Bringing Social Capital and Trust into Transition Economics (Academic Working Paper, LSE, September 2022)
After two enjoyable years of going back to be a (part-time mature) student, I have recently completed a Master of Science (Economic History) at the London School of Economics, 30 years after graduating with my first master degree from the very same alma mater.
In my dissertation, I returned to some of the topics that had also interested me 30 years ago, how economies move from autocratic central planning to market economies and liberal democracies, and try to sustain that incredibly difficult transition from one world order to another.
The attached paper is a slightly modified version of that recent master dissertation, and you may find it interesting, as there are many parallels between the challenges of transition economies 30 years ago and the effects that globalisation and populism are having in the western world in recent years.
Over 30 years ago, some 26 countries in Central and Eastern Europe (CEE) and the Former Soviet Union (FSU) commenced the transition from planned economies to market economies. What was an enormous challenge for policymakers also constituted a natural experiment for social scientists. This paper reviews the wide disparity in outcomes with a clear schism between CEE and FSU, and the accompanying transition literature. Building on the new institutional economics (North et alt), prior work (Neuber 1993, 1995), and the revival of institutional analyses in mainstream economics further to AJR 2001, it purviews the literature on social capital, trust, norms and culture (Putnam, Fukuyama, et alteri). Putnam’s (1993) cross-regional and longitudinal study on the effectiveness of identical Italian institutions across 20 regions from the 1970s offers important insights into the relevance of informal institutions such as trust, norms, culture, and civic attitudes to institutional analyses of governance and growth. The influence of historic governance patterns between authoritarianism and republicanism is demonstrated. Pro-civic inclinations are revealed to foster cooperation and to facilitate overcoming collective action problems, furthering the provision of public goods, and creating joint narratives and purpose. Political scientists, psychologists, legal scholars, historians, and sociologists have made important further contributions to this neo-institutionalist literature, offering new avenues for intradisciplinary study. The paper argues that these concepts and their bearing on institutional effectiveness provide novel insights into institutional prerequisites for successful transitions and offers up several ideas for further research.
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