CHAPTER ONE
Cultivating Consensus
International Institutions and a Liberal Worldview
I present here a theory of institutional influence that locates the impetus for state-level compliance in social mechanisms, specifically in the cultivation of a common worldview. This common—liberal—worldview is anchored by a shared perception of where authority lies. For much of central and eastern Europe (CEE), the postcommunist transition has been marked by a shift from domestic sources of authority, such as historical experience and nationalist striving, to international sources of authority, such as the North Atlantic Treaty Organization (NATO), the European Union, and the Bretton Woods institutions—the World Bank and the International Monetary Fund (IMF). The policy manifestations of the liberal worldview embraced by these institutions, and to varying extents transferred to CEE states, include the institutionalization of central bank independence (CBI), the internationalization of bank ownership, the democratization of civil-military relations, and the denationalization of defense planning and foreign policy.
This chapter also introduces three hypotheses used throughout the study to assess the validity of the theory. The cultivation of a liberal worldview around specific issues depends on both domestic and international variables. On the domestic side, international institutions are more likely to gain access to reform processes, and thereby define what constitutes “optimal” policy, under conditions of interest demobilization and uncertainty in the domestic sphere and when target states seek the social recognition of external actors. On the international side, the power of institutions to cultivate support for their policy preferences is heightened when their prescriptions are normatively consistent with the practices of their member states. This combination of factors gives international institutions access to domestic reform processes and allows them to cultivate a consensus around the policy orientations of a liberal worldview. Whereas realist approaches in international relations have traditionally argued that it was the distribution of capabilities in international politics that produced particular outcomes, I contend that, rather, it is the distribution of knowledge that shapes enmities and alliances. In this book, the focus is on the distribution of knowledge that concerns where authority appropriately rests—in international institutions or in domestic claims for national autonomy and tradition.
Although I emphasize the cultivation of “knowledge” and “consensus” around shared understandings of who wields authority in the international system, my theory of institutional influence should not be construed in terms of harmonious volunteerism among actors or even in terms of socialization. Building transnational coalitions that support the denationalization of defense planning or the internationalization of bank ownership, for example, is often a politically charged process in which even formidable domestic players are shamed into embracing policies they believe to be bad ideas. Moreover, the same transnational coalitions, once constituted, are powerful agents of internationally inspired agendas. Should subsequent challenges to an initial liberal consensus emerge (and they often have), international institutions can use coalition partners to help isolate that opposition. Although cultivating consensus around who should wield authority may seem shallower than socialization or persuasion, outcomes of the consensus on authority are no less consequential for international politics.
I begin by introducing my theory of institutional influence. Since this theory is at odds with much recent constructivist literature that recognizes a clear distinction between the logic of consequences and the logic of appropriateness, I make the case for a constructivist-rationalist synthesis and locate it within the international relations literature. I then detail and operationalize the three hypotheses used throughout the study. The aim is to assess conditions under which international institutions can influence domestic reform processes and to explain variation in the timing and nature of outcomes. Finally, I set out the rationale for my case selection and consider alternative approaches.
A THEORY OF INSTITUTIONAL INFLUENCE
Under certain, rather narrow conditions, international institutions can transform political dynamics and shape choices in societies undergoing transition. Three conditions in particular, which form the foundations of this study, boost the power of international institutions over target states. These conditions comprise a particular social context and include the uncertainty of domestic actors, their perceived subordinate status vis-à-vis international institutions, and the credibility of the policies in question. As the case studies show, a social context informed by uncertainty, status, and credibility, mapped onto measurable domestic and international conditions, is more important for securing liberalizing outcomes than is new information or incentives taken on their own. Uncertainty, status, and credibility allow international institutions to imbue information and incentives with particular meanings, and thus power. A radically different social context can likewise render the same information and incentives, provided by the same international institutions, meaningless.
Uncertainty among domestic actors, their perceived location in a hierarchy in relation to foreign advisors, and the credibility of international institutional policies all permit international actors to persuade their domestic interlocutors of where authority appropriately lies. Such persuasion can be based on the merits of an argument or on the affective relationship between domestic and international actors—or both. Alternatively, social influence, in which actors comply with the prescriptions of international institutions because they believe that not everyone else can be wrong, may also encourage domestic players to recognize new sources of authority. If international institutions can exert power over policymaking elites, they can influence not just proximate outcomes but the basic properties of states, where “property” refers to the balance of power among groups in society or the international orientation of states.
Although the consequences of social dynamics have more often been the concern of constructivists than rationalists, this is not a study that pits rationality against norm-governed behavior as is so often the case in constructivist research. Rather, I argue that instrumentality among actors is central to the construction of normative contexts in which only narrow manifestations of rationality are politically tenable. Thus while actors and their choices are heavily structured by social practice, I contend that outcomes, in this study and beyond, are not strictly characterized by either a consequentialist or an obligatory logic.1
In a social context defined by uncertainty, status, and credibility, international institutions can cultivate transnational coalitions that strengthen their domestic members—not by virtue of their authority in terms of popular support but by virtue of their internationally recognized status. To be clear, the cultivation of a domestic consensus by international institutions is not simply the empowerment of particular preexisting domestic interests. In this sense, my argument is somewhat different from those contending that policies make their way into domestic settings largely as a consequence of “goodness of fit” (e.g., Checkel 2001a, 187–89; Cowles, Caporaso, and Risse 2001). Rather, I argue that consensus evolves via a process of domestic interest mobilization through which policy “fit” takes on the appearance of being “good” in the eyes of reformers and the public alike.
