company with other Western governments, international agencies, and reformers in Central and Eastern Europe and the New Independent States, it focused its early analyses and interventions on ways to liberalize and stabilize command economies. Much less effort went into mapping either their likely future topographies or the paths that would take them there. As time has passed, however, those tasks have become more urgent. With respect to transformation-political, economic, and social-what is actually happening, and why? What might come next?

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Transforming Post-Communist Political Economies By the time the task force went to work, it was becoming clear that the widely varying historical heritages of the Central and Eastern European and post-Soviet states were causing large differences in their paces and directions of change. All had experienced state planning and communist rule, but to vastly different degrees over different time spans. Both before and during communist rule, their involvement with the capitalist West varied enormously, from relatively close in Czechoslovakia and Estonia to quite distant in Bulgaria and Tajikistan. The reactions of their peoples to the end of communist regimes and of Soviet domination ranged widely, as did ideas concerning desirable directions for change. Economic development, resources, ethnic composition, and geography posed differing opportunities and constraints. The international economy itself impinged in contrasting ways on successor states as different as Hungary and Uzbekistan. When the task force began its work, both positive experiences (mainly in Central Europe and the Baltic states) and negative experiences (for example, in Bulgaria and Ukraine) had already confirmed the crucial role of stabilization measures and substantial liberalization of prices, markets, and new business entries—measures on which international financial and economic circles tend to agree. It was also becoming clear that these necessary measures were far from sufficient to transform command economies into stable, wealth-generating socioeconomic systems. Restarting and sustaining economic growth, mitigating poverty, and reshaping social organizations in ways that would be accepted by different national and ethnic populations required a much broader range of changes. On such questions as how to liberalize labor markets and restructure industrial relations, competing models have their partisans, but experience with both post-communist and other economic regimes demonstrates that similar policies can produce quite different outcomes in different contexts. The dominant models of Western economics have important contributions to offer, especially as baselines for gauging what sorts of changes are actually occurring in Central and Eastern Europe and the New Independent States. But they can offer only limited guidance as post-communist countries move beyond stabilization and liberalization to rebuild sectoral institutions. These conditions challenged the task force to seek more penetrating and provocative analytical frameworks, better documentation and explanation of current changes, more accurate identification of potential risks, and more nuanced guidance for policy interventions than were currently available. To this end, Sections II through V examine what has been taking place in post-communist economies and why, whereas this section elucidates priorities for further research. The research agenda presented here has three goals: (1) to direct researchers to the topics, issues, and processes most deserving of attention and analysis; (2) to encourage the elaboration and application of new approaches and methodologies, as well as the utilization of methods and tools

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Transforming Post-Communist Political Economies developed in related social sciences, to the study of economies undergoing transformation; and (3) to focus the attention of U.S. government agencies and the funding community at large on priority areas for support. In seeking potentially fruitful conceptual approaches and methodologies to improve understanding of the processes of transformation, the task force became convinced that approaches that treat these processes as narrowly economic are less useful than those which cross intellectual and disciplinary boundaries and apply concepts and methods from related social sciences, such as political science, sociology, and anthropology. Surveys that focus on short-run changes in prices, incomes, or the structure of ownership without grounding these phenomena in a larger sociopolitical context provide only limited insights and information concerning transformation—whatever the extent of its penetration or its likely trajectory. Similarly, we found case studies focused on developments in a single region or country less useful than cross-regional and cross-national studies. Only comparative studies—both those that remain within the bounds of a single discipline and those that cross disciplinary boundaries—provide opportunities to identify the key variables and determinants channeling change and affecting transformation. Moreover, the task force found a wide range of research methods and techniques useful in elucidating various aspects of transformation. Some of these methods are relatively novel in much of the post-communist world, while others are benefiting from increased rigor in their application. Examples include the use of focus groups, public opinion research, time budget surveys, and surveys of household income and expenditures. Other methods, such as in-depth anthropological and ethnographic observation of local communities, can also produce remarkable insights concerning the context within which transformation is taking place. INSTITUTIONAL ANALYSIS During 1995 and 1996 the task force held a series of five workshops on economic transformation. In analyzing the materials presented at these workshops and debating the hypotheses and conclusions advanced by the workshop participants, the task force began to focus on the new institutional economics as a singularly provocative and powerful conceptual tool. By this we did not mean to imply that other approaches are less valuable or insightful in analyzing a range of issues and topics; indeed, as suggested above, the task force views a variety of approaches as mutually reinforcing and amenable to cross-fertilization. The task force emphasizes the institutional change approach in this volume because we found it offered particular potential to improve understanding of economies undergoing transformation, as well as an appropriately broad and cohesive framework for analysis, and because this approach has been relatively neglected by those working in the field.

