Weingast B.R., Wittman D. The Oxford Handbook of Political Economy

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652 the role of the state in the economy

with speciﬁc skills, are also likely to support both the vocational training and social

protection systems which facilitate their acquisition (Hall and Soskice 2001). Firms’

and workers’ decisions to invest in a particular set of production proﬁles and skills,

therefore, create vested interests in the set of interacting institutions which maximize

the expected returns to these investments.

These theoretical arguments have two implications of relevance to this chapter

which are of particular importance to the future of the ﬁeld of comparative political

economy. First, they imply that governing political parties are in fact tightly con-

strained in their selection of socioeconomic policies by the structure of the inher-

ited socioeconomic institutional environment in which they are operating. Second,

they imply that socioeconomic actors’ policy preferences should be considered

endogenous in our models of institutional evolution—deﬁned by the structure of

the institutions themselves.

If these arguments are true they indicate that in attempting to identify the impact of

politics on economic outcomes, there may be more explanatory power to be gained

by investigating the political factors contributing to institutional choice at certain

key moments of historical discontinuity, and by understanding processes of political

path dependence in institutional evolution (as exempliﬁed, for example, in the work

of North 1990), than by the development of increasingly sophisticated models of

the structure of electoral opportunities and constraints faced by governing political

parties (as exempliﬁed in the research agenda initiated by Tufte).

Before any conclusions on this issue can be drawn, however, it is critical that

the open empirical question of the relative importance of government partisanship

and the state’s socioeconomic institutional structure be resolved. Unfortunately, as

outlined above, this task has proved somewhat problematic methodologically, given

the high levels of correlation between many key variables, and the small size of the

sample on which most empirical investigations have focused. These problems can

only be expected to worsen in the face of the expanded network of socioeconomic

institutions theorized to impact interactively on economic outcomes in the “varieties

of capitalism” approach. Eﬀective resolution of these methodological issues will re-

quire a broadening of the sample on which such analyses are conducted, or the pursuit

of more detailed case study analysis. This research is essential to the goal of separating

the eﬀects of state structure and political agency on economic outcomes.

3 Conclusion

.............................................................................

In conclusion, let us consider what new light has been shed on Tufte’s original

characterization of the nature of political control of the economy by subsequent

developments in the comparative political economy literature. On the one hand, new

arguments in this literature (as well as in economics) suggest increasing constraints

on the capacities of governments to engage in eﬀective macroeconomic demand

anne wren 653

management. On the other hand we still see signiﬁcant evidence of state inﬂuence in

the development of supply-side strategies. On both the supply and the demand side,

however, we ﬁnd a range of new arguments which emphasize how governments are

constrained in their selection of policies by the existing socioeconomic institutional

conﬁguration of the state. These arguments are coupled with empirical evidence iden-

tifying signiﬁcant long-term eﬀects of states’ socioeconomic institutional structures

on patterns of economic development and performance. By emphasizing the impact

of state structures on patterns of economic activity, these arguments tend to downplay

the signiﬁcance of the economic role played by elected governments.

Ultimately the question of the signiﬁcance of government inﬂuence on economic

policy-making in the face of inherited institutional constraints is an empirical one,

which can only be resolved through methodological innovation. However, as we have

described, it has important normative and positive implications. Stated in the most

general terms, the important question which we need to address is whether we should

see “states” as sets of equilibrium socioeconomic institutions, relatively immune to

the actions of governments (aside from their historical role in the selection of institu-

tions at the point of creation), or whether governing political parties should also be

considered important state actors—retaining the capacity signiﬁcantly to inﬂuence

economic outcomes, and the welfare of citizens.

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chapter 36

..............................................................

DEMOCRATIZATION

POST-COMMUNIST

IMPLICATIONS

..............................................................

anna grzymala-busse

pauline jones luong

Why do some countries successfully democratize, while others fail to establish ﬁrmly

the rules and practices of democracy? Scholars have approached this question from

two distinct perspectives. The ﬁrst one focuses on the role of structural preconditions

for democracy: a given society’s levels of economic development, urbanization, or

literacy. These are not easily inﬂuenced by any one individual, develop over decades

if not centuries, and act as a fundamental constraint on elite behavior. The second

concentrates instead on political agency, and argues that elite actors can “craft democ-

racies:” when authoritarian governments and their opponents confront each other,

they bargain over the distribution of power and authority. As a result, these actors

can write new democratic rules and create the legislative and judicial structures to

support and enforce these rules.