International institutions, even under the most propitious conditions, are not uniformly successful in shaping domestic political choices, either within or across countries. Indeed, in postcommunist Europe, where a range of international institutions has been actively trying to direct outcomes, observers have noted a wide variation in political and economic systems (Bunce 2003; Kitschelt 2003, 49). The objective here is to provide a theoretical framework that explains this variation in compliance with international institutional policy prescriptions. I argue that both compliance and defection are possible, depending on the presence or absence of particular social contexts and the degrees of uncertainty, status, and credibility produced within them.
Combining Constructivist and Rationalist Perspectives
There are three elements to my argument for a constructivist-rationalist synthesis. Whereas rationalists have assumed instrumentality among actors, constructivists have argued that actors are largely socially motivated—to fit in, to follow norms, to fulfill roles. Thus the first component of my constructivist-rationalist synthesis is to claim that despite instances in which agents are acting either instrumentally or according to social motivation, more often they are doing both. Acting on and identifying instrumentality depends, after all, on being able to assess and agree on costs and benefits, respectively. One example of divergent perceptions of costs and benefits that ultimately converged in CEE (albeit to varying degrees) is in the area of civil-military relations. NATO officials believed that democratizing civil-military relations was the right course for postcommunist countries. But getting them to do so depended on NATO’s ability to create a social context in which the failure to democratize was embarrassing—and therefore costly. But for something to be embarrassing, actors must share social reference points—which NATO had to create because they did not yet exist. Where such reference points remain different for the several parties to an action, however, one person’s instrumentality is another person’s irrationality.
The second element of the constructivist-rationalist synthesis is that although actors may be “optimizing” in that they seek to achieve their preferences, this study does not assume a baseline rationality. Rather, I investigate what actors believe is rational in a given context and why what constitutes “rationality” shifts over time. Finally, although incentives are typically construed as regulative rules that direct actors’ behavior but do not change who or what those actors are, I reach a different conclusion. The evidence here suggests that incentives, when embedded in a social context, can in fact be constitutive of actors or, in other words, can fundamentally shape their preferences.
Three theoretical goals follow from this constructivist-rationalist synthesis. The first is to engage the rationalist literature on transitions, institutions, conditionality, and compliance. I argue that the social context in which actors make choices should be at the center of any analysis that seeks to enhance our understanding of why certain outcomes prevail. The second is to avoid neoliberal and constructivist approaches that attempt to carve out a separate sphere for the role of ideas in politics, distinct from power and interests, which, as I argue, ratify an artificial divide between instrumental and obligatory (i.e., socially motivated) action. Finally, I provide a theoretical framework that specifies the conditions that favor the institutionalization of particular ideas at the domestic level.
Building a constructivist-rationalist synthesis stems from a dissatisfaction with rationalist approaches and the constructivist responses to them. In international relations, rationalist approaches that assess the influence of international institutions have tended to focus on the role of incentives—in the form of financial assistance, security, transparency, and autonomy—in eliciting particular behaviors from states (for the postcommunist states, see Wallander 2000; Moravcsik and Vachudova 2003; Kelley 2004a, 2004b; Schimmelfennig 2005; Schimmelfennig and Sedelmeier 2005; Vachudova 2005). This conceptualization of action as a utility-maximizing response to signals in the environment is consistent with neoliberal institutionalism, which is largely concerned with the constraining, regulative, and coordinating role of international institutions in the life of states (Keohane 1984; Goldstein and Keohane 1993; Haftendorn, Keohane, and Wallander 1999; Wallander 1999). Building on the assumptions of neorealism rather than radically departing from them, neoliberal institutionalists hold actors’ interests, and the social contexts in which they find themselves, to be “preexisting” and “exogenous.” These “rationalist” studies therefore elide some of the most important dynamics in explaining the incidence of domestic conformity with burgeoning or prevailing global trends—including, for example, the increasing use of markets as opposed to authoritative methods of allocation as a primary means of resolving political conflict.
Dissatisfaction with rationalist explanations led constructivists to demonstrate that some behavior is driven not by instrumentality, but rather by “rules.” In contrast to the “logic of consequences,” in which actors make a decision based on self-interest and a cost-benefit calculation, the “logic of appropriateness,” which is said to underpin rule-based behavior, refers in its most pristine form to action that is “taken for granted” and consistent with an actor’s identity (March and Olsen 1989, 1998).2 Such choices are guided by a sense of what one “should” do—for moral, social, or taken-for-granted reasons—in any given situation.
The tendency, first among constructivists, to link sociological approaches in international relations to the logic of appropriateness led to a false and counterproductive divide. Because cost-benefit analysis and instrumental action were characterized as features of “rationalist” analysis, obligatory action was categorized as something other than, and possibly less than, rational. Constructivist scholars tried to show either that “culture” operated in some instances where “rationality” might have triumphed instead (e.g., Legro 1996) or that some kinds of political systems allowed norms to have constitutive effects while others allowed them to have only constraining ones (e.g., Checkel 1997).3 Both kinds of studies conceive of consequential and obligatory actions as distinct, with actors responding to incentives in some instances and rules in others.
The methodological challenge posed by constructivism also fueled the notion that distinctive logics underpinned action. In an effort to distinguish between material and social causal forces and to avoid overdetermination, some constructivist scholarship focused on issues in which explanations based on national interests, as conceived by the dominant international relations paradigms, fail (Katzenstein 1996). Or, where policies concern questions other than wealth and power—such as human rights—realist, interest-based explanations are arguably not relevant.4 But the problem with the obligatory/consequentialist dichotomy is that the insistence on separate logics of behavior upholds the notion that power and interest have meaning and effects independent of social relations—a claim that several scholars have already convincingly dismissed (e.g., Kratochwil 1989; Onuf 1989; Wendt 1999).
An additional drawback of the obligatory/consequentialist conceptualization is that it leaves the misimpression that constructivists have little systematic to say about core issues of our field—war, capabilities, power, and interest. Rarely do we find instances of pure “sociological” phenomena in our highly instrumentalized world that do not also illustrate the centrality of deliberation and, with it, optimization. But this fact should do nothing to diminish the salience of sociological approaches. Our ability to “calculate” stems precisely from our capacity as individuals and collectivities to imbue events with particular meaning (Kratochwil 1989, 11; 2000b, 56; Ruggie 1998, 861).5 Irrespective of this key insight, rationalists tend to suppress the social dynamics inherent in many political processes or to understate their causal and constitutive significance (e.g., Walt 1987, 1996; Schweller 1998; Wallander 1999, 2000; Schweller and Wohlforth 2000). This study is an attempt to make these underlying social forces explicit and central—with actors behaving rationally.6
Another problem for constructivists derives from the notion that certain norms have constitutive effects while others are basically regulative. This suggests that regulative rules do not affect the properties of actors and that constitutive norms do not regulate behavior.7 Neither claim endures under empirical scrutiny. For example, as CEE political parties adopt the policy prescriptions of international institutions, even if only nominally in response to incentives, they are implicitly recognizing a new authority. In postcommunist Europe, such recognition is accompanied by more general changes in the underlying goals of states. In this study, recognizable changes of this kind include shifts from preferring executive authority over the armed forces and high levels of military autonomy to securing civilian oversight; from seeking territorial integrity against historical rivals to supporting an alliance pursuing “out-of-area” (i.e., foreign) missions; and from preserving national power through control over domestic credit allocation to accepting high levels of foreign investment in banking.
I develop a theoretical framework that specifies the conditions under which such shifts in the distribution of knowledge in the international system are likely to occur. I argue that international institutions provide incentives attached to conditions because that is the language in which they speak, and from the highly instrumentalized perspective in which international institutions operate, exchanging incentives for compliance seems rational to them. Indeed, international institutions apply conditionality as though it were a consistently proven method of winning compliance, even though many studies have reached more ambiguous conclusions (Killick 1996; Collier 1997; Hunter and Brown 2000; Grabbe 2002; Stone 2002; Hughes, Sasse, and Gordon 2004; Jacoby 2004; Kelley 2004b; Epstein 2005a, 2006a; Sasse 2005; Weyland 2005). Incentives are only the tip of the iceberg, however, insofar as money or membership—or even, as previously noted, instrumentality—are meaningless outside the context of how the parties to an interaction constitute and interpret money, membership, or instrumentality.
In the case studies presented in this book, I trace a series of causal and constitutive episodes in which international institutions denationalized the frames through which CEE politicians perceived their interests. This in turn affected how politicians structured their domestic political institutions. Instrumentality pervades the story. But so too do the social processes through which a certain kind of instrumentality—in which Western rewards were exchanged for compliance with Western norms—became the rule.
Accounting for Variation
My three hypotheses for understanding the circumstances under which international institutions can generate domestic support for a particular idea are based on measures of uncertainty, status, and credibility that vary over time and across sectors and countries, and that help account for fluctuating levels of compliance. International institutions can maximize their influence over domestic reforms under the following conditions:8
1. When sectoral or regime discontinuity demobilizes interest groups and leaves domestic actors uncertain about how to make policy (the uncertainty hypothesis, H1).
2. When domestic actors seek the social approbation of the international institutions that are undertaking policy transfer (the status hypothesis, H2).
3. When purveyors of policy are normatively consistent in the ideas they promote and the policies they prescribe (the credibility hypothesis, H3).
The presence of these variables renders domestic actors relatively more open to adopting foreign advice and definitions. Uncertainty, status, and credibility give international institutions the power to assign positive meanings to information and incentives, making them worthy of compliance for domestic actors.
In this study, I operationalize each of these variables for postcommunist conditions. In the first hypothesis, in the course of breaking with communism, states had to create some entirely new institutions around which domestic interests had yet to coalesce (H1). I argue that when policy areas are new, domestic actors are more dependent on foreign expertise and policies become “functional” by virtue of their association with internationally respected opinion. This is especially true when domestic actors have little assurance of what the consequences of different policies will be.
I operationalize the resulting “uncertainty” (i.e., the disorientation and dislocation of interests) by assessing both sectoral and regime discontinuity. Interest demobilization, and thus uncertainty, is stronger in sectors where the state-socialist system was all-controlling. In finance, for example, price liberalization and the creation of two-tiered banking systems during the transition yielded entirely new environments. International institutions therefore had more intellectual access to processes of financial reform than, for example, to military reform early in the transition, because the functioning of the armed forces was not peculiar to the state-socialist system and uncertainty was correspondingly weaker. Regime discontinuity also varied. Poland and Hungary, for example, experienced uncertainty at the outset of transition when opposition movements came to power (in the form of leaders new to office), but this did not occur in Romania and Ukraine until later. (Case selection of these four countries is discussed below.)
In the second hypothesis, international institutions can imbue ideas with status—that is, render them desirable—if domestic actors seek social affirmation when engaged in promoting domestic reform (H2). International institutions may confer social recognition through partnership agreements, by providing public praise, or by awarding membership or money. When domestic actors solicit social affirmation, they seek association with the values and status embodied by an international institution.
The perceived status of international institutions corresponds closely to the quality of political competition.9 When political competition is robust, the salience of international opinion is higher because the domestic desire to win international approval also increases—especially among communist successor parties. I argue that the intensified desire to win approval is a result of such parties using international opinion to rebuild their post–Cold War image. In the absence of political competition, a ruling party has thorough control over political discourse and can choose the basis on which it cultivates domestic support. When two or more blocs are competing for power, however, international institutions have the opportunity to choose sides and confer legitimacy, and by doing so gain domestic partners that can speak for the preferences of international institutions at the national level.
The quality of political competition, and thus the status of international institutions, can change over time. In Romania and Ukraine the desire for international approbation was initially low but grew as political competition intensified. By contrast, in Poland and Hungary, regular political party turnover from the outset of transition ensured the early access of international institutions to domestic reform debates: the presence of at least two oppositional blocs encouraged parties to use international opinion as a point of competition. Political parties’ mimicking of one another based on the judgments of international institutions is one consequence of the elevated status of these institutions.
In the third hypothesis, assessing the credibility of policies requires measuring the extent to which international institutions take the technical correctness or political desirability of a policy for granted (H3). “Taken-for-grantedness” is high where a particular policy prescription is the outcome of a political battle already fought and settled in Western industrialized states. Central bank independence (Epstein 2006a) and democratic civil-military relations (Epstein 2005a) are two such examples. But a low level of policy contestation in Western states does not mean the distributional consequences of a particular policy are negligible. All economic arrangements produce winners and losers—even those portrayed as Pareto optimal.10 The question is whose interests deserve protection at the expense of others.
Where there is strong international consensus behind a policy, that policy is more likely to be perceived as credible and international institutions can more easily undermine the legitimacy of the losers’ claims in a target state, thus suppressing domestic political debate about the policy. But where the existing (Western) member states of international institutions behave inconsistently, space is created for target actors to question the credibility of a policy. A high level of taken-for-grantedness among promoters of a policy powerfully conveys to target actors who does and does not have legitimate claims.
The presence of the three conditions—the uncertainty of domestic actors, their perceived subordinated status relative to international institutions, and the high credibility of policies under consideration—enhances the power of international institutions to build transnational coalitions in support of their ideas and preferences.11 By imbuing ideas with elevated status, international institutions mobilize support for particular practices. The social dimensions of policies are crucial: their origins, their uses, their supporters, and even their detractors will determine the chances of compliance or defection.
Incentives that purportedly bolster a country’s wealth, security, and independence are not independent from perceptions of whether and how certain incentives make such contributions. As an example, selling the bulk of a country’s banking assets in response to IMF incentives may enhance that country’s long-term security by breaking up business networks and eliminating political lending. But the same policies could also be construed as diminishing long-term security by relegating authority over the availability of credit to foreigners and by potentially limiting state power. The point is that wealth, security, and independence are not objective entities. Their definitions depend on the answers to value-laden questions concerning wealth for whom, security from what, and, given that no country is literally autonomous, “independent” in what sense. In CEE states in transition, international institutions, where they had access, weighed in on precisely these value-laden questions, usually promoting the liberalizing or internationalizing perspective at the expense of national autonomy or tradition.
I use the uncertainty, status, and credibility hypotheses as reference points when evaluating alternative explanations, in the spirit of making my work more useful to others. I fully acknowledge the eclecticism of claiming that social forces are central to any explanation of political outcomes, while also adopting a positivist epistemology of hypothesis-testing to demonstrate that this is the case. The difficulty, of course, as at least two scholars have lucidly explained, is that the intersubjective nature of the concepts that populate our social world make them inextricably linked to us and thus not subject cause-effect processes.12
Equally, I recognize that my hypotheses, stated in their general form, are not readily falsifiable. Although my effort to identify falsifiable proxies with “concrete” measures in the real world may suggest a strong commitment to the hypothesis-testing epistemology, in fact it signals an awareness of the kind of intractable backward reasoning that is impossible to operationalize, for which some constructivist work has justifiably been criticized (Moravcsik 1999). And although I refer to the hypotheses throughout my empirical analysis—with comparisons between what a hypothesis would predict and observable outcomes—I am also telling a story in which perspectives compete for dominance, an avowedly interpretative exercise.
Dealing with such inconsistencies is daunting, but not prohibitive. Ultimately, research is a social enterprise in which deliberation among many scholars adjudicates the utility of competing approaches (see Vasquez 1997, 900). I have therefore chosen a strategy that speaks to warranted mainstream anxieties about methodology as well as to constructivist concerns about the importance of social forces for understanding politics.
CASE SELECTION
Sectors
I devote a chapter each to the institutionalization of CBI, the internationalization of bank ownership, the democratization of civil-military relations, and the denationalization of defense and foreign policy. The focus on financial sectors and military-security apparatuses serves several purposes. As proxies for capitalist development and democratic consolidation, outcomes in finance and defense are critical for measuring the extent of transition from central planning and authoritarian rule. Just as the erosion of state power over domestic capital allocation has become a lodestar of free market enterprise, so has the subordination of the armed forces to democratically accountable civilian officials become a cornerstone of democratic governance.
Finance and security are hard cases for constructivists. For all of the constructivist discussion about the unique human capacity to attach particular meanings to concepts and thus deliberate about them, finance and security seem to come awfully close to being features of a material base that exist independent of any meaning we might assign them (Wendt 1999). I therefore use these cases to demonstrate not only that rationalist approaches are incomplete on a case-by-case basis (Katzenstein 1996) but also that constructivist analyses can explain recurring patterns that have social and ideational sources—even in the difficult cases of money and security.
Finance and defense are also empirically important cases both in terms of domestic distribution and in terms of how the international system functions. Banking, for example, is one determinant of the state’s role in the economy (Gerschenkron 1962; Zysman 1983) and may shape institutional complementarities according to which other domestic political and economic institutions develop (Hall and Soskice 2001; Hancké, Rhodes, and Thatcher 2007). Defense planning—another example—has ramifications for the military’s role in society and consequent modes of governance (Ralston 1990). Both sectors also bear on the functioning of the international system insofar as they signal the willingness of states to embrace interdependence or preserve relative autonomy (Adler and Barnett 1998).
The range of sectors also provides variation on the first and third variables, concerning the uncertainty of actors and the credibility of international institutional policies. Sectoral discontinuity and consequent uncertainty during the CEE transitions gave international institutions more access to some areas of reform than others (H1). Militaries across CEE were reluctant to embrace NATO’s standards of democratic civil-military relations, in large measure because their legacies and traditions endured through the transition.13 Sectoral discontinuity and uncertainty were comparatively greater in banking, where price liberalization rendered state-socialist bankers unsure about what policies would best serve their interests.
The credibility of policies also varies across sectors, largely in keeping with the degree of international consensus underpinning a policy (H3). There was a strong (albeit new) international consensus in support of CBI and low inflation by the early 1990s, even if at the expense of national monetary flexibility. By contrast, at least at the outset of transition, there was a weaker consensus on the wisdom of selling state-owned banks mostly to foreign interests, given that the majority of OECD (Organisation for Economic Co-operation and Development) states had proved unwilling to follow a similar course themselves. The denationalization of defense planning was also problematic in states that had suffered inadequate security guarantees in World War II, because of the West’s perceived lack of credibility in living up to its security commitments.
Finally, the range of sectors necessitates coverage of several international institutions. My inclusion of NATO, the European Union, the IMF, and the World Bank, among others, helps address alternative explanations predicated on the power of markets, incentives, and membership independent of any social context. Similarly situated countries respond differently to the same incentives (Killick 1996; Stone 2002; Jacoby 2004; Vachudova 2005). At the same time, international institutions may offer the same rewards for different levels of compliance (Grabbe 2002; Hughes, Sasse, and Gordon 2004; Sasse 2005; Sissenich 2007). Uneven application of and inconsistent responses to incentives highlight the extent to which social forces come into play, thus undermining a strictly rationalist interpretation of events.
Countries
The choice of Poland, Hungary, Romania, and Ukraine as cases provides additional variation, principally in terms of sectoral or regime continuity and uncertainty (H1) and the perceived status of international institutions, measured according to the quality of political competition (H2). Because it is both representative and exceptional, Poland, the central case in the study, is particularly appropriate for examining the effects of international institutions on postcommunist domestic policymaking. It is representative in that Poland faced an array of challenges common to all states in the post-Soviet bloc—the result of decades of authoritarian rule and central planning and the economic and political crises they precipitated. From the standpoint of pursuing liberalization, however, Poland is exceptional. Episodes of democracy in Polish history have repeatedly given way to internal strife, foreign domination, and domestically generated authoritarianism. Even Solidarity, the most commonly cited of Poland’s anticommunist credentials, has an ambiguous relationship with liberal economic reform, given its origins as a movement fighting for the expansion of workers’ rights rather than market ideals (Powers and Cox 1997; Orenstein 2001; Ost 2005). Analysts made the most pessimistic forecasts for Poland in 1990 precisely because of its turbulent past, its nationalist proclivities, and the severity of its economic collapse. Those fears seemed to materialize in 1993 when Poland joined Lithuania as one of the first countries where communist successor parties expressing ambivalence about Western institutions returned to power.14
And yet within a decade of transition, liberal political and economic reforms had clearly prevailed in Poland. Despite volatile turnover in governing coalitions, the country consistently stayed the liberalizing course. Poland joined NATO and became an essential player in the first round of EU enlargement. In the same period, CBI was enshrined in the 1997 Constitution, and Polish politicians, albeit reluctantly, opened the banking sector to substantial foreign investment. In 2003, the United States chose Poland to lead the third stabilization zone in postinvasion Iraq.
Hungary, Romania, and Ukraine are to varying degrees comparable and contrasting. Hungary most resembles Poland in terms of both explanatory factors and liberalizing outcomes in the economic sphere. Hungary had for decades had a vibrant democratic opposition to communism, so international institutions had broad access to domestic reform processes in finance and, to a lesser extent, in defense. An elite political class born of that opposition identified with the values embedded in a range of Western policy prescriptions, from economic liberalization to military reform. Hungary was an obvious candidate for EU membership and ultimately—even though it was not geographically contiguous with the alliance—persuaded NATO that it should be included in the alliance’s first post–Cold War enlargement. Important for all those developments was the communist successor party’s eventual cooptation of Western reform ideas as it sought to create a political image more appropriate for the postcommunist era, in opposition to the more conservative center-right and nationalists.
Romania had quite different starting conditions. Owing to its highly repressive communist regime, economic backwardness, and lack of democratic opposition, and the ability of members of the communist apparatus to “manage” the revolution and govern in its aftermath—in sharp contrast to Poland, Hungary, and Czechoslovakia—those in power initially had little concern for social recognition from the West. But in a case of telescoped transformation, although international institutions initially lacked access to Romanian reform processes, by the early 2000s they had helped transform the political context such that everything from democratic civil-military relations to CBI was on the reform agenda and moving toward Western models. Whereas the potential benefits of both EU and NATO membership failed to elicit Romanian compliance in the first half of the 1990s, both major political groupings—including, crucially, the direct communist successors—were competing for international approval by the end of that decade.
Ukraine provides a different kind of variation because is not a member of either the European Union or NATO. The European Union and, to a lesser extent, NATO have held Ukraine at arm’s length.15 Although similar in some ways to Romania in its starting conditions, the divergence between the two countries since the embrace of Romania by NATO and the European Union illustrates the difference that international institutions can make. Despite the presence of a Ukrainian Westernizing elite, the country has only sporadically embraced those reform strategies most often associated with Western norms—democratization of civil-military relations, institutionalization of CBI, or denationalization of commercial banks through privatization with foreign capital. The European Union’s reluctance to categorize Ukraine as a potential candidate for membership has no doubt diminished the salience of Western influence on Ukrainian reform. Inclusion of the Ukraine case in this study helps address the best-practice argument in which observers claim that market pressures would have forced CEE states to adopt liberalizing reforms even in the absence of international institutional influence. Market pressures evidently have not been decisive in Ukraine, so it is not clear why they should have been decisive elsewhere.
The case selection here, of both sectors and countries, is designed to address the major questions considered in the book. With variation in my explanatory factors and controlled consistency in possible alternative explanations, the study demonstrates that the predicted outcomes correspond more frequently with the presence of uncertainty, status, or credibility than with rival hypotheses. Apart from design, however, the cases are also empirically important because of the countries’ strategic significance and what the issue areas reveal not only about domestic reform but also about the international orientation of states.
ALTERNATIVE APPROACHES
Four kinds of alternative approaches serve as points of comparison for my explanation of liberalization in finance and defense in postcommunist Europe: domestic politics, neoliberal institutionalism, conditionality, and socialization. Although I borrow from each of these approaches, I depart from them in significant ways. Domestic political explanations tend to downplay the role of international institutions. Neoliberal institutionalism and conditionality take a strictly rationalist view in which the properties of agents do not change. Socialization captures an understudied cause of political change but also, in my view, too narrowly defines the scope of constructivist claims.
Domestic Politics
Some studies understand democratic and economic outcomes in postcommunist Europe as primarily the consequence of domestic actors making decisions solely in reference to national factors (Vachudova and Snyder 1997; Fish 1998; Bunce 1999, 2003; Orenstein 2001; Reiter 2001; Grzymała-Busse 2002). I concede that domestic politics can indeed trump international forces, and point to the conditions under which this is likely to occur. I also argue, however, that an exclusively domestic approach mistakenly omits international pressures as a crucial source of reform.
An important theme in the comparative literature is the degree to which political competition facilitates the development of democratic institutions and free market enterprise. Fish (1998) argues that the first electoral outcomes of the postcommunist transition set the stage for liberalizing and privatizing trajectories thereafter. Where communist rulers were replaced with reformers, the result was more aggressive economic reform in the short run and greater sustainability of medium-term reform. In separate studies, Vachudova (2005) and Grzymała-Busse (2002) theorize that two prior conditions were essential to a victorious opposition and a subsequent high quality of political competition: the existence of a democratic resistance movement under communism and a communist party that reformed itself before the collapse of state socialism.16 Comparativists argue that political competition ensures greater transparency in the political system,17 and that it encourages consensus rather than polarization, equity rather than rent-seeking, and the emergence of future-oriented constituencies that trump detractors focused on the past.
I borrow from these approaches while also providing an alternative to them. As noted above, domestic conditions are central to my analysis. Indeed, I argue that at least early in the transition, the ideational appeal of Western international institutions to eastern European reformers can be mapped onto democratic opposition under communism. The presence of communist-era dissident movements and an opposition takeover during transition are powerful indicators of early postcommunist compliance with liberal norms. But a purely domestic explanation for political and economic outcomes raises two sets of issues.
First, comparative studies take the objective of liberalization for granted without exploring the political origins of the reform agenda—the uniformity of which constitutes a significant puzzle.18 Few scholars are concerned with questions about why liberalism and why now, because they typically assume that liberal objectives amount to “best practice.”19 Given the historical context in which CEE “had mimicked fascism in the 1930s and socialism in the 1950s” (Orenstein 2001, 3), it is also not surprising that the region should once again provide a microcosm of global trends.20 But the strong correlation between political trends external to and developments within CEE points to processes of international diffusion that in all likelihood facilitate such convergence. But these are conspicuous by their absence in comparative studies of transition.
A second weakness of cross-national comparisons that depend on country-level variables is that they have trouble explaining sector-level variation within countries. That cross-national studies “necessarily do violence to detail and fine distinctions” (Fish 1998, 32) is in my view an acceptable price to pay for the significant advances such generalizations bring to our understanding of macro trends. But to the extent that we can refine theories over time to reduce such “violence,” we should. Moreover, although efficient, the claim that political competition alone explains initial patterns of liberalization and democratization is somewhat reductionist in suggesting that characteristics desirable from a liberal point of view—that is, democratization and cross-sectoral liberalization—will cluster together in the “good” countries and not emerge in the “bad.”
The political competition thesis on its own thereby elides several important facts about the CEE region that contradict expectations. Otherwise liberal regimes could be “illiberal” when they so wished: Poland and Hungary had trouble democratizing civil-military relations; Slovenia insisted on maintaining significant state control over its banking sector; and Latvia was decidedly illiberal in matters of citizenship and linguistic rights for all of its citizens. As for “illiberal” regimes, Bulgaria and Romania ultimately institutionalized CBI, and Ukraine may yet do so. In the medium term, liberal and illiberal policies may not conform to the democratic starting conditions that initially resulted in high- or low-quality political competition. Only by addressing the international dimensions of transition and how they affect domestic politics can we explain such apparent anomalies.
Neoliberal Institutionalism and Conditionality
Neoliberal institutionalism, which takes its assumptions and insights from contractual economics, is also relevant to understanding how international institutions affect state behavior (Keohane 1984; Haftendorn, Keohane, and Wallander 1999). According to this approach, international institutions arise out of uncertainty and insecurity and the desire of states to counter both by institutionalizing the rules, norms, and procedures that create transparency. The rationality assumption on which this approach is premised suggests that actors’ interests are exogenous. This means that rules, norms, and procedures have only regulative, not constitutive, effects (Wallander 1999). Institutions can thus change how actors behave, but not who or what they are.
The rationality assumption is problematic because it understates the potential power of international institutions and leads to logical inconsistencies between theory and evidence. For example, in explaining the post–Cold War preservation and adaptability of NATO, Wallander uses a transaction costs approach to develop hypotheses about when states adapt rather than dissolve institutions in response to altered geostrategic conditions. She argues that if it is less costly to change old institutions than to create new ones, then “states will choose to sustain existing arrangements rather than abandon them” (2000, 706). She goes on to take stock of NATO’s specific and general assets and the efficiency gains they produce, arguing that the cost-efficiency of the alliance’s preservation was linked to the adaptability of its risk-management assets to post–Cold War security concerns (712).
Although Wallander concedes that the “objectives, beliefs, and roles” of particular states are relevant to institutional adaptation, she maintains that structural incentives and opportunities are more important.21 The concession is noteworthy, however, for throughout her presentation of evidence, Wallander repeatedly points to political processes and motivations that fall outside the ontological assumptions of a transaction costs approach, such as the importance of NATO after World War II for bolstering public support for Germany’s semi-sovereign status, for cultivating “trust” among alliance members, and for “enmeshing” Turkey and Greece in a “web of relations” (716). In the post–Cold War period, NATO did the same for the CEE states. The alliance’s denationalizing, democratizing efforts most certainly had regulatory effects. But they also changed these states and their polities and policies (a constitutive effect), especially regarding the balance of power among groups in society and their international orientation. Moreover, as Wallander also points out, NATO officials often talked about the primacy of creating solidarity in this process, rather than the need to produce “efficiencies” (726–27).
Neoliberal institutionalism poses two, related problems. The first is ontological inconsistency. It is difficult to sustain the argument that transparency is the putative objective of an international institution but that transparency can be achieved only through solidarity. For while transparency may exist independent of our competing perceptions of it (and I am skeptical even on this point), solidarity certainly does not. This means that for NATO to have the effects that neoliberal institutionalists attribute to it, they must assume something different about the nature of institutions and actors than they acknowledge. Indeed, implicit in Wallander’s analysis is an assumption about the centrality of intersubjective social forces that in turn contribute to outcomes—and not just on the margins.
The second problem is the language of “costs.” I would not dispute the claim that states work to preserve institutions when the costs of losing them are higher than those of keeping them. But then the argument hinges on what constitutes cost—a judgment that I argue is informed by actors’ interests that can readily change over time. Both problems—ontological inconsistency and the indeterminacy of costs—stem from the rationality assumption. My rejection of it does not mean that on the whole I think people are irrational. It simply means that we have to understand the terms of rationality and where they come from if discussions about costs are to have any meaning or measurability.
Research on EU conditionality also tends to view states’ choices about whether to comply in terms of costs (e.g., Moravcsik and Vachudova 2003; Kelley 2004a, 2004b; Schimmelfennig 2005; Schimmelfennig and Sedelmeier 2005; Vachudova 2005). Assessing the costs of compliance is certainly a logical first step, given that all former Soviet satellites would in theory have been equally eligible to join European institutions but responded differently to that uniform incentive. But again, in the conditionality literature, “costs” are normally not well enough specified in the hypotheses to tell us in advance whether we could expect compliance or not.
Schimmelfennig argues, for example, that between 1994 and 1998, Slovakia failed to comply with EU and NATO prescriptions concerning minority rights legislation because the domestic power costs for Prime Minister Vladimir Mečiar would have been too high—that is, his nationalist coalition partners would have brought down the government (2005, 849). As it turned out, the costs of not complying were also high for Mečiar; his party lost power in the next elections in no small measure because Slovak opposition parties and groups were able to rally the public that strongly favored European integration (Vachudova 2005, chap. 6). The theoretical point here is that had Mečiar made the opposite calculation—to advance Slovakian compliance in the short term with an eye toward longer-term political viability—Schimmelfennig would still be right. In other words, hypotheses premised on costs are generally not falsifiable because most policies imply some cost and it is usually not obvious what course actors should prefer, except in retrospect.
More important for my purposes, however, is that conditionality arguments do not normally investigate the origins of interests. More interesting than the fact that Mečiar seemed to be trapped in a nationalist coalition that was unwilling to comply with Western minority rights prescriptions is that Mečiar’s governing partners apparently perceived that the right to continue discriminating against minorities was more valuable than EU or NATO membership. Rather than dismiss this preference as irrational, my theoretical framework systematically investigates its origins—by measuring the uncertainty of actors, the perceived relative status of international institutions, and the credibility of their policies in terms of Western practice. On at the least the third of these variables my framework would anticipate such problems with compliance, based on the uneven adherence to any codified minority rights policy in western Europe (Grabbe 2005; Sasse 2005).
My aim is not to dismiss the power of conditionality or to argue that a social context informed by uncertainty, status, and credibility independent of incentives more often explains outcomes. Rather, the purpose is to specify why conditionality is compelling in some instances but apparently meaningless in others. The attention to social context is meant to shed light on exactly that question.
Socialization
The recent attention to socialization in international relations is a welcome innovation that has expanded our understanding of what drives political and institutional change (Checkel 2001b, 2005; Johnston 2001, 2003; Kelley 2004a; Gheciu 2005a, 2005b). The variables presented here (uncertainty, status, and credibility) overlap with those used for theorizing the impact of persuasion (Checkel 2001b; Johnston 2001; Gheciu 2005a). But important points of intellectual convergence notwithstanding, there are two, related ways in which my theoretical framework departs from this literature. First, socialization is too narrow to capture the full range of outcomes this study examines; and second, as noted above, I disagree with the insistence on distinctive—instrumental and obligatory—logics of actions.
Although I refer to “consensus” in this study, I am not primarily interested in the causes of socialization in the strictest sense of that term. Nor do I make strong claims about how the political processes examined here alter privately held beliefs. The growing literature on argumentation, persuasion, and socialization rightly emphasizes that the “distribution of knowledge” in the international system bears on political outcomes. I take the position, however, that community-held norms about what constitutes an appropriate belief, as expressed in language or in action, is the more relevant measure on liberalizing outcomes in post-communist Europe. The reasons for this are twofold. First, while beliefs are not observable, language and action are. Second, since language and action can readily belie beliefs, I argue that it is language and action rather than beliefs that must have proximate effects on outcomes. This is particularly salient to my argument when one considers the power of social pressure to shape conflicts and their resolution in the political sphere.
Given my emphasis on actors’ beliefs about where authority lies based on their language and actions, Checkel’s analysis might seem to subsume the processes in my study under what he calls “Type I socialization” (2005, 804). Checkel defines Type I socialization as the perfunctory adoption of rules that does not require actors’ reflexivity but does necessitate a shift from the logic of consequences to the logic of appropriateness. It is doubtful, however, that perfunctory adherence to rules actually constitutes socialization, since Checkel stipulates on the same page that socialization implies an internalization of new rules. More important for my argument, however, is that not only is the shift from a logic of consequences to a logic of appropriateness unobservable, but under most circumstances actors are not adhering to either one logic or the other—they are drawing on both. Rules emerge as a consequence of social interaction, to be sure. But a failure to adhere to social rules can also carry costs—a fact not lost on the generals and bankers responsible for weighing national autonomy and tradition against international pressures.
Attention to socialization in international politics narrows the scope of constructivist claims by insisting that we show there is a shift away from the logic of consequences and that actors have internalized new rules (see also Epstein 2005b). With such evidentiary requirements, social forces risk being relegated to that rare category of events in which actors are persuaded of the rightness of an idea and implement policy on that basis. Indeed, the either/or approach in which international institutions have either persuaded domestic actors or pressured them into complying has unjustifiably limited the salience of constructivist insights and social forces.
Kelley (2004a, 2004b), for example, in reference to minority protection and language policies in four postcommunist countries, argues that conditionality seems to be the most powerful mechanism in assuring legislative compliance with the policy prescriptions of the Council of Europe, the European Union, and the Organization for Security and Cooperation in Europe. She presents three propositions that, when tested against the evidence, seem to show that only in very few cases does socialization register an independent effect, and then only when domestic opposition is low. Kelley concedes that it is difficult to separate the effects of socialization from conditionality because there are few cases in which European institutions apply conditionality without also making some effort to persuade target states of the desirability of a policy (2004b, 439). She nevertheless concludes that the absence of socialization would probably not have seriously undermined the power of conditionality to encourage states to adopt liberal legislation, even where domestic opposition was high (449–53).
I have no doubt that Kelley’s claims are generally correct, but her conceptualization of socialization, which is consistent with Checkel’s, is too narrow to infer anything about the constructivist-rationalist debate. Normative pressure, as Kelley defines it, “occurs when an institution advises a government on the direction a policy should take, offering no reward other than the approbation of the institution” (2004a, 3). Because the definition limits the possible constructivist scope of explanation to instances in which target actors are persuaded by the power of arguments alone, it understates the degree to which social forces could be at play (Epstein 2005b). Social processes that might contribute to an explanation of why states respond variably to EU minority rights prescriptions include the degree to which western European states follow such prescriptions, the perceived value of EU membership versus national autonomy, and the prior politicization of ethnic differences. These variables roughly correspond to credibility, status, and uncertainty—the presence or absence of which, I argue, explains whether international institutions can embed liberal policies in transition states.
CONCLUSION
Although I specify the processes through which international institutions cultivate consensus around the policy manifestations of a liberal worldview, the argument is more broadly applicable to contemporary global politics. Capitalist and democratic cultural forms increasingly animate societies’ understandings of our world.22 Technology in all its applications—transport, communication, and international economic flows—may well shape the material bases that in turn make the global spread of particular cultural forms possible. But both material bases and the technology that structures them are underdetermining insofar as neither bears on the central issue of why these particular cultural forms. By addressing this critical question in the context of postcommunist transition, I hope to contribute to more general debates about how knowledge is transmitted in the international system and with what political consequences.
My use of uncertainty, status, and credibility as core elements of the analysis of what makes incentives powerful distinguishes this approach from studies premised on stable interests or the rationality assumption. However, my simultaneous insistence on the role of instrumentality in assigning meanings to concepts also distinguishes my theory of institutional influence from constructivist work dedicated to specifying the conditions under which competing logics of action—consequential and obligatory—obtain. By detailing how the initial establishment and further embedding of a liberal worldview take place, I also demonstrate that incentives embedded in a social context have both regulative and constitutive effects. Where international institutions have had the power to delineate what kind of capitalism and what kind of defense, they are also defining what kind of state.
Where the social context in postcommunist Europe allowed, international institutions limited the range of policy options that politicians could pursue and circumscribed the kinds of arguments they could use to cultivate public support. The result in finance and defense has often, though not always, been denationalization, such that governments have opted for market-oriented economic policies and multilateral security strategies. Limiting policy options and discourses to denationalization transforms previously contested ideas into commonly held assumptions. Denationalization in finance and defense has distributional consequences domestically. But it also signals a state’s willingness to engage in interdependence or defend relative levels of autonomy.
As the evidence will show, the distribution of knowledge in these cases is not about convergence around economic best practice or optimal strategies for security maximization. It is, rather, about convergence around what constitutes rational political action in a particular social context, a perhaps even more profound manifestation of a state’s intention to signal its solidarity with a particular community. The role of international institutions in cultivating support for liberalism brings us closer to understanding processes of reconciliation or alienation between national politics and our increasingly integrated international system.
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