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Transforming Post-Communist Political Economies As discussed in the introduction to this volume, it should be noted that the new institutional economics uses the term institution in a way that differs substantially from its use in common parlance or in such disciplines as political science to include not only formal laws, operating rules, and organizations, but perhaps most saliently, the informal structures and norms that channel behavior.1 According to this approach, institutions embody the "rules of the game" within which key actors (including individuals, households, ethnic groups, and enterprises) operate. When those rules change, the players face a different array of incentives and constraints. Their behavior is then shaped and channeled by the institutions that have changed, those that have not changed, and the tensions between the two. The task force concluded that research applying the institutional change perspective can enhance understanding of the transformation of the economies of Central and Eastern Europe and the New Independent States along a number of key dimensions. First, an institutional change perspective illuminates a broad range of economic, social, and political processes. It brings together areas of inquiry from diverse fields in which specialists often proceed independently—sometimes too independently—of each other. It assists analysts in making connections among changes in national and international laws, norms, and structures; the responses of sectors, firms, households, ethnic groups, and communities; and the behavior of individuals. It also directs analysts to examine and identify the feedback mechanisms that link these levels of analysis. For policymakers and their advisors, research applying an institutional change perspective can help explain why similar reform programs often produce markedly different outcomes in different settings. It can also help in specifying the incentives and structures that would facilitate institutional reforms. Perhaps most critically, the institutional change perspective directs attention to evolving property rights and their enforcement. Secure property rights extend time horizons, promote investment, provide incentives for effort, encourage productive activity, and ensure the creation of wealth. Similarly, risk-reducing institutions, such as legal and organizational arrangements for limited liability and orderly bankruptcy, play crucial roles. The absence of secure property rights and related risk-reducing institutions favors shortened time horizons, disinvestment, speculation, rent seeking, crime, and corruption. 1   "Organizations" are more or less formal associations, such as government agencies, business firms, and citizens' associations. Members of an organization pursue shared goals, and their interactions are governed by internal rules and structures. Organizations can usefully be viewed as collective actors whose behavior is shaped both by internal goals and rules and by the larger institutional context. "Structure" is a broader concept, encompassing not only organizations, but also other more or less enduring sets of relationships such as families, networks, and ethnic groups.

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Transforming Post-Communist Political Economies The institutional change perspective led the task force to highlight the distinction between economic activities that (1) promote the creation of new wealth, that is, are productive, and (2) simply redistribute existing wealth, that is, involve rent-seeking, predatory, and protective activities. Whereas productive activities involve the transformation of inputs into outputs, rent-seeking, predatory, and protective activities focus energies and effort on the appropriation, exchange, and control of already existing goods and assets. Analysts and policymakers need to recognize the distinction between these two types of activities, monitor the relative predominance of each, and identify policies that promote the former—the creation of new wealth. The institutional change perspective emphasizes path dependence, or the dependence of current events on prior institutions and developments. Legacies from pre-communist and communist pasts, as well as the ways communist economic and political control unraveled, vary widely in different parts of Central and Eastern Europe and the New Independent States. These differing contexts—ranging from official economic policies to the strategies of individual firms, social and ethnic groups, and households—powerfully affect the character of the changes now under way. Path dependence highlights the fact that historical legacies are not simply deadweight obstacles to change, but also (1) constraints on what can happen next; (2) resources on which people inevitably draw as they create political and economic change; and (3) important models that affect what people regard as possible, acceptable, and desirable. The institutional change perspective alerts researchers to the possible effects of the perspectives, values, and identities of different social and ethnic groups on their responses to changes in economic conditions. As North notes in his framework essay for this volume, economic change draws on (and is bounded by) existing stocks of knowledge. A ''stock of knowledge" is not an objective entity divorced from context. The views of any group's members concerning valid or relevant knowledge will be filtered through their ideas of who they are, whom they wish to resemble, and how the world works. Romanian villagers, for example, will hold views of "property rights" that differ fundamentally from those generally accepted in Western capitalist countries, and these perceptions will shape the villagers' responses to changes in formal laws and government policies. The values and understandings of different groups are partly legacies from pre-communist and communist pasts. Like other legacies, they evolve, sometimes in direct reaction against other aspects of the past (for example, the current intense cynicism about political parties throughout the region is a result of prior experience with communist parties), and sometimes in response to new ideas, information, and opportunities. A key feature of the transformation has been the abrupt and dramatic increase in exposure to such new ideas as a result of increased exposure to foreign contacts and influences. Both gaining insight into existing cultural frames and monitoring how they are changing will be crucial for understanding the transformation process.

