Capital, Coercion, and Postcommunist States

Gerald Easter

• Publisher: Cornell University Press
• Year: 2012
• ISBN:
  9780801465277
• Topic: Economia
• Subtopic: Politica economica

The postcommunist transitions produced two very different types of states. The "contractual" state is associated with the countries of Eastern Europe, which moved toward democratic regimes, consensual relations with society, and clear boundaries between political power and economic wealth. The "predatory" state is associated with the successors to the USSR, which instead developed authoritarian regimes, coercive relations with society, and poorly defined boundaries between the political and economic realms. In Capital, Coercion, and Postcommunist States, Gerald M. Easter shows how the cumulative result of the many battles between state coercion and societal capital over taxation gave rise to these distinctive transition outcomes. Easter's fiscal sociology of the postcommunist state highlights the interconnected paths that led from the fiscal crisis of the old regime through the revenue bargains of transitional tax regimes to the eventual reconfiguration of state-society relations. His focused comparison of Poland and Russia exemplifies postcommunism's divergent institutional forms. The Polish case shows how conflicts over taxation influenced the emergence of a rule-of-law contractual state, social-market capitalism, and civil society. The Russian case reveals how revenue imperatives reinforced the emergence of a rule-by-law predatory state, concessions-style capitalism, and dependent society.

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TOWARD A FISCAL SOCIOLOGY OF THE POSTCOMMUNIST STATE

The unexpected collapse of the communist regimes of Eastern Europe was an event not to be missed by social scientists. The once-feared Soviet Leviathan and its formidable totalitarian bloc crumbled into two dozen independent nation-states, rechristened the “ideal laboratory,” wherein social science theories on markets and democracy could be applied. Most influential in this endeavor were neoliberal economists, behavioralists, and transitologists, none of whom made the state a central feature of analysis. Instead, they shared expectations about individual and elite behavior that rested on a “liberal” conceptualization of state and society. But early postcommunist reform experiments produced unanticipated and disappointing results. Democracy was derailed, capitalism was corrupted, financial systems failed, and criminal rackets thrived. In the time it takes to publish a dissertation, scholarship on the postcommunist transition experienced an abrupt shift in focus. The ideal laboratory was closed, and the state was brought back in.

The second wave of postcommunist scholarship pointed to the “weak” state to explain Eastern Europe’s wayward transition outcomes. But while scholars now agreed that a “strong” state was a necessary component in making markets, crafting democracy, and upholding the rule of law, they still disagreed over the principal sources of “weakness” of the postcommunist state. Was the state too accommodating, too avaricious, or just too inept? The real-life event that prompted a social science return to the postcommunist state was the 1998 financial crisis, which wreaked havoc on state finances across the region. Indeed, this event led some scholars to identify underdeveloped fiscal capacity as the principal source of state weakness. From this observation emerged a lively literature on the comparative politics of the postcommunist tax state. It is upon this foundation that this book builds a fiscal sociology framework. Fiscal sociology was originally devised as a state-centered conceptual alternative to Marx and the Market. Although long missing from contemporary social science, recent scholarly efforts have begun to elaborate a neo-fiscal sociology, which this book contributes to through a comparative case study of the postcommunist state.

Leviathan Once Lost, but Now Found: In Search of the Postcommunist State

In September 1993, as a newly minted PhD and visiting professor at Georgetown University, I was invited to a meeting of Washington-area political scientists to discuss the ongoing political crisis in Moscow, which had just turned violent. A most reputable senior political scientist, though not a Russian specialist, clearly exasperated by what he was hearing, pulled out a copy of the U.S. Constitution and exclaimed: “Here is a constitution that works, all Russia needs to do is to adopt it.” In retrospect, this advice does not quite seem sufficient to have brought resolution to Russia’s protracted transition crisis, though implicit versions of this point of view were entrenched in the first wave of postcommunist political and economic scholarship; that is, the notion that a new set of institutions and rules would promote new behavior by individual actors. It is a notion associated with the “neoliberal” paradigm.

The collapse of communism fundamentally changed political life in Eastern Europe as well as political science about Eastern Europe. Regional specialists came in for harsh criticism for being too insulated by theoretical generalists, who reorganized the research agenda of postcommunist studies. This scholarly regime change incorporated the “neoliberal” paradigm.1 It was delivered by neoliberal economists and economics-influenced political scientists, whose policy and academic influence were ascendant in a moment of triumphant global capitalism.

