Transition Economies: Political Economy in Russia, Eastern Europe, and Central Asia by Martin Myant and Jan Drahokoupil (review)

Martin Myant and Jan Drahokoupil offer a large volume aimed at revisiting the political economy of transition in the Russian Federation, Eastern Europe, and Central Asia. This book focuses on the political economy of state socialism; macroeconomic transformations, including shock therapy and slow economic recovery; alternative strategies for democratic transition; and the new role of the state, including its changing economic position, maintaining the rule of law, and elements of the welfare state. It also addresses microeconomic evolutions, private enterprise, small businesses, new financial systems, and commercial banks. Almost an encyclopedia of economic transition, this 400-page volume deals with just about every aspect of this ongoing process, named and analyzed, and supported with thorough date analysis. The book begins with the system of state socialism and the successes and failures of central planning and traces the courses of transition in different post-socialist societies. Balancing between macro- and micro-evolutionary approaches, the authors cover the differences between different groups of countries in terms of productivity and economic integration during the period of sharp economic decline and slow recovery in the 1990s, the financial crisis of 1998, and the growth of the 2000s.

Unlike most other works examining similar topics, this book groups together the successor states of the USSR, formerly socialist countries in Eastern Europe, and Mongolia. This wide geographic scope is rather unusual, since normally volumes on post-socialist transitions cover either the countries of the former USSR, the countries of Eastern Europe, or the countries of Central Asia. But in terms of their approach to transition societies, most of the authors of this volume are not unusual in employing comparative analysis and using a mix of economically and politically based analytical tools for the examination of transition societies. Their discussions are issue-focused rather than country-centered. Thus, the major function of this volume—and its major merit—is that of synthesis.

The strongest section of this volume is Section VI, titled “Conclusions,” with subsections focused on the emerging varieties of capitalism, the financial crisis of 2008 and its aftermath, and the authors’ final verdict on transition. Myant and Drahokoupil offer a new classification of capitalism in transition economies on the basis of characteristics on which former socialist countries both converge and diverge. Thus, these countries may be grouped in different clusters. The authors use international integration as the major criterion in delineating the types of capitalism in transition economies and assigning countries to a certain group. They offer six forms of international integration: export-oriented foreign direct investments in complex sectors, export-oriented complex sectors without foreign direct investments, simple manufacturing subcontracting, commodity exports, dependence on remittance and aid, and dependence on financialized growth. This approach is quite unusual. Moreover, such original and clearly presented contributions are always of interest to scholars and general readers as well. Specifically, the authors distinguish five varieties of capitalism in transition economies: FDI-based (second rank) market economies, peripheral market economies, oligarchic or clientelistic capitalism, order states, and remittance- and aid-based economies (310-312). FDI-based (second rank) market economies include countries of Central-Eastern Europe. Despite having developed elaborate export structures, these economies have only a second-rank position in international production networks. Peripheral market economies are those in the South-Eastern Europe and the Baltic states. Oligarchic or clientelistic capitalism refers to Russia, but applies equally to most of the Commonwealth of Independent States (CIS). Order states are CIS countries that experienced the most limited reforms under authoritarian and arbitrary regimes and a low level of financial development with numerous obstacles to organizing new businesses (these states include Belarus and Uzbekistan). Remittance- and aid-based economies include low-income countries in the CIS and Eastern Europe. These types of capitalistic modes of organization, which emerged in the region during the period of transition, were put to the test in the 2008 financial crisis. Four stages of the crisis...