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Transforming Post-Communist Political Economies The institutional change perspective calls attention to formal institutions and informal norms and conventions and the coherence or conflict between the two. Lack of coherence between formal and informal institutions gives rise to widespread noncompliant behaviors, including corruption and the formation of underground economies. These behaviors operate at all levels of social life; identifying and understanding them is a requisite for explaining what is going on in changing economies. Networks are emerging to fill institutional lacunae. Just as networks of politicians and entrepreneurs are shaping the way enterprises respond to changing economic conditions and government regulations, networks of friends and relatives provide an important mechanism for households coping with the costs of economic restructuring. Networks in finance and ownership are also playing crucial roles in evolving and increasingly entrenched patterns of corruption and criminal activity. Few analysts have made serious attempts to utilize an institutional change framework or to apply the insights of the new institutional economics to transforming economies. Although the potential rewards may seem self-evident, efforts to measure transactions costs or to determine the extent to which property rights have become secure confront a complex situation. Much of the wealth being redistributed or privatized was, and remains, outside any pricing system (e.g., privileges associated with nomenklatura status, access to opportunities for rent-seeking behavior), or was seriously mispriced (e.g., housing, utilities, health care). Assets are changing hands, or not, on the basis of insider networks; wealth is being shifted between economic sectors (e.g., from the military to the civilian); the previously underground economy is frequently becoming part of the official economy (but sometimes not); and criminal enterprises and corruption are filling the interstices left by inadequate institutional development. Transformation is not a closely managed process. Many of its features are inchoate and unstable and operate out of control. At the same time, in some changing economies, different levels of government are making conflicting attempts to regulate critical aspects of transformation, sometimes interfering with efforts to establish a predictable fiscal and regulatory environment. As if this were not sufficient, none of the economies of Central and Eastern Europe and the New Independent States are developing in isolation: foreign investment, debt, capital flight, trade opportunities, and exchange rate instability all affect their monetary and fiscal policies, gross domestic product, and standards of living. Despite the difficulties of observation and measurement in rapidly evolving and often chaotic circumstances, the enhanced understanding to be gained from research that analyzes dynamic tensions in institutional change and relationships between the redistribution and creation of wealth in transforming economies clearly makes the effort worthwhile. Such research should:

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Transforming Post-Communist Political Economies Examine the relationship between formal and informal institutions, and determine the causes and consequences of various noncompliant behaviors and their manifestation in various underground economies. Specify how selected institutional changes alter incentives for productive, protective, and predatory behaviors. Examine how selected institutional changes influence the efficiency and equity of the institutions' operation. Explore the interaction between selected institutional changes and behavioral responses that result. Do those responses facilitate or raise obstacles to intended outcomes, encourage or block related policy interventions, or reduce or increase the tension between reformed and entrenched aspects of the system? Identify the dynamic feedback between selected changes and the behavioral responses of economic actors, and thereby the likely effects of the changes on the creation and redistribution of wealth. As noted earlier, a wide range of research methods and techniques will prove useful in improving understanding of the processes of transformation. The task force wishes to emphasize the potential value of longitudinal panel studies. Such studies are especially useful for tracing trends and revealing emerging patterns of behavior and outcomes at the micro level, that is, within households, among particular social and ethnic groups, and within enterprises. With respect to households, cross-sectional time series and longitudinal studies would assist tremendously in identifying trends and patterns in family formation, fertility, migration, employment, and welfare. Panel studies such as the Russian Longitudinal Monitoring Survey and annual surveys being carried out in Central and Eastern Europe, particularly those conducted under the Luxembourg Income Survey, represent unique data sources that should be supported and expanded. PRIORITY RESEARCH AREAS The task force focused its attention on four key components of political, economic, and social systems: Institutional change, property rights, and corruption Management, labor, and production Social trends, household behavior, and social-sector policies The changing role of the state While these four areas do not exhaust the possibilities, they should nevertheless appear on any list of major issues involved in the transformation process. In theory, it would be desirable to shorten the list or identify a very small number of questions whose answers would, by themselves, generate major

