Competitive Rent-Seeking, Socioeconomic Infrastructures, and Post-Communist Transition in Central and Eastern Europe

Abstract

The political and economic transformation of former Soviet Bloc Europe has been far-reaching in the last 30 years. Although most former socialist countries in Central and Eastern Europe abandoned the Communist ancien régime, not all of them managed to fully integrate liberal democracy and market economy into society. Some scholars explained this divergence in development through the dichotomous regime types. From the perspective of what propels the retreat of political power from market and with the theory of competitive rent-seeking, we demonstrate that the retreating logic is underlain by the competition between rent-seekers. A competitive rent-seeking regime dissipates the rent through distorting market mechanism and dampens both political authority and rent-seeker’s enthusiasm, providing a better prospect for economic liberalization. Through a comparative case study of transitional experiences of Hungary and Belarus, we find that countries with pre-existing socioeconomic infrastructures that facilitate the formation of competitive rent-seeking regime are more successful in economic liberalization. We suggest that the academic interest previously paid to dichotomous regime-type argument should be diverted into a deeper inquiry of the evolution of socioeconomic institutions that shape the state–market interaction.

Democracy and Economic Growth:the Case of Moldova

“…The large and growing body of scholarly literature that examines the link between economic development and democracy can be categorized into two approaches. In the first one the conditions that give rise and sustain democracy are analyzed [4,[8][9][10][11]. The second is aimed at determining how democracy contribute to welfare [12][13][14][15][16][17].…”

“…Further empirical evidence for Middle East and North Africa's countries suggest that democratization negatively impacts economic growth [38]. State's capacity to guarantee the rule of law, private property and economic freedom show to be the most critical factors for long-term development [4,[39][40][41][42][43].…”

“…Despite the initial rumored interest in this large scale political transformation, the literature on the impact of democracy on transitional economies is rather scarce. According to several authors, different development rates in post-socialist countries are closely related to each country's structural and historical heritage [4,7]. Pre-existing socio-economic institutions influenced the model of interaction between State and market and predicted how successful economic liberalization was going to be.…”

“…Despite a large body of theoretical and empirical literature examining the issue, no scientific consensus has been reached. In addition, it has not been achieved in studies concerning transition countries [2][3][4][5][6][7]. Researchers who use different approaches and methods in assessing this phenomenon sometimes come to opposite conclusions.…”