Symposium Report

James Peters, Intern at the CRCE

‘Inhibited Transition’ organised by the CRCE, with generous support from the Atlas Economic Research Foundation, was held at the picturesque Lake Bled in Slovenia over the weekend of the 25^th-28^th September 2004. The aim of the conference was to examine and discuss the progress made in Central and Eastern European countries fifteen years on from their transition to market economies.

A large number of participants attended, both those representing the region, as well as those from the United States and Western Europe, ensuring a lively and informed cross country analysis.

The initial paper presented by Vladimir Benacek and Alena Zemplinerova highlighted the significant progress made by the CEECs despite the many obstacles faced in moving towards a functioning market economy. However, it was stressed that no one country has made a completely successful transition. After a faltering start, the combination of flows of foreign capital into the region, the creation of small and medium sized enterprises and export growth has contributed to increased development in the CEECs. In the case of advanced transition countries there are now signs of possible convergence with Portugal and Spain in 8-12 years. Russia’s differing performance is attributed to not following a true democratic path, explaining their Gross Domestic Product at 40% of the 25 Transition country average.

The role of culture was discussed in a paper by Steve Pejovich in terms of institutional restructuring in Central and Eastern Europe. The cultural differences in CEECs were shown to create transaction costs explaining the uneven results of institutional restructuring in the last fifteen years. The analysis suggested that the results of restructuring correlated with the degree of previous western influence in CEECs. As measured by the Heritage Index of Economic Freedom, the Baltic States, the Czech Republic and Slovakia were shown to have the highest level of economic freedom.

Security was discussed in terms of recent NATO enlargement with discussion of security free riding from smaller countries. The role of the EU was also questioned; with a new world order emerging with regards to security, there was some ambiguity as to where the EU belongs. Could it develop into a state ready to defend itself? The danger of ethnic conflicts was discussed in a paper by Andrej Miholic who examined the change in perception of security threats in the region. Traditionally most at risk from war, the central and south eastern European countries now face greater risk from internal ethnic conflict and post modern threats such as economic crises and organized crime. Successful transition to market economies is vital for the region in order to control these threats, as is increased dialogue at an international a role role do now and then a The transition process of the regions most developed country, Slovenia, was discussed in a paper by Rado Pezdir. Despite the gradualist policy initially helping to advance Slovenia’s development in the early years of transition, the paper argues that the long term effects could see Slovenia lagging behind her CEE neighbours. The combination of gradualism with interventionism has slowed Slovenia’s rate of growth, whilst privatisation and competition policy have not been taken seriously. The author argues for increased internationalisation, flows of foreign capital and regional development.

Overall, the two days of the conference highlighted the great progress made by the CEECs since the collapse of communism. EU accession for eight of the CEECs, whether ultimately beneficial or not, has testified to this. However, it is clear that the process of transition is still a work in progress and will provide a multitude of challenges ahead for the region.