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Transforming Post-Communist Political Economies advances in explaining economic and political change. For the moment, however, the complexities and interdependencies are understood with greater clarity than the crucial nodes; to narrow the focus greatly now would surely exclude important analytic opportunities that will emerge as inquiry unfolds, relevant theory strengthens, and empirical verification proceeds. With this broad perspective in mind, the following subsections outline high-priority issues in each of the above four areas and pose some specific research questions that might be addressed in examining these issues. Institutional Change, Property Rights, and Corruption What kinds of institutional infrastructure (legal, financial, and administrative) are needed to support private ownership, free market exchange, investment, and economic growth? To what extent are different kinds of institutional infrastructure emerging? What are the likely consequences of extending ownership and exchange rights to land and housing? How and why are forms of property changing in post-communist economies? How much do current conditions and trends vary from one part of Eurasia to another? What explains the variation? What are the major types of underground activities in transition economies? How can their size be measured and their causes and consequences be determined? There is abundant evidence that property rights are changing in former areas of state socialism, with deliberate programs of privatization accounting for only some of the change, and often having consequences other than widespread property holding and investment by members of the general population. There is also good reason to believe that the sorts of property rights that emerge in Central and Eastern Europe and the New Independent States will (1) differ in important ways from the forms of property currently prevailing in Western Europe and North America, (2) significantly influence future economic organization and productivity, and (3) have a strong impact on future political institutions. We recommend a program of comparative research going well beyond idealized models of socialist and capitalist property rights, or of public and private property, to document and explain actual changes in property. The following are some specific research questions that might be addressed: What determines the allocation of human effort among productive, protective, and predatory activities? How can the resources devoted to each type of activity be measured, and the consequences of each for economic, political, and social development be determined? What new property regimes are emerging from the "social ownership" of the communist period? What residual de facto rights are being preserved from the earlier system? How do prior differences in communist property

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Transforming Post-Communist Political Economies regimes affect emerging differences in the timing, location, and forms of property relations (e.g., the mix of "public" and "private," the pace of privatization, and the emergence of exclusive ownership as opposed to overlapping use rights)? How do these differences affect transaction costs? How are use rights, income rights, and alienation rights to property assigned and enforced? What governance institutions are available to create incentives when these rights are separated and redistributed? What attitudes concerning property and ownership affect the rise of new property regimes? What do different groups of people think "property" means? How are relationships between property rights and citizenship rights developing? Why? What implications do these changes have for political stability (particularly in connection with ethnic/national questions)? In countries such as Latvia where citizenship is a prerequisite for property ownership, but some ethno-national groups do not have access to citizenship, what political consequences ensue? What have been the effects of Western pressures to reduce such discrimination? How can informal or underground economies be distinguished and their size and growth measured? How do various kinds of underground economic activity affect efficiency, equity, and stability? What conditions promote or inhibit rent seeking and corruption in post-communist economies? How can corruption and rent seeking be measured and monitored? What consequences do they have for economic change, human welfare, and inequality? What conditions promote organized crime, and how can it be measured and monitored? In what ways is it intertwined with "legitimate" economic activities, and with what effects? To what extent are underground activities reflected in the observed increased use of cocirculating currencies, such as the dollar and D-mark, and can observation of these monetary flows be used as an indicator of corruption, organized crime, and capital flight? How have different land tenure patterns and ownership rights affected productivity in different transitional economies? Management, Labor, and Production To what extent is a private, nonstate production sector emerging in transitional economies? What institutional infrastructure is needed to support the development of nonstate producers? What government policies impede or foster the growth of a private sector? To what extent is the structure of production adjusting to consumer demand and international integration? What institutional deficiencies or barriers impede economic adjustment and integration into the world market?

