Conservative Developmental Statism in East Central Europe and Russia

ABSTRACT

Russia, Hungary and Poland have been at the forefront of the illiberal counter-movement to neoliberalism. However, while there is increasing knowledge about how ‘populism’ as a discursive strategy has brought illiberals to power, especially in Poland and Hungary, we know surprisingly little about the socioeconomic programme and guiding principles of illiberals. In this article, we argue first that there is such a programme and that – notwithstanding the differences between countries – it features a similar programmatic core in the three countries that took shape in conservative think tanks and guides socioeconomic policy recommendations. Second, this programmatic core is best understood not so much as populism, but as a combination of economic nationalism – subordinating the economy to national interests and to the imperative of protecting national identity – and conservatism, reorienting economic policies to serve the traditional family and undo the perceived wrongdoings of post-communist elites, in particular, privatisation. We call this core conservative developmental statism. Thus illiberalism is reducible neither to populism nor to the whims of the power-holders of the day, and in these countries it needs to be seen in a wider context in which rightwing intellectuals have been working in parallel with politicians to give illiberalism a conservative content.     

A review of bank performance during transition in central Europe

This study, based on panel data from 189 industrial enterprises in 1992‐96, shows that privatisation 'on average' produces little improvement in performance of Russian enterprises. However, disaggregating the process, we reveal that methods of privatisation do influence performance but the impact is not always positive. The state seems to be a passive shareholder. At the same time, our results suggest that majority state ownership is preferable to a state minority stockholding, possibly because the absence of a monitoring shareholder in the latter case does not permit managers to achieve their own objectives at the expense of other shareholders.     

Privatisation and Transition in Albania

This article considers the privatisation policy and its role in the transition to a market economy in Albania. The disintegration of the old regime took place over a much longer time than in other Central and East European countries, resulting in chaos and a political vacuum in which no systematic or effective policy could be formulated. The new government, committed to fundamental reforms necessary for a market economy, did not take power until after the second general election in March 1992. One outcome of this long pre-transition period was that the privatisation programme had to evolve gradually in the course of transformation, without ever having been planned in a comprehensive and integrated manner. Privatisation proceeded on five different fronts: small privatisation, privatisation of agriculture, housing, small and medium-sized enterprises and mass privatisation. The article discusses the progress of each aspect and provides up-to-date information and data on their progress. The privatisation of agriculture and housing were the most crucial aspects of the overall policy, with significant impacts on economic growth and the progress of the transformation programme. The privatised agricultural sector grew very rapidly and made a major contribution to pulling the whole economy out of the 'transformational recession'. Privatised housing created a significant wealth effect amongst the urban population, providing many of them with collateral or start-up capital. The privatisation of state-owned enterprises, however, was carried out with much more difficulty and controversy. Although auctions were to be the main method of transfer, ensuring a significant income for the treasury, in practice many enterprises were privatised through other methods, bringing in less income and giving rise to allegations of political favouritism. Another aspect of privatisation was the weak corporate governance mechanism which replaced state ownership. Many small and medium-sized enterprises (probably about half) were sold or transferred to their employees, without any outsider interest. The performance of this sector has to be monitored closely in order to assess the impact of massive insider privatisation, reminiscent of Russia's privatisation programme. Mass privatisation too, by distributing enterprise shares amongst the general public, resulted in the increased power of insiders. The shares of nearly 100 enterprises were transferred to the private sector over the first year of the implementation of this programme. Although the privatisation programme progressed very rapidly, no serious attention was paid to problems of corporate governance. Without concentrated ownership or the involvement of financial intermediaries to oversee and monitor the managers, it is unlikely that the expected efficiency gains will be realised. The political crisis resulting from the collapse of informal financial schemes brought the whole reform process, including the privatisation programme, to a halt in early 1997. It is expected that, with a new government in power, there will be a new push for reforms and an increased pace of privatisation. It is hoped that the renewed efforts will also deal with the shortcomings of the previous schemes-particularly the corporate governance issues.     

Restructuring Huta T. Sendzimira—from the Lenin steelworks to lean production

The article explores economic reform in post-Soviet Kyrgyzstan and focuses on its impact on the country's labour market and economic migration. Mass and rapid privatisation and 'shock therapy' have been perceived as the pillars of change in the country. However, the reform was accompanied by a number of negative factors, including fast-growing unemployment, poverty, a sharp decline in industrial and agricultural output and loss of foreign markets. All together, these problems have led to contraction of the local labour market and mass outflow of the economically active part of the population. Using the example of Kyrgyzstan the author assesses the interconnection between economic decline and economic migration in the post-Soviet era.     

Economic ramifications of China–United States trade war for the Russian Federation

ABSTRACT

The purpose of the article was to assess the impact of escalating China-United States trade war on the economic development of such countries as the Russian Federation, Poland, Turkey, Taiwan, Thailand, and South Africa. A cognitive map was developed to describe the general model of economic development of the countries under study, impacted by the trade war, which allowed for substantiation of a qualitative nature of the trade war ramifications in core economic sectors in the countries under consideration. The research results and recommendations are of scientific and practical importance, since they serve as the basis for elaborating further strategies to stem the risks of the escalating trade war to the countries engaged in international trade.     

Re-evaluation of Welfare Changes during the Transition in Poland

The costs of shortages/rationing are not captured by standard consumer price indices. Thus the change in real GDP per capita is an over-estimate of welfare losses in transition economies. In this study virtual prices are used to calculate new cost of living indices, making it possible to construct more accurate pre-reform and post-reform welfare comparisons. The results for Poland using virtual prices show 62-84% decline in welfare over the transition 1987-92. This welfare loss is approximately one-third of the value obtained using actual prices.     

Is It a Few Days of Good Times and then Darkness Ensues? Long-Term Performance of an Industry after Broad Reforms and Privatisation

ABSTRACT

The long-run financial performances of privatised firms have rarely been investigated. This study examines the financial and operational performance within the Pakistani cement industry utilising two decades of post-privatisation data. Broadly speaking, regression analyses confirm that long-term positive impacts of reforms and privatisation on profitability, output and investment are uncertain. After controlling for firm, industry and economic factors, our estimates show that privatised firms initially improved their profitability but recorded a statistically significant decline over a longer period. The sale efficiency, capacity utilisation, and leverage indicators, however, improved over a considerably long post-ownership change period.     

Regional Disparities in Transition Economies: A Typology for East Germany and Poland

This article uses cluster analysis to construct a typology of regions for East Germany and Poland on the basis of indicators for economic capability and their determinants. The results show that, in both countries, the most capable regions are those with or in the vicinity of the largest agglomerations. Besides high income, low unemployment and population gains from migration, these regions have comparatively large stocks of qualified labour and participate in technical progress. Two regional types in particular could be established as problematic: (1) rural regions peripheral to the agglomerations and (2) old industrialised regions. Indicators of investment are not very well suited to indicating the future economic capability of regions under the circumstances of transformation.     

Privatisation and aggregate output: testing for macroeconomic transmission channels

In this paper we examine empirically the impact of privatisation on output in the UK, through macroeconomic transmission channels. While most privatisation studies focus on microeconomic shocks, namely at the firm level, we are interested to see whether a large scale privatisation policy, as the one pursued in the UK in the 1980 and 1990s, had a measurable impact on output. This may contribute to the ex post evaluation of this policy and complement the microeconomic evidence. We use quarterly data from 1979 to 1998 of privatisation proceeds, as our impulse policy variable, and of private consumption, gross fixed capital formation, net government expenditures, as transmission channels, and aggregate output as our final response variable. The econometric methodology is based on Structural Vector Auto-regressive models and Impulse Response Functions. Non-stationarity and cointegration properties of the time series have also been considered. We find that privatisation shocks do not have an impact in the consumption-output model, but have a moderate and transitory impact in the investment and the public expenditures models. Such positive demand effects, however, have not been completely matched by supply side effects, and, consequently, privatisation in the UK did not contribute to a sustained economic growth.

Privatisation of the Russian Defence Industry: Ownership and Control Issues

This article analyses the outcome of privatisation in the Russian defence industry in the second part of the 1990s. It is based on the results of the longitudinal survey of defence enterprises conducted over the period 1995‐99 in the main defence production regions of Russia: Moscow, St Petersburg, Central European region, Western Siberia, Volga region, the Urals and the Far East. Using the survey data, we investigate the distribution of ownership in defence enterprises and examine the non-linear relationship between ownership and control inside these enterprises. We also test the hypothesis of the growing criminal influence in defence enterprises and outline a possible future scenario for privatisation in the defence industry.     

Determinants of Enterprise Restructuring in Transition: Description of a Survey in Russian Industry

The survey described in this article collects data on enterprise restructuring, ownership, competition, budget constraints and, particularly, institutions in Russian industry, covering the period between the start of 1992 and September 1999. On their own, the survey answers show a devastating restructuring crisis, massive privatisation, rather weak competition, unexpectedly hard budget constraints, an overwhelmingly negative and relatively positive assessment of formal and informal institutions respectively, and largely the same ruling networks as before the start of market reforms. Ironically, tentative results based on this survey indicate that important determinants of enterprise restructuring in Russian industry are exactly those on which least reform has been accomplished: stronger competition and better institutions go with more restructuring, while privatisation and harder budget constraints do not. The substitution, to some extent, of informal for formal institutions may have prevented even worse restructuring figures, but better formal institutions in general would have led to further improvements.     

What Drives the Operating Performance of Privatised Firms?

Using a panel data analysis of Spanish privatised firms, we study how different factors influence the operating performance of divested companies. The results show that it is not privatisation per se but other factors that matter. After controlling for possible sample selection bias related to government timing of divestments, we find that the greater the relinquishment of State control and the smaller the percentage of ownership held by managers and/or employees, the better the firms’ post‐privatisation performance. Moreover, privatisations that are accompanied by liberalisation programmes and occur during buoyant economic cycles turn out to be more successful.     

The Role of Foreign Direct Investment in the Privatisation and Restructuring of the Czech Motor Industry

Foreign direct investment (FDI) has been considered one of the crucial factors of a successful economic transformation in Central and Eastern Europe. This article investigates the role of FDI in the privatisation and restructuring of the Czech motor industry in the 1990s. In particular, it examines how governmental policies towards FDI affected FDI inflows, the immediate effects of FDI at the enterprise level, and the contested nature of this change. Advantages of foreign ownership for Czech enterprises, such as access to investment capital, access to sale and distribution networks of parent companies and technology transfer are discussed, as well as examples of failures of FDI to result in a successful enterprise restructuring. The information presented is based upon in-depth interviews with top managers of twenty component suppliers, governmental officials and vehicle makers in the Czech Republic as well as on the secondary data.     

Defence Industry Transformation in Russia: Evidence from a Longitudinal Survey

The article is devoted to the new phenomena in the market transformation of the Russian defence-industrial complex. Based on the data generated by the repeated survey of the CEOs (general directors) of defence enterprises in 1995‐99, it examines economic performance of enterprises, their conflicts with the government and efforts at internal restructuring brought about by reductions of Russia's defence spending, mass privatisation and opening up of the domestic market. We found that despite the dramatic reduction in defence orders, inconsistent government policies and extremely unfavourable macroeconomic environment, the Russian defence industry has made significant progress in its adjustment to the market. Even before the devaluation of the ruble in the autumn of 1998 economic performance of defence enterprises had been gradually improving; it entered a virtual boom since then. Contrary to widely held views, the painful experience of the 1990s has not made the top managers of the defence industry more hostile to reforms: at the end of the decade they were generally more supportive of the market than in 1995.     

Economic Integration between the European Union and the Transition Economies of Central European Initiative Countries

In this article we examine the main factors influencing trade and FDI flows between the transition countries of the Central European Initiative (CEI) and the EU member states. We distinguish three groups of CEI countries, according to the degree of trade and FDI integration with the EU: the 'fast mover' countries, the 'next tier' countries and the 'slow movers'. By estimating a number of trade and FDI equations we were able to locate the significance of alternative variables which affect the flows of trade between the CEI countries and the EU. According to our results, the low volume of trade and FDI between the 'next tier' and 'slow movers' of the CEI region, on one hand, and the EU, on the other, is a reflection of the fact that these particular countries have not yet achieved adequate institutional and economic reform while, at the same time, privatisation has not progressed as much.     

The economic performance of state-owned enterprises in Central and Eastern Europe

This article explores the economic performance of state ownership in the largest non-financial enterprises operating in 13 post-socialist Central and Eastern European (CEE) countries over the period 2007–2013. The largest state-owned enterprises (SOEs) are selected based on the ‘Coface – 500 Top Companies in CEE’ list in 2013. Of these 500 enterprises, 69 were identified as state-owned. All originated in the socialist period. The majority of them are from Poland and Ukraine. SOEs hold a dominant position in energy supply, the oil and gas sector, and transport. We find that the persistence of state ownership in post-socialist countries is caused by incomplete privatisation and the presence of SOEs within strategic sectors. The economic performance of the largest state-owned companies is, on average, comparable to their private counterparts.     

Adam Smith's theory of economic history and economic development

Abstract

The aim of the paper is to show that Smith has a theory of economic history grounded in a politico-economic modeling (as well as a sort of economic theoretical modeling). In terms of the politico-economic approach, in the Wealth of Nations (Book III.ii–iv) Smith tried to offer a systematic account of economic development from feudalism to capitalism in Europe. These lead to suggest that the seeming internal inconsistency between the natural and the actual courses of progress in Book III may be resolved, and that Smith may be treated as a precursor of Douglass North, who stressed an inextricable link between the polity and the economy in economic history.     

Incorporating adherence in cost-effectiveness analyses of asthma: a systematic review

Abstract

Aims: Non-adherence is associated with poor clinical outcomes among patients with asthma. While cost-effectiveness analysis (CEA) is increasingly used to inform value assessment of the interventions, most do not take into account adherence in the analyses. This study aims to: (1) Understand the extent of studies considering adherence as part of the economic analyses, and (2) summarize the methods of incorporating adherence in the economic models.

Materials and methods: A literature search was performed from the inception to February 2018 using four databases: PubMed, EMBASE, NHS EED, and the Tufts CEA registry. Decision model-based CEA of asthma were identified. Outcomes of interest were the number of studies incorporating adherence in the economic models, and the incorporating methods. All data were extracted using a standardized data collection form.

Results: From 1,587 articles, 23 studies were decision model-based CEA of asthma, of which four CEA (17.4%) incorporated adherence in the analyses. Only the method of incorporating adherence by adjusting treatment effectiveness according to adherence levels was demonstrated in this review. Two approaches were used to derive the associations between adherence and effectiveness. The first approach was to apply a mathematical formula, developed by an expert panel, and the second was to extrapolate the associations from previous published studies. The adherence-adjusted effectiveness was then incorporated in the economic models.

Conclusions: A very low number of CEA of asthma incorporated adherence in the analyses. All the CEA adjusted treatment effectiveness according to adherence levels, applied to the economic models.