Policy-Making at the European Periphery

The Case of Croatia

Zdravko Petak, Kristijan Kotarski, Zdravko Petak, Kristijan Kotarski, Zdravko Petak, Kristijan Kotarski

• Publisher: Palgrave Macmillan
• Year: 2018
• ISBN:
  9783319735825
• Topic: Politica e relazioni internazionali
• Subtopic: Politica pubblica

This book examines Croatia's economic and political transformation over the last 30 years. It brings together the best political scientists, macroeconomists and public finance experts from Croatia to provide an in-depth analysis of the Croatian policy-making context and the impact of Europeanization upon its domestic institutional framework. The second part of the book scrutinizes the political economy context and Croatia's long-term macroeconomic under-performance, especially in comparison to other transition economies. The final part explores sectoral public policies, including cohesion policy, education, health, pensions, and local government. The book offers a unique blend of Croatia's political economy framework and public policy analysis.

© The Author(s) 2019

Zdravko Petak and Kristijan Kotarski (eds.)Policy-Making at the European PeripheryNew Perspectives on South-East Europehttps://doi.org/10.1007/978-3-319-73582-5_1

Begin Abstract

1. Croatia’s Post-communist Transition Experience: The Paradox of Initial Advantage Turning into a Middle-Income Trap

Kristijan Kotarski¹ and Zdravko Petak¹

(1)

Faculty of Political Science, University of Zagreb, Zagreb, Croatia

Kristijan Kotarski (Corresponding author)

Email: [email protected]

Zdravko Petak

Email: [email protected]

End Abstract

1.1 Introduction

Understanding the political and economic development of Croatia after it gained independence and left the Yugoslav federation in 1991 requires an understanding of the dynamics of the political and economic development that preceded these events. At the peak of industrialization and the development of the capitalist system in Europe (which took place rather late in Croatian lands, in the late nineteenth century), Croatia—then part of Austria-Hungary—was a peripheral European country. Croatia, Slavonia and Dalmatia were among the most underdeveloped parts of the Austro-Hungarian Empire (Good 1994: 877). No essential change ensued after Croatia had joined the Kingdom of Serbs, Croats and Slovenes in 1918. On the eve of World War II, Yugoslavia was a backwater Balkan country, less developed than Czechoslovakia, Hungary and Poland of the day.¹ Although Croatia (together with Slovenia) was located in the western part of the country, more developed than its remaining regions, it was nevertheless on the far periphery of Europe in terms of economy, with inadequate industry and a strikingly large share of rural population (Vinski 1970). Immediately after World War II, Croatia still lagged behind all of Central Europe and its GDP was even lower than in some Southeastern European countries. In 1945, Croatia became part of the Yugoslav federation and a socialist system was introduced. In the ensuing period Croatia saw an intensive economic development, together with the rest of Yugoslavia (Woodward 1995). Between 1952 and 1980 , Yugoslavia’s GDP grew by 4.72 times and Croatia’s by 5.18 times (The Maddison Project 2013)—considerably more than the GDPs of the then socialist countries of Central Europe, all of which were more developed than Croatia at the outset. Of those former socialist countries, only Slovenia, as the most developed federal unit of Yugoslavia, was more developed than Croatia.² Up until that time, the country had undergone intensive industrialization and urbanization and the share of its rural population had been substantially reduced, gradually shifting Croatia (together with the rest of former Yugoslavia) from the very far periphery to the semi-periphery of Europe.