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Transforming Post-Communist Political Economies Eastern Europe, Russia, and the New Independent States have accomplished an impressive transformation, privatizing a large share of production, liberalizing domestic markets, and liberalizing commercial relationships with the world market. At the end of 1995, 14 of the transition economies had, indeed, rekindled economic growth. However, recovery in some of the largest transitional economies—Russia, the Ukraine, and Kazakhstan—appears to be in serious jeopardy. They face the task of building new state structures that can fulfill the essential functions of government and create the environment needed to support a healthy, prospering economy. However, the international community and international investors are uncertain whether the fragile new institutions of these countries are up to the task. In Russia in particular, missing institutions and harmful policies impede investment and the entry of new small firms. The lack of ownership rights to land blocks agricultural reform and retards construction of housing. At the same time, a confiscatory tax and regulatory environment, in conjunction with increasing crime and corruption, impedes the establishment of new private firms. The following are some of the specific research questions that relate to institutional change with respect to the productive and financial sectors: To what extent are the transition economies creating well-functioning private sectors in agriculture, industry, and services? What factors impede the emergence of new private producers? What institutional arrangements are important in providing frameworks for production and investment in Western market economies? To what extent are similar institutional frameworks available to producers in the transitional economies? What are the consequences of missing infrastructure? What, if anything, can producers do when financial, legal, or administrative infrastructure is missing or dysfunctional? How do differences among various forms of privatization (employee buyouts, managerial/nomenklatura buyouts, mass privatization, auctions, and negotiated tenders) affect enterprise organization, performance, and productivity? How does the availability of legal, financial, and administrative infrastructure influence the form of enterprise governance and the scale of firms? How does it affect the supply of investment and domestic and foreign investors' perception of risk? What policies and mechanisms (such as prudential regulation and introduction of international accounting standards) are necessary to support well-functioning financial markets? What institutional changes are needed to allow financial institutions to bring savers and investors together in well-functioning financial markets? Are the institutional changes being introduced in stock exchanges and other mechanisms for financial mediation creating more transparent and ac-

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Transforming Post-Communist Political Economies countable regulatory frameworks, or entrenching old networks or bureaucracies in a new guise? What incentive structures are creating and reinforcing these developments? What changes are required to provide rule of law and enforcement of contracts? What changes are needed to bring regulation into conformity with legislation? What factors lead to the persistence of soft budget constraints in some transitional economies? What are the consequences of such constraints for government stabilization and structural change in the economy? What factors impede the movement of labor from areas of low demand to areas of potential growth? What institutions or policies would encourage greater labor mobility and mitigate its costs? What major factors other than geographic immobility impede improved labor productivity? How do the institutions of the international market impact domestic institution building? To what extent have the liberalization of international trade and consequent international competition induced changes in domestic institutional infrastructures? Social Trends, Household Behavior, and Social-Sector Policies What institutional changes are taking place at the household level? What is happening to household assets, such as ownership of land, housing, savings, and work-related skills? To what extent, where, and how are current economic and political transformations aggravating poverty, inequality, and insecurity? How are households coping with new economic pressures and the erosion of state services and assistance? Which populations are the most vulnerable, and does this change over the course of transformation? How and why are social transfers and delivery of social services changing, and with what consequences for (1) welfare, (2) economic transformation, and (3) political processes? Growing evidence suggests that since 1989, Central and Eastern Europe and the New Independent States have experienced considerable—in some cases dramatic—increases in poverty and inequality, substantial declines in health and life expectancy, and alterations in patterns of ownership and employment. At the same time, real expenditures on education, health, pensions, and other social assistance have declined, at least temporarily. Fundamental reorganizations of social-sector programs are being debated or (in a few cases) are under way. These trends have far-reaching and as yet poorly understood implications for welfare, economic growth, and political evolution. Some specific questions that might be addressed by research in this area are as follows:

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Transforming Post-Communist Political Economies What are the dynamics of impoverishment? How can it be determined whether what is occurring is a short-term by-product of transformation or the beginnings of long-term social inequality? Studies to date indicate that transformation has had particularly severe effects on children in both large and single-earner households, though important variations exist among countries and subregions in this regard. Especially in Russia and other countries where the impact has been acute, how can effects on these and other vulnerable populations be better monitored and analyzed? What are the relevant trends in child poverty in those post-communist countries which have experienced several years of economic growth, such as Poland? Who are the long-term unemployed? How and why does their composition by age, gender, ethnicity, education, and employment sector vary within and among countries? What patterns are emerging in the distribution of inequality by gender, age, and ethnicity? Why? Is a "feminization" or an "ethnicization" of poverty taking place? How do objective indicators of income and expenditures relate to subjective perceptions of current and future well-being, as well as future prospects, as measured by opinion surveys and focus groups? Do different social, generational, and ethnic groups or different genders have differing attitudes toward changes in property ownership and increased inequality? What aspects of inequality—differences in income, wealth, opportunity, security, political influence, or prestige—most concern these groups, and why? What implications do these attitudes have for policy? What substitutes are emerging for publicly provided social safety nets? How are households, women, extended families, and ethnic groups coping with the burden of welfare functions previously provided by the socialist state? What bases for forming social support networks (kinship, community, occupation) are emerging, and do they vary significantly by country? How well do they work? What are the scope and characteristics of growing private-sector (profit and nonprofit) education and health service facilities? How are localities coping with the erosion/collapse of old social service delivery institutions? What are the evolving roles of local governments, nongovernmental organizations, and private services? What are the major factors influencing local responses? In view of fiscal constraints (including the need to contain or reduce overall social expenditures in some Eastern European countries and weak revenue capabilities throughout the New Independent States), what strategies are emerging for sustainable and improved services in education, health, and social assistance?

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Transforming Post-Communist Political Economies With regard to the choice between (1) entitlements and (2) varying degrees of individual responsibility for various sorts of services, how are shared understandings evolving among different social and ethnic groups and countries? What implications does that evolution have for public support of future regimes? What impact, if any, have mass privatization programs had on the distribution of wealth? Can further privatization efforts create a private-sector safety net? How would extensions of property rights to land and housing affect income and wealth distributions? The Changing Role of the State How are shifts in the scope, personnel, and formal organization of political life affecting property rights, economic organization, household experience, collective goods, and the viability of political regimes? Why, and with what consequences for the future? Both within post-communist countries and among Western observers, wide disagreements exist concerning the interactions between type of political regime on the one hand and quality of economic performance on the other. The great variety of paths followed by post-communist regimes presents a crucial challenge and an opportunity for researchers to trace causal connections between the two sets of factors. Prospects for democracy, economic growth, and public well-being are at stake. Specific questions to be addressed include the following: How are sharp increases in the concentration of income and wealth at the top end of the distribution affecting political power, and how are these relationships mediated by formal and informal institutional arrangements? What are the emerging patterns of concentration of media control, and what are the implications for the political process? How are election campaigns being financed, and with what consequences? To what extent and how are new (or altered old) political and economic interests organizing to press their claims? How are these processes being mediated by formal and informal institutions? Do lower voting percentages in the region reflect a lack of internalization of democratic principles within important components of the population? Are there discernible variations by gender or ethnicity? What indicators other than voting would be more appropriate for gauging popular commitment to democratic ideals and processes? In those countries where state revenues have severely dwindled or collapsed, what are the major operative factors, and what incentives and capacities must change to restore the state's ability to collect revenues? How does a society assure itself of an honest and competent civil service? What institutional changes are required to this end?