The neoliberal paradigm contained several basic assumptions about human nature, society, and the state: All humans possess similar desires and fears, and are thus susceptible to similar incentives and threats. All humans are capable of reasoning their way to actions that will realize their desires and minimize their fears. Society is an aggregate of self-interested individuals, at least some of whom figure out that their particular interests are better served through selective associations, from which are derived both market and state. Because the market is driven by private interests, as opposed to the public interest-driven state, it is a more efficient, and thus, a preferred form of association. Neoliberalism prefers a minimalist utilitarian state, which comprises politically neutral institutions charged with private conflict resolution and public safety.2 The first wave of scholarship on the postcommunist transition assumed features of this worldview: individual rationality, blank-slate institutions, state-societal autonomy, and universal applicability.

The influence of neoliberalism is especially noteworthy, since the stakes were more than academic.3 Early assessments of the postcommunist transition were based on assumptions of an ideal neoliberal state. The main concern was the creation of a conducive macro-setting for the market. The state was viewed as inherently antagonistic to the market, which could take care of itself. In 1993, Anders Aslund and a leading cast of neoliberal economist-advisers to Russia published a two-hundred-page collection of essays commenting on the initial progress of economic reform and discussing designs for the next phase; the role of the state consumed just three pages.4 Similarly, in an early evaluation of Polish reforms, Jeffrey Sachs identified “five pillars of an economic transition to a market economy,” including stabilization, liberalization, privatization, a social safety net, and Western economic aid. His analysis had no role for the state, although he cautioned that politics, in the form of “demagogues ready to seek political power by playing on the public’s fears,” posed the “hardest part of the transformation.”5

According to the neoliberal script, the transition economy was supposed to follow a “U-curve,” with a steep drop in production as the old state sector wilted, followed by a precipitous upturn as a new private sector blossomed.6 But expectations for the spontaneous emergence of Western-like markets were dashed as economies in East Central Europe only slowly improved, the former Soviet Union languished in depression and financial collapse, and the war-wracked southern tier became a smugglers’ paradise of black market banditry. Unleashing individual incentive in the service of market capitalism was a more complex task under postcommunist conditions than theoretical generalists had assumed. The neoliberal script needed a rewrite.

The critique of neoliberalism is now its own sizable literature, in four varieties: denial, repentance, vindication, and scorn. “Denial” is expressed by those who long insisted that, as messy as things might look, most of Eastern Europe had in fact constructed market capitalism. Growth and prosperity were being concealed by deliberately deflated economic statistics; any persisting problems were not due to neoliberal plans per se, but to the bad intentions of those who implemented them.7 “Repentance” is expressed by economists who early on advocated macropolicy radical reform, only to later acknowledge its shortcomings in the absence of accompanying institutional and cultural support.8 “Vindication” is expressed by economists with area studies training, who were consistently skeptical that manipulations of macrolevel incentive structures would cause a shift in individual behavior, which cumulatively would lead to the emergence of market capitalism.9 “Scorn” is expressed by analysts who view Russia’s neoliberal experiment as an imperialistic sham, which some of its leading academic proponents used to enrich themselves personally.10

The neoliberal autopsy on the socialist economy attributed the main cause of its miserable demise to state suffocation of society’s natural economic inclinations. Thus, the disentangling of the state from the economy to uncover the suppressed markets within was the priority task of the transition. “Many economic problems solve themselves,” assured Jeffrey Sachs. “Markets spring up as soon as central planning bureaucrats vacate the field.”11 But the departed communist state bequeathed more than just economic planners. The ideal neoliberal world may be one of butchers, bakers, and candlestick makers—those who create capital—but the real postcommunist world was one of cops, colonels, and racketeers—those who trade in coercion. History is replete with examples of demobilized agents of coercion who, once official political hostilities have ceased, managed to adapt their violent skills to unofficial economic activities. The end of the cold war brought one of the largest demobilizations in history, which was ignored because coercion was not an essential component in making markets in the neoliberal lexicon.12 Coercion was not subordinated and tamed in a legal system. The coercive talent of the communist state did not fade away like an old soldier; instead, it became a defining feature of many transition economies in the region.13 Postcommunist scholars who wanted to follow the lead of economists might have profited more from reading Schelling’s cool appraisal of “criminal enterprise” than Friedman’s warm praise of “free enterprise.”14

The second wave of postcommunist scholarship was launched in reaction to the transition’s deviant outcomes: reinvigorated authoritarianism, crony capitalism, criminal rackets, and social decline. These negative phenomena were blamed on a series of institutional weaknesses—contested laws, ineffective enforcement, broken bureaucracies. The tasks of the state, that is.15 The second wave began with a scholarly consensus that an enfeebled state is not an asset, but a liability to a transition economy. Disagreement existed over the sources of state weakness, however. To explain postcommunism’s wayward development, analysts compiled three competing conceptualizations of the postcommunist state: captured, incapable, and grabbing.16