We argue here that the artiﬁcial divisions and unrecognized overlaps between the

two perspectives have hampered our understanding of democratization. Drawing

upon the experience of post-Communist countries, we show how structural pre-

conditions enable elite action as much as they constrain it. Elites deliberately use

existing structural legacies to construct new regimes. The rules and practices critical

to democracy are both formal and informal, and they are as much a product of pre-

existing state structures as of societal preconditions.

The chapter proceeds as follows. We ﬁrst review and contrast the two approaches.

We then focus on the post-Communist experience to synthesize the two perspectives.

anna grzymala-busse & pauline jones luong 657

We conclude by evaluating the success of these approaches in explaining the variation

in democratization outcomes.

1 Approaches To Democratization

.............................................................................

Most of the scholarship views either structural preconditions or elite agency as

the critical factor behind the success of democratization. This dichotomy is often

portrayed as mutually exclusive, if not jointly exhaustive. Below, we examine each

approach in turn.

1.1 Structure

Structural accounts have emphasized broad societal preconditions for democracy,

such as economic development and subsequent urbanization, or the development of a

middle class and greater literacy. Scholars have highlighted these particular precondi-

tions because they increase the demands for participation and for accountability that

lead authoritarian regimes to democratize (e.g. Lipset 1960;Lerner1958;Kilson1987).

They arise slowly, over decades and generations, and cannot be easily inﬂuenced by

any one individual’s beliefs or actions.

Such approaches portray these structures as formidable constraints on human

behavior, which range from broad socioeconomic conditions, such as the level of

economic development and class interests (e.g. Luebbert 1991;Moore1966), to more

immediate factors such as the path of extrication from the previous regime or

economic conditions (e.g. Karl and Schmitter 1991; Haggard and Kaufman 1995).

They also include speciﬁc institutions that shape governance and the relationship

between state and society, such as legislatures or judiciaries (e.g. Bratton and van

de Walle 1992; Widener 1994). The international political context can also greatly

inﬂuence democratization, as democratic norms are exported abroad, and one coun-

try’s citizens learn that it is possible to democratize similarly repressive regimes (e.g.

O’Loughlin et al. 1998;Starr1991).

Others argue that economic performance can determine democratization out-

comes. Sustained economic growth has long been viewed as a democratic stimulus,

while low levels of economic development and the absence of a middle class, for

example, have long been viewed as impediments to democratization (e.g. Moore

1966; Huntington 1991).

More recent scholarship has conﬁrmed that economic

wealth helps to maintain both authoritarian and democratic regimes; in other words,

¹ Not all subscribe to this notion, of course. On the other extreme, for example, Przeworski and

Limongi 1997 argue that democratic transitions occur randomly.

² Larry Diamond argues that although the correlation has weakened, it remains robust. See Diamond

1992.

658 democratization

all regimes acquire a renewed stability beyond a certain GDP-per-capita threshold

(Przeworski et al. 2000). Yet these ﬁndings are cold comfort for countries under-

going simultaneous democratization and market reforms: newly empowered elec-

torates can lash out against governments that implement economic reforms that

are painful in the short term (e.g. Callaghy 1994). Short-term losers of the transi-

tion can thus subvert the long-term processes of continued economic reform and

its beneﬁts (Przeworski 1991). The pessimistic conclusion is that political and eco-

nomic transformation, if undertaken simultaneously, are likely to undermine one

another.

Such broad phenomena, which occur at the level of entire societies and economies,

are said to form powerful constraints on elite action and institutional innovation.

Historical legacies of authoritarian regimes are especially likely to undermine the

chances for successful and stable democratization.

For example, where the authori-

tarian regime has violently oppressed society, even the most democratic of successor

regimes have to contend with the “torturer problem:” punishing the powerful per-

petrators of past evil without letting them undermine the fragile new democracies

(Huntington 1991;Fatton1999). As a result, the survival of actors and institutions

from the previous regime makes the transition to democracy more diﬃcult. This

pessimism has been echoed by some studies of the former Soviet Union and eastern

Europe, who argued that the “Leninist legacy” of empire, one-party rule, and forced

participation could doom both political and economic reform to failure for lack

of widespread popular experience with and support for pluralism (e.g. Jowitt 1992;

Motyl 1997).