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Transforming Post-Communist Political Economies How are the mandates and structures of state organizations changing? What new levels or divisions of government are forming, and which ones are disappearing? How are state organizations presenting their mandates to relevant publics? In what ways, to what extent, and with what deliberate publicity do governmental appeals differ from those of the communist era? How are emerging political institutions and practices affected by social and ethno-national conflicts? What are the implications for long-term political stability and the continuity of economic policy? How equally or unequally do emerging political relations engage the energies of and impact areas of concern to different genders and ethno-national groups? What are the consequences for public politics, present and future? Are new legal and judicial mechanisms/institutions being successfully institutionalized? What role are they playing in the enforcement of contracts and the resolution of disputes? To what extent are preexisting judicial institutions assisting or impeding economic transformation? How do different social and ethnic groups and individuals conceptualize "the political" and their relations to parties, the political process, and the state? How do contending parties recruit, organize, and exert control over their members? To what extent do political parties consist of coalitions among kin, friends, and business associates? How much and what kinds of authority and responsibility have been shifted from state-wide to lower levels of government, and what are the implications for economic organization and growth, social policies and programs, and the legitimacy and capacity of all levels of government? What institutional changes are required to create stable tax-based government budgets? What is the division of government revenue and expenditure responsibility among central, regional, and local authorities, and what have been the consequences of alternative allocations of responsibility among different levels of government? PROPOSED RESEARCH PROGRAM The interdisciplinary study of transformation, comparative analysis, and the fields of post-Soviet and Central and Eastern European studies have experienced vibrant growth, both qualitatively and quantitatively, in the West and the East since 1989. Although the growing body of work on democratization and other comparative aspects of transformation is producing valuable insights on Central and Eastern Europe and the New Independent States for analysts, policymakers, and practitioners, the particularities of the post-communist transformation have yet to be effectively integrated into this literature. Somewhat paradoxically, after decades of having to search painstakingly for nuggets of information, post-Soviet and Central and Eastern European

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Transforming Post-Communist Political Economies analysts are being inundated with data and finding it increasingly difficult to separate the wheat from the chaff. At the same time, a misplaced sense of triumphalism has led government agencies and independent foundations to underestimate the potential contributions of work in these fields and, as a result, to begin shifting their priorities and funding away from this area of the world. This trend, coinciding as it does with widespread retrenchment on university campuses, threatens to erode the financial foundations on which the research infrastructure in both comparative and area studies is based. Most important, it also endangers the replenishment and enrichment of these fields with a new generation of scholars and research analysts. In producing this research agenda, the task force hopes to focus attention on, and bring some coherence to, the post-communist research enterprise by (1) calling into question the unconsidered assumptions on which much current work is based; (2) highlighting the need for work that is both interdisciplinary and comparative; (3) emphasizing the need to take history, politics, demography, and ethnography into account in both designing and analyzing the course and consequences of economic reforms; and (4) focusing attention on a particularly fruitful conceptual framework—the new institutional economics. A cohesive research program can not only maximize the utility of increasingly scarce research dollars, but also enable analysts to concentrate on particularly salient aspects of transformation. Such a program can also promote synergy as scholars working in diverse disciplines bring their analytical skills to bear on common problems. Without a substantive and sustained program of research, current policy interventions in post-communist economies will surely fail in some regards and produce unanticipated, and all too frequently undesirable, effects in others. Although improved research cannot guarantee the achievement of particular policy goals, better-informed and more sensitively designed policy interventions stand a far higher chance of success than those which have not benefited from research-based analysis. It is time for major, theoretically motivated and empirically supported inquiries into the four key research areas explored in this volume: (1) institutional change, property rights, and corruption; (2) transformation of management, labor, and production; (3) social trends, household behavior, and social-sector policies; and (4) the changing role of the state. In all four of these areas, research should be empirically grounded; comparative, seeking to explain both change and variation across Central and Eastern Europe and the New Independent States; and sensitive to ethnic, national, generational, and gender differences. This is not to say that every investigation should deal with every post-communist country, or every nationality, or every age group; on the contrary, as the chapters and essays in this volume show, close examination of changes and their causes in single cases can provide one of the best defenses against schematic reductionism. The questions outlined in the preceding sections provide the necessary

