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Published by EH.Net (May 2024).

Aleksandr V. Gevorkyan. Transition Economies: Transformation, Development, and Society in Eastern Europe and the Former Soviet Union. New York: Routledge, 2018. 292 pp. $54.95 (paperback), ISBN 978-1138831131.

Reviewed for EH.Net by Yakov Feygin, Center for Public Enterprise and Jain Family Institute.

 

The Russia-Ukraine conflict has been taken by some to herald the end of the “post-Soviet” era. So it might be surprising that I that find Aleksandr V. Gevorkyan’s Transition Economies, written before 2022, remains indispensable reading for those who wish to re-engage with a region that has been forgotten by so many scholars and has radically re-emerged into public consciousness. Gevorkyan’s book is an ambitious undertaking. It aspires to be a textbook that covers the key issues of post-socialist transition not just in the former USSR but in Eastern Europe. As the book itself admits, this is an overwhelming task because there is no one specific form of “socialism.” While sharing some similarities, state socialist economies differed across the post-Socialist world. And yet this book largely fulfills this task.

Gevorkyan rises to the challenge by taking a “dialectical approach.” By this, he means couching a traditionally macroeconomic story into a historical narrative which embeds the former socialist economies into their political and social context. This means that institutions and their transformations are at the center of the story. Unlike most broad, textbook overviews of transition economics, Gevorkyan also centers changes to human welfare and migration. The book is thus organized into three parts: an overview of the Soviet-style planned economy, the macroeconomic aspects of transition toward a market system, and the ongoing human transition of welfare, trade, and migratory systems.

Transition Economies’ first substantive section is dedicated to the functioning of the planned economy. Unlike many textbooks that approach the problems of post-socialism, this is not a cursory overview of planning and the Soviet economy. Gevorkyan takes the economic structures of state socialist economies seriously rather than as a prelude. In his dialectical and institutionalist framework, understanding the patterns of state socialism is critical to seeing why a transition to a market economy represented such a deep break for both economic production and for the human ecology of the former USSR. As an economic historian of the former USSR, I am struck by the detail and care in describing the politics of planning in the USSR.

Unlike most books, in Transition Economies one can learn about the dramatic, at times violent debates about the purpose and nature and the economic plan. As well, Gevorkyan focuses on a macroeconomic feature of Soviet-style planning – the overwhelming preference for heavy industry over light industries and producer goods. The persistent, politically determined, disequilibrium in state socialist planning is a vital background to the difficulties of reformist socialism and ultimately the transition period. Another original aspect of Transition Economies is that it takes the diversity of socialist economies and their interconnection seriously. While it is undeniable that economic integration across the former Soviet bloc was not very successful, trade relationships in the region and with capitalist economies were established. Thus, the disruption of the domestic economy was also a collapse of a regional political economy.

The next section of Transition Economies deals with the transition itself. Characteristically, Gevorkyan does not begin his narrative in the familiar dates of 1989 or 1991. He begins his discussion of transition with an overview of the reforms of state socialist economies. The post-socialist states did not transition directly from a rigid Stalinist system into a free market. By 1989 the economy of the socialist states was unrecognizable. Most socialist economies already, formally, or informally, integrated market mechanisms and the planned economy, as such, did not exist. A growing economic crisis meant that the question of the late 1980s was not whether to move toward a more market economy but how fast to do it and what a modern market economy even meant.

This macro-economic and political context is important to understand when we compare the pace and results of the 1990s transitions. Gevorkyan offers an overview of the differences and pitfalls of privatization schemes across the entirety of the post-Soviet space. He provides a comprehensive overview of the “shock therapy debates” and the particular socioeconomic factors inherited from the socialist era that made each privatization experience different.

The strongest feature of Transition Economies is its emphasis on the path dependencies created by socialist economic relations as contributing factors to the problems of transition. The socialist collapse was not just a national phenomenon. It ended and entire system of international economic relations and birthed new states out of a single economic unit called the USSR. The impact of this regional breakdown on domestic outcomes has been immense.

The collapse of the USSR alone was a dramatic dislocation of economic geography. Paradoxically, mobility across the former Soviet zone increased. The former Soviet Union was a transfer union, but human mobility was limited and, like the contemporary Chinese Hokou system, used as a form of social control. The collapse of the USSR destroyed the transfer union but freed up labor migration across the former USSR. East Central Europe, on the other hand, was integrated into the European Union and became a source of migrant labor. Gevorkyan focuses on this and other human elements of transition in far greater depth than previous books. Departing from his descriptive method of economic transformation, he makes serious policy proposals for creating regional and diaspora-led remittance development banks to further regional economic integration and to spur more efficient growth.

Gevorkyan closes Transition Economies with a discussion of the region in the “Roaring 2000s” and the aftermath of the 2008 crisis. Generally, this section is a description of the impact of the commodity super cycle on the rapid improvement of consumption in post-socialist countries and the sudden stop of the post-2008 period. Here we really see a sharp diversion between the former USSR and the East Central Europe. The former becomes strongly tied to the commodity cycle, the latter to the EU. This creates very different export structures, interdependencies, and, thus, economic cycles in what was once an interconnected post-socialist world. From a shared starting point, different forms of integration into a globalized economy have created sharp divergences. In both cases the rise of a new capitalist system is unstoppable.

Overall, Gevorkyan has written an exceptional overview of the post-socialist transition. In some ways I believe he has written the “final word” on the issue. Not only because it is perhaps the most comprehensive, cross-disciplinary, and institutionally grounded overview of transition economics, but because the post-socialist era is likely over. The crisis in Ukraine is a cesura in many ways. One way is that Russian economic integration into the global economy is rapidly changing. The growing isolation and militarization of Russia’s economy might herald a reduction of Moscow’s role as a regional economic and political hub for the post-Soviet states of Central Asia. On an even broader level, the problem of “transition to what” is becoming more pertinent as the Washington Consensus that had guided the image of idealized capitalism has been buried.

However, I do not think this means we should not be talking about transition economics anymore. Rather, that conversation is now important in a deeper, even more profound way. For economists and their friends from allied social sciences, a key tenet is that all economics is transition economics. Economies exist in historical time and are guided by embedded institutions rather than optimizing agents.

As such, the post-Soviet transformations provide us with general lessons about dramatic changes in complex socioeconomic systems. Understanding these dynamics are vital in a world of climate change and renewed geopolitical challenges that might cleave apart neoliberal globalization in the coming decades. From this vantage point, transition economics will never go away and Gevorkyan’s text will be vital to prepare for a turbulent future.

 

Dr. Yakov Feygin is a recovering historian, project finance specialist at the Center for Public Enterprise, Fellow at the Jain Family Institute, and, previously, Associate Director at the Bergguen Institute. He is the author of Building a Ruin: The Cold War Politics of Soviet Economic Reform (Harvard University Press, 2024).

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