1.2 Agency

If structural accounts view democratization as inﬂuenced primarily by the precon-

ditions inherited from the ancien régime, agency-based accounts view it as a sharp

and deliberate break with the authoritarian past. Where structuralist accounts talk

of thresholds beyond which democratization is likely, agency-based accounts see

unpredictable and contingent events that cascade into regime collapses. And, where

structure-based models rely on societies and economies as the levels of analysis,

agency-based accounts focus on individuals and their ability to enact their preferences

for regime change or the status quo. As a result, democratization in this perspective

can be both radical and rapid.

For agency-based accounts, therefore, the catalyst for democratization is often a

regime crisis. Such crises can be external in origin (e.g. wars and occupations, or

radical changes in trade patterns) or arise from domestic sources (e.g. the inability of

³ The exceptions include those who argue that the particular conﬁguration of political and economic

institutions inherited from colonial rule has a direct impact on both the rate and the degree of

liberalization. Thus, for example, francophone Africa experienced an earlier transition to democracy

than the former British colonies in Africa due to the legacy of corporatism, which not only fostered

interest group formation but also lowered the transaction costs of various interest groups to mobilize in

support of political reform (Widener 1994).

anna grzymala-busse & pauline jones luong 659

governments to deliver goods and services to the populace, the death of an authori-

tarian ruler, the rise of local opposition to the government.)

In responding to these crises, elites and the societal groups they mobilize determine

the outcomes of democratization. In one schematic, radicals and moderates (often

identiﬁed as “softliners” and “hardliners”) arise within both the government and

the opposition (O’Donnell and Schmitter 1986; Huntington 1991). Under certain

circumstances, these groups begin to bargain over the rules by which politics will be

played. If centrists from both groups emerge as the most powerful actors, then such

bargains can conclude in pacts that establish new democratic rules that allow for free

competition, the expression of popular interests, and the protection of both ancien

régime actors and new democratic rights. If, on the other hand, hardliners from either

group emerge triumphant, a stable democratic pact is unlikely. The formal political

institutions that follow thus reﬂect both the preferences and the power bases of these

bargaining elites (e.g. Di Palma 1990;LinzandStepan1996).

Partly owing to its focus on elite bargaining and the ability of the bargainers to

enact their preferences, this literature also emphasizes the construction of formal

democratic institutions such as legislatures, electoral systems, or judiciaries. Since

they were set up to favor the more powerful of the negotiating sides, moreover,

the composition of these institutions reﬂects the distribution of power during the

transition. Such explanations have been especially popular among scholars analyzing

institutional change in post-Communist states (e.g. Colomer 1994;Geddes1996).

For example, they can account for the initial power of the Polish presidency (set up

to favor Lech Wał

˛esa, the wildly popular anti-Communist leader) or the complex

Hungarian electoral system (which reﬂected the calculations of the weak but radical

opposition during the democratic transition) (Bernhard 2000).

As a result, the rise of these formal institutions, the backbone of functioning

democracies, has also become one of the chief indicators of both transition to democ-

racy and its consolidation. Especially salient debates were waged over the impact

of formal electoral institutions on representation and government stability, and the

speciﬁcities of electoral systems, political party regulations, and the choice of parlia-

mentary versus presidential systems (e.g. Lardeyret 1991;Quade1991). For example,

an overwhelming consensus developed that parliamentary systems are more likely to

promote democratic consolidation than presidential systems (e.g. Linz 1990;Stepan

and Skach 1993). Numerous studies have also evaluated post-Communist transitions

to democracy by solely examining the conﬁgurations of formal democratic institu-

tions (e.g. Elster, Oﬀe, and Preuss 1998;Frye1997).

2 The Post-Communist Experience

.............................................................................

Structural explanations highlight the broader context in which regime tran-

sition takes place, speciﬁcally the institutional constraints on the process of

democratization. They are ill equipped, however, to explain the strategic behavior

660 demo cratization

that often drives this process. Conversely, agency-based explanations go a long way

in analyzing the thrust and parry of the transition period, as multiple actors struggle

for survival and dominance. Yet they have been aptly criticized for suﬀering “from a

myopia of the moment” (Bratton and van de Walle 1997, 27) and lack of attention to

the limitations and opportunities inherited from the past. One resolution has been a

division of labor: “structuralist approaches are good at accounting for the general

causes of regime breakdown and the consolidation of new democracies. Process

approaches may explain the timing of breakdown and transition as well as the speciﬁc

trial-and-error process of searching for a new viable regime” (Kitschelt 1992, 1029).

