Back to Socialism in Central Europe

Central Europe’s four-pack of liberated former Soviet colonies — Poland, Hungary, Slovakia and the Czech Republic — have been drifting away from free markets and democracy and back toward socialism and authoritarianism.

According to Marian L. Tupy, a policy analyst with the Cato Institute, Central Europe’s liberal political parties (i.e., free market parties) have been losing out at the polls to populist parties that combine left-wing economics with right-wing social attitudes. I talked to Tupy, who has an article about the rise of illiberalism in Central Europe in the January Reason magazine, by telephone Tuesday from his offices in Washington.

Generally, how have Poland, Hungary, Slovakia and the Czech Republic done economically, politically and socially since the end of communism?

Marian L. Tupy: I have no doubt that the current social and economic situation in Central Europe is better than it was in the dying days of communism. Standard of living judged by income per capita adjusted for inflation and purchasing power parity is at historical highs. Longevity is up. School enrollment is up. The people of Central Europe enjoy more material goods, and, of course, they are free. So both from an economic and a political perspective, it seems to me that the past 17 years have been pretty successful.

How do you define these new populist parties?

Tupy: Populist parties in Central Europe tend to promise a lot of things which ultimately are contradictory and which they cannot possibly deliver within the limits of a modern, free-market liberal democracy and also a capitalist economy. They may promise greater job protection and at the same time they may promise lower unemployment. They may promise greater welfare payments and at the same time lower budget deficits.

What is interesting about the populist parties is that … they are the opposite of liberals. Liberals, in the classical sense of the word, emphasize the need for economic as well as social autonomy of the individual. In other words, the individual should be able to make independent decisions in his personal life and also be able to — autonomously and free of government intervention — participate in the economic life. Populists have really combined illiberal elements — or the opposite of both. They emphasis religious conservatism and nationalism and at the same time they emphasize socialist economic thinking.

What is causing the popularity of these illiberal populist parties?

Tupy: People in the public opinion surveys still continue to believe generally that free markets and democracy are the best ways to go forward. Some of the most dramatic reforms that have been undertaken by reformist regimes in Central Europe continue to enjoy public support. In Slovakia, which had the most radical reformist government in recent years in Central Europe, some of the free market reforms such as the flat tax and privatization of the pension system continue to enjoy public support. My hypothesis is that the rise of the populist parties has to do with the discrediting of the political elites in these countries and public revulsion at the behavior of those political elites and established political parties.

And you say it is corruption that is causing this revulsion?

Tupy: Yes. The main part of it has to do with corruption. I went to Central Europe and I talked to people at the time of the Slovak elections, for example. The Slovak election was obviously pretty crucial, because here was this profoundly reformist government seeking re-election. But the people did not say, “We think the reforms are crazy and we would like more state intervention.” What they said was, “We do not believe in our political elites. We believe our political elites are corrupt and we want somebody to clean the Augean Stables.”

What kind of corruption are we talking about — that former communist leaders are living off the state’s former assets, trading privileges for money?

Tupy: I think both. The communists certainly did very well out of the transition from the communist system to the free market. But there is a more general problem with the political elites and the political establishment in Central Europe, which is to say that people continue to seek public office, be it at a national level or a local level, in order to make money.

What’s the cure for this kind of corruption? Is it just a matter of time until they become more mature democracies?

Tupy: Certainly, corruption amongst public officials is helped by a number of factors. One is the relative weakness of civil society. Unlike in the United States, where we have a vast variety of NGOs (non-governmental organizations) and public pressure groups whose vested interest and entire raison d’etre is to track political corruption and fight it, these sort of political organizations have not yet had time to emerge in Central Europe and those that have emerged have not yet attained the kind of strength that might be the case in the United States.

Public oversight — oversight that you might expect from courts and parliaments — is still relatively weak, in part because courts continue to suffer from high rates of corruption, and parliament accountability continues to be low because it is the parliamentarians themselves who are often on the take.