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Transforming Post-Communist Political Economies scaffolding for a major, focused, and cohesive research program. They are not intended to be either all-inclusive or exclusive. The task force believes the best work will be accomplished if the gates are opened as widely as possible to individual researchers, research teams, and research centers to compete for funding under the auspices of the program. The development of new arrangements for coordinating and encouraging innovative research would substantially further the proposed research agenda. As a first step, the relevant U.S. government departments and agencies (the departments of State and Defense, the Agency for International Development, the National Science Foundation, and the various intelligence agencies) should undertake consultations aimed at coordinating government funding of research related to Central and Eastern Europe and the New Independent States. Institutionalizing channels of communication across departments and agencies having responsibilities in the region should not only assist the research effort, but also broaden the scope of government thinking on this area of the world at a time when new thinking is at a premium. Improved communication and coordination should reduce duplication of effort on the part of both government and researchers while enhancing the capacity to study, analyze, and understand change in a large and increasingly volatile part of the world. The task force does not presume to dictate the individual components or determine the most appropriate sequencing of this research effort. Practical details concerning the mix of institutions, teams, and individuals to be charged with particular aspects of the work should be developed through consultation both within and among the agencies cited above, and with substantive input from the Kennan Institute for Advanced Russian Studies, the National Council on (Post) Soviet and East European Research, and the Joint Committees of the Social Science Research Council and the American Council of Learned Societies, as well as the leading foundations supporting work in these fields. One beneficial by-product of the Cold War is the substantial existing infrastructure of research centers devoted to the study of Central and Eastern Europe and the New Independent States. In the United States alone, there are a large number of institutions that merit the appellation of centers of excellence and innovation, from the Berkeley-Stanford program, to the universities of Michigan, Wisconsin, and Indiana in the mid-west, to the Harriman Institute at Columbia and the Russian Research Center at Harvard. The hallmarks of these centers of excellence and innovation are their interest in fostering creative, high-quality work; interdisciplinary research; participation in inter-university and East-West partnerships; and their commitment to training a new generation of scholars and researchers who are equally adept with the most rigorous social science methodologies and the intricacies of area studies. Opportunities for close collaboration with Eastern European universities have never been as great as they are today. Consortia of Western European universities are developing innovative institutions, such as the International

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Transforming Post-Communist Political Economies Center based at the University of Tuebingen, to promote this kind of work. Most significant, serious centers of scholarship are being resurrected in Eastern Europe (for example, Tartu University in Estonia) or newly created (for example, the Central European University in the Czech Republic and Hungary and the University of the Humanities in Moscow). Research that engages the talents and assists in the further training of a new generation of Eastern European social scientists should be particularly encouraged. The following guidelines can help ensure the success of this proposed research program: Funding should be made available in 3- to 5-year increments so that institutions, research teams, and researchers can make the necessary substantial investments of time, energy, and resources. Research teams should not only be interdisciplinary but also, whenever possible, include researchers from Central and Eastern Europe and the New Independent States. Research projects should be explicitly designed so that, when appropriate, the data produced will be comparable across time and countries. Research topics should be proposed by individual investigators and research teams, not set by the institution(s) coordinating the research program. All of the research, and the underlying data on which it is based, should be publicly available, be deposited for use by other researchers, and, when possible, be accessible on the World Wide Web. Observation of the above guidelines will enable researchers to build on each other's work and give policymakers confidence that the results produced are indicative of real socioeconomic trends and processes. In addition, research conferences should be convened annually under the auspices of one or more of the organizations overseeing the implementation of this research program, such as the Kennan Institute or the National Council on (Post) Soviet and East European Research. These conferences should be focused on critiquing and refining the ongoing research effort. Individual researchers and research teams should be asked to present their results, as well as emerging hypotheses, to their colleagues and practitioners in the field. Such conferences would improve understanding, assist policymakers in obtaining a more up-to-date and nuanced view of developments in the region, and generate new avenues of inquiry. After 5 years, the research program should be revised and refined, preferably after broad consultations involving all major actors in the field, including the lead organization(s) overseeing implementation of the program, allied professional associations, private foundations, and the relevant funding agencies. After the revised program has been accepted by the funding agencies, there should be another round of

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Transforming Post-Communist Political Economies proposals and funding, an additional series of conferences, and a further iteration of the research agenda. Scientific judgment is inherently imprecise, whether one is quantifying the risks associated with nuclear reactors or identifying the effects of imposing stabilization strategies on transforming societies. Reasonable assumptions and widely accepted theories can and have been proven false, and strategies that have succeeded in one set of circumstances may fail in others. Important work needs to be done on the post-communist economies of Central and Eastern Europe and the New Independent States. At present, the processes and mechanisms are poorly understood, theory is deficient, and methodologies are uncertain. The research program outlined here represents a major step toward improving both the analysis and understanding of the political economy of the post-communist transformation.