In the second wave, the conceptual heir to the neoliberal state is the “captured state,” in which the public powers of the state are in service to private interests.17 From this perspective, the state is weak and society is strong, or at least a segment of society is strong. The state is effectively seized by special interests, who use its rule-making, administrative, and coercive agencies for their personal benefit, instead of for the public good. Accordingly, postcommunist reforms went awry when narrow cliques high-jacked the transition for their own selfish ends. The concept was inspired by the rise of the Russian “oligarchs” in the mid-1990s, a small group of newly rich business tycoons, whose political influence peaked during President Boris Yeltsin’s wobbly second term. Curiously, the concept has endured, even though under President Vladimir Putin it seems increasingly clear that it is the “oligarchs” who have been captured, figuratively and literally. The concept was fundamentally flawed because of implicit “liberal” assumptions: first, its presumption that society-based capital was autonomous from the state; and second, its neglect of the enormous reserve of coercive resources possessed by the state. To be captured and to be for sale, as it turns out, are quite different situations.

Second, some scholars instead conceptualized an “incapable state,” redirecting attention to issues of implementation, enforcement, and compliance.18 From this view, both state and society were weak—disconnected and disorganized. The source of weakness was institutional underdevelopment, which caused postcommunism’s dysfunction, disparities, and disappointments. The incapable state could not perform the most basic tasks associated with the modern state. Its claim as rule-maker was disputed. Its claim to monopolize the means of violence was challenged. And, its claim on society’s resources was disregarded. Economic transactions were badly regulated, contract enforcement was in doubt, financial investments were vulnerable, and property rights were unsecured. Criminal protection rackets and private police forces supplanted the state’s monopoly on coercion. Operating in an institutional void, state and societal actors fell back on survival strategies learned under the old regime: building patron-client networks. In so doing, personalistic practices of the past persisted and corrupted institutional development in the present.19 The incapable state concept also underestimated the potential for state-directed coercion to shape institutional outcomes, and did not give enough credit to the actors themselves for their strategic, though incapacitating, choices.

The third concept is the state as “grabbing hand,” as opposed to the market’s “invisible hand.”20 From this view, the state was strong and society was weak. No shortage of coercion here. The grabbing state is part of an intellectual tradition that goes back at least as far as Machiavelli. Its contemporary “neorealist” incarnation fancies sinister-sounding metaphors: the state as predator, bandit, and racketeer.21 This state was capable of making policy and setting rules with minimal interference from societal actors. Moreover, it maintained the infrastructural capabilities to implement policy and enforce the rules when it so desired. Postcommunism’s protracted economic crisis was attributed to the state’s resilient capacity for distortion and extortion through interventionist and regulationist forays. The state employed its coercive and rule-making powers to exact rents from the business sector. In so doing, it undermined market development by creating perverse incentives. To avoid the grabbing hand, transactions took cover in the shadow of the unofficial economy and investment capital sought safe haven beyond the state’s reach. By manipulating the redistribution of resources, the state designated victors and losers in the transition economy. The problem of the grabbing state is not ineptitude, but its blatant disregard for the public good. It confiscates, coerces, and connives for its own advantage, with little regard for even its own rules. The main weakness of the grabbing state concept is that it sometimes exaggerates the capability and coherence of the postcommunist state.

Of course, there really is not one type of postcommunist state. Cross-national observation reveals varying degrees of capture, incompetence, and grabbiness, as well as efficiency, accountability, and service. Most analysts recognize that each of the above characterizations can be found in one place or another within any particular state’s multiple spheres of activity. The state is not a single entity, nor is it Janus-faced. The state is a multifaceted institution, whose representative human agents often act at cross-purposes. What is called the state for the sake of analytical convenience is a complex organization riven with horizontal and vertical, external and internal, formal and informal cleavages. Each above conceptualization, however, highlights what is suspected to be the root political-institutional cause for ...

Table of contents

• Preface
• Introduction
• 1. Toward a Fiscal Sociology of the Postcommunist State
• 2. The Fiscal Crisis of the Old Regime
• 3. Politics of Tax Reform: Making (and Unmaking) Revenue Bargains
• 4. State Meets Society in the Transitional Tax Regime
• 5. Building Fiscal Capacity in Postcommunist States
• 6. Taxation and the Reconfiguration of State and Society
• Conclusions
• Notes
• Selected Bibliography