Thirdly, you’ve got the mentality of the people. In other words you have vast sways of society that were brought up under communism where theft and lying were not just tolerated, they were a prerequisite for survival in a communist society. And obviously these attitudes persist in today’s era and all that will have to be changed.

Now. Is that enough? In my view, that is not enough. The populist parties in Slovakia and Poland have promised to combat corruption by basically just placing greater controls on the behavior of public officials and placing the right people in the right positions. I don’t think this is enough. In my view, in a society where you have this cultural baggage from the days of communism, where you have underdeveloped civil society and an underdeveloped system of checks and balances, what you need to do is minimize or to limit the scope of the state and spending. So it’s not enough to hope that people will change, or that if you have more controls, those controls will address the problem of corruption.

You need to suck the air out of corruption by doing two things: One, to limit the scope of the state; and two, by limiting the amount of spending by the state. As I pointed out in my paper, I believe on average Central European governments spend about 44 percent of GDP per year, which is an incredibly high number. So obviously public spending has to decline.

How does that compare with the United States?

Tupy: The federal government spends about 20 percent of GDP in the United States…. Plus, of course, you have to add to that state government spending…. In Central Europe, in the case of Hungary, the central government spends 50 percent of GDP. So that gives you a comparison. Spending is obviously very high. Unlike the United States, you don’t have a vibrant civil society, a culture of non-corruption, etc., etc. On top of that there is the problem of the scope of the state — the areas that the state interferes in. In the United States, the regulatory environment, for example, is much less burdensome. In Central Europe, the number of regulations that the bureaucrats administer is much larger and consequently there is more scope for corruption.

What country is the most backward or the least liberal of the four?

Tupy: I’d have to go with Poland. Poland doesn’t have the highest spending in the region — that’s Hungary. But Poland’s economy is the most highly regulated. Once you combine the spending effect with the overregulation of the economy with the scope of bureaucratic action, Poland is the worst country out of those four.

The best?

Tupy: I’d probably have to go with a country outside of Central Europe — Estonia. When it comes to regulatory environment, Hungary is doing the best in Central Europe and then when it comes to state spending, Slovakia is doing the best. If I wanted to give the Central Europeans an example to follow, I’d have to go with Estonia.

Why Estonia?

Tupy: First of all, Estonian economic performance has been superior to any other country from the former Soviet Bloc. Estonian income per capita grew at a much faster pace than in Central Europe. From 1995 to 2004, Estonian income per capita grew by 96 percent, which is absolutely extraordinary. Also, the Corruption Perception Index, the measure of corruption in Estonia, is the lowest out of all post-communist countries.

Is it a perfect country? Definitely not. But it is doing better than any other post-communist country in terms of corruption. And why is that? The argument I make in my study is because Estonia has actually made the greatest progress when it comes to limiting the power of the bureaucrats and also in limiting government spending. Estonian spending is on a par with Slovakia but its regulatory involvement is less.

In other words, there are fewer bureaucrats spending less money than anywhere else in post-communist countries — which, of course, limits corruption.

Are you generally optimistic or pessimistic about these former communist colonies?

Tupy: I’m very optimistic in the medium to long term. The underlying problem of Central Europe is corruption.

Because the populist parties in Central Europe do not believe in the free market, do not believe in the value of limited government, they are going to maintain and perhaps even exacerbate the problems of corruption. They are not going to stop spending. They are not going to limit the size of government. And as a consequence, in the next few years we are going to see the kind of corruption scandals we have seen before blow up in the face of the populists as well.

It’s already happening in Poland. The Law and Justice Party, which came to power promising to tackle corruption, is now deeply embroiled in corruption scandals. In Slovakia, 100 days into the new government, we have already seen the resignation of one state secretary for suspicion of corruption. So the undoing of the populists in the medium term is going to be the same problem they have been accusing their predecessors of, which is corruption. As these populist parties become discredited, the liberal parties, that obviously I believe have the answers to the remaining social and economic problems of Central Europe, are going to be given another chance. Then it will be their task to make sure that when they tackle the problem of corruption, they are unimpeachable when it comes to government.