Constraints and coalitions: Politics of economic reform in Central and Eastern Europe after the return of the left

The dissertation analyzes the process of economic policy making in Central and Eastern Europe after former communists won parliamentary elections and returned to power in early 1990s. Most of the winning left-wing parties campaigned on promises of a broader redistribution and of lowering the social costs of transformation, for which they held initial radical reformist teams responsible. Only a few of the ex-communist governments, however, have abandoned the neoliberal reform course after taking office. Moreover, in Hungary the left-dominated government has radicalized the transformation process as compared to its conservative predecessors. The author explains the economic strategies pursued by the governments in Poland, Hungary, and Slovakia by the interaction of external pressures imposed, on one side, by lenders, international financial organizations, world markets, and institutions such as European Union, and, on the other side, by constituencies of the incumbent governments, which shape their domestic power base. The specific combination of the international and domestic factors produced different reform trajectories in each individual case. In Hungary, the intense external constraints were imposed on the government that was controlled by it "universalistic" ex-communist party, which had a broad and diverse base of support and therefore had an incentive to pursue an economic strategy that aimed at the delivery of public goods. Unlike Hungary, in Slovakia the government was controlled by "particularistic" ex-communist parties, which had a support base concentrated in the constituencies and interest groups that were likely to become losers of the continuation of neoliberal reforms. Having not encountered intense international constraints, the Slovak government gained a free hand to undo the neoliberal reforms pursued by predecessors, and pursued instead an economic strategy that institutionalized clientelist giveaways to a limited circle of rent-seekers who controlled the government. In the Polish case, the intense external constraints were imposed on the government that was formed by both a universalistic (Democratic Left Alliance) and particularistic (Polish Peasants' Party) parties. As a consequence, the reform was slowed down due to lengthy stalemates and periods of indecision that resulted from both the clashes between international and domestic actors and between the coalition partners who had opposite incentives vis-a-vis the economic policy. The analysis of the performance of three left-dominated governments in the areas of fiscal policy and privatization has shown that the ex-communist left had few incentives to pursue a social democratic reform strategy, as it was more likely that the government-authorized redistribution of income and property rights would be targeted to powerful supporters of the incumbents and to former nomenclatura rather than to the most disadvantaged parts of the society. Against this background, the radical neoliberal strategy had not only fostered economic growth but also brought forth a more fair and transparent government, as it diminished the space for the rent-seeking activities of the rent-seeking interest groups, including the former nomenclatura.