… if not us, then who? With special thanks to Jakub Zowczak for inputs and Monika Swaczyna for comments Transition in CEE – a comparative analysis Kamil Pruchnik

2 Transition in CEE – a comparative analysis How changes in the political system and freedom influenced the pace of transition? How was the level of public spending connected to the rate of transition? Which was better a shock theraphy or a gradual approach? Did success in transition trigger succes in relative income? Did sucess in transition trigger sucess in overall development in the region? Did sucess in transition result in increase in inequality? Did success in transition result in increase in happiness? Questions

3 Transition in the CEE – a comparative analysis Poland Hungary Czechoslovakia Lithuania Ukraine Belarus