Croatia became a medium developed country, strongly oriented to the internal Yugoslav market, and was therefore badly affected by the subsequent disintegration of that market. The amount of Croatian export to third countries was approximately half the amount of its export to other republics of the then Yugoslav federation (Petak 2005).³ However, in the early 1980s, a marked stagnation of the economic growth occurred (Dubravčić 1993: 266). Following the negative growth rates in 1982 and 1983, GDP grew insignificantly; it reached its high in 1986 but that peak was followed by another significant drop. In 1990, when the Croatian Democratic Union led by Franjo Tuđman scored a convincing victory in the first free multiparty election in Croatia, the country was already in a severe recession and had dropped back to the level of the late 1970s (Bartlett 2003: 89). In spite of this, at the beginning of the transformation of European post-communist countries into democratic systems with market economies, Croatia and other developed parts of former Yugoslavia constituted the most developed part of the socialist world, together with Czech Republic. In the following year (1991), Croatia and Slovenia opted for independence and departure from the federation they had belonged to. This triggered a brutal war in Croatia, with thousands of lives lost and with enormous destruction. However, after the end of the Homeland War and restoration of peace in 1995, Croatia never got back on track of the development it had seen in the 1960s and 1970s. The newly gained independence and disintegration of the Yugoslav single market, the economic and social costs of the Homeland War, and the emergence of a clientelistic system centred around various economic and social groups marked the descent of Croatia’s economy into a sort of crony capitalism (Franičević and Bićanić 2007: 640–641). By not limiting its role on regulatory goals the state, fully under control of the ruling party, was left open to “numerous acts of clientelism, favouritism, nepotism, localism, informal dealings and outright corruption” (Franičević 1999: 38), which strongly affected the development of institutions and public policies, causing Croatia to lag behind the Central European post-communist countries more and more. Even after the centre-left coalition won the 2000 election, thus ending the absolute domination of the Croatian Democratic Union (HDZ), which had ruled the country on its own in the 1990s, things did not change substantially.

Reasons for this should be sought in the institutional arrangements that were established and the ways of policymaking that were introduced after the evident signs of stagnation of modernization efforts of socialist Yugoslavia in the 1980s (Rusinow 1988: 1–5).⁴ These periods of stagnation were additionally intensified by the development of institutions and the ways of policymaking in the early and mid-1990s, which had all the typical features of crony capitalism (Franičević and Bićanić 2007). The previously mentioned processes riveted Croatia deeply into the European periphery and the country never managed to get back on track of the modernization and development it saw under socialism, particularly in 1960s and 1970s. The system of institutional arrangements established in the early 1990s debilitated the modernization and entrepreneurial potentials of the society, causing the country’s gradual descent to the bottom of the list of the present-day post-communist member states of the European Union.

The central puzzle of Croatia’s post-communist transition has been therefore the extent of economic and institutional divergence with new EU member states bound by common historical legacy and imperatives of institutional transformation, following a collapse of the old institutional order. Comparative historical analysis points out that there are two critical junctures in Croatia’s growth trajectory that led to severe economic divergence with the European core, and later even with countries portrayed as a semi-periphery and periphery. The first one has already been mentioned and it refers to the period of socialist stagnation in the 1980s. The second one came on the wings of the global financial crisis (GFC), which ushered in the lost decade since 2008. Figure 1.1 shows that Croatia’s GDP outperformed that of its socialist peers in the period from 1952 to 1980, although having more unfavourable initial position (Bolt and van Zanden 2013).

Fig. 1.1

GDP per capita 1952–1990 (in Geary-Khamis dollars) (Source: Maddison project (2013), author’s own calculation)

Despite authoritarian rule and socialist economy, the Yugoslav brand of socialism allowed at least some private initiative, unlike the more centralized approach taken by the rest of the Eastern bloc. By 1980, Croatia managed to close the gap with military dictatorships such as Portugal, Spain and Greece, even though it gradually diverged with the European core as exemplified by Austria and North/Central Italy. However, the latter trend was only reinforced due to the onset of socialist stagnation in the 1980s. On top of that came the economic devastation that arose from the Homeland War. However, until 1998 Croatia at least kept pace with the average GDP per capita of new member states (Central and Eastern Europe, CEE-10) as indicated by Palić et al. in Chap. 7 of this volume. Nevertheless, political choices made after gaining independence, such as partial reform equilibrium, the establishment of vast clientelistic networks and a captured state, are the major culprits of economic divergence with CEE-10 since 1999 (for a detailed discussion on ‘captured state’, see Chaps. 2 and 5, this volume). All of this came with even more vengeance when the GFC hit in 2008 and the captured state, deprived of essential steering capacity, collided with major external shock.

Wherein lies the rub for the emergence of inhibiting political economy structures that are likely to account for the potential continuation of divergence? This introductory chapter will firstly address the specific political economy of Croatia’s transition and its impact on the current governance structure. Secondly, it will analyse the type of capitalism which emerged and consolidated in the years since Croatia’s independence by using conceptualization first introduced by ...

Table of contents

• Cover
• Front Matter
• 1. Croatia’s Post-communist Transition Experience: The Paradox of Initial Advantage Turning into a Middle-Income Trap
• Part I. Policy-Making Process in the Newest EU Member State
• Part II. Croatia’s Political Economy
• Part III. Sectoral Public Policies
• Back Matter