The Political Economy of Transition in Post‐Socialist Systems: The Case of the Baltic States

The nature of the failed socialist systems calls for a transition which is as comprehensive in its objectives as were the systems themselves before they failed. Hence, the transition to democracy in the post‐socialist systems cannot be treated as separate from the transition to a market economy and national independence. The critical part of the transition is the economic reforms inasmuch as the institutions of the planned economy are the major power base for the conservative elites. To be successful, the economic transition must be able ‐ in both the short and the long term ‐ to command political support, to achieve social acceptance of the distributional consequences involved and to be compatible with democratic institutions. Analysis reveals that in the case of the Baltic states widespread support for the transition to a market economy can be detected and that the democratically elected governments have so far been fairly active in establishing a legal framework for transition, but appear unable to implement the necessary stabilization policy. The reforms have produced strong social protests, and the governments have been under pressure to maintain social guarantees during the period of transition. The non‐Baltic minorities in particular defend previous social privileges and are distressed by their uncertain status after independence. The ultimate outcome of political and economic transition in the Baltic states, therefore, remains in doubt.