Yet the most recent wave of democratization, which followed the collapse of Com-

munism in 1989–91 in the Soviet Union and its east European satellites, shows that

these two perspectives have much to contribute to each other. First, several structural

preconditions inherited from the authoritarian regimes act to foster democratization,

rather than constrain it. Moreover, elite agency matters long after the initial bargain-

ing and well into the subsequent “consolidation” period. Second, elites can deliber-

ately use these legacies to construct democratic regimes—subject to constraints from

both elite competition and informal institutions. Third, the formal institutions of the

state are as important as those of participation and electoral competition. Indeed, if

there is a dominant lesson to be learned from the experience of post-Communism,

it is that weak states threaten both democratic freedoms and the rule of law (e.g.

Holmes 1997).

2.1 Structures Enabling Elites

First, both structure- and agency-based accounts tend to assume that structure con-

strains elites. It is only in moments of crisis that elites can act more freely. Yet if elite

actors are the central agents of democratization, then where do their relative power,

preferences, and strategies come from? Classifying elites “hardliners,” “softliners,”

or “liberalizers” often leads to tautologies: the actors concluding the bargains are

centrists, and we know they are centrists because they concluded the bargain. Just

as importantly, why are some elites so much more successful than others in imple-

menting their strategies?

Post-Communist cases demonstrate that the key to elite action is their cognitive,

organizational, and social endowments: skills and experiences, reputations, informal

alliances and networks. Ironically, for the elites involved in democratization, these

resources have their origin in the authoritarian anciens régimes and they can be used

to facilitate or obstruct democratization. In central Asia, for example, regional leaders

empowered by their control over scarce resources and, hence, ability to distribute

patronage under Soviet rule dominated the negotiations for institutional change

following the regimes’ collapse. Not surprisingly, facing almost no popular opposi-

tion, they opted to change little of the system with which they continued strongly to

identify and from which they continued to beneﬁt disproportionately (Jones Luong

2002). But such elite endowments can also have more subtle eﬀects: for example,

anna grzymala-busse & pauline jones luong 661

the post-1956 Hungarian consensus on the need for stability, and the Communist

regime’s subsequent cooptation of many of its intellectual opponents, weakened the

anti-Communist opposition and left it without a broad support base—which then

paradoxically emboldened the opposition (Bruszt and Stark 1991).

As a result, it is not only democrats who can establish democracy. The actors most

likely to support the transition to democracy, no matter what their political pedigree,

are those with portable resources: skills, reputations, and networks that allow these

elites to function easily in both authoritarian and democratic regimes. Such elites can

be found both among the functionaries of the old regime, and among the opposition

ﬁrebrands. For example, those Communist elites in east–central Europe who were

recruited into the party on the basis of their managerial skills and put in charge of

implementing liberalizing reforms have proven to be the most successful democratic

competitors of post-Communist political contests (Grzymala-Busse 2002).

Similarly, committed democrats may not be the best ones to establish and consol-

idate democracy. There are several cases of opposition elites who have been unable

to manage successfully the transition to liberal democratic politicians as a result of

their patchy skill set: Lech Wał

˛esa in Poland is perhaps the most illustrious example.

A popular leader of the opposition to Communist rule and Nobel Peace Prize winner,

he was unable to adapt to his new role as Poland’s democratically elected president,

fomenting a destructive “war at the top,” fragmenting elites, negating foreign policy

commitments, and questioning the legitimacy of other elected oﬃcials.

Critically, then, structural preconditions are not simply a constraint on elites—

nor are they simply found at the level of societies or economies. The practices

and structures of the authoritarian past can enable democratization by providing

elites with the skills, reputations, and networks necessary to create and then credibly

commit to the new rules and practices of democracy. The rise of legacies that enable

democratization calls into question the widespread assumptions that the legacies of

the authoritarian past undermine democratization, and that the survival of actors

from the previous regime makes the transition to democracy more diﬃcult.

2.2 The Deliberate Use of Structure

If structural preconditions do not necessarily constrain elites, they are also subject to

deliberate use and exploitation by political elites. The opportunities to gain political

and economic advantage in the new democratic regimes from the inherited structural

legacies are manifold. Subsequently, political elites continue to exploit and transform

the new democratic institutions they have created, as their constituencies, identities,

and interests change over time.

First, as noted earlier, some of the elites were endowed with skills and resources that

were highly portable to the new regime. In one example, former Communist party

elites endowed with these resources radically transformed the Communist parties

after the collapse of their rule into successful democratic competitors. In Hungary,

Poland, Slovenia, and Lithuania, highly experienced and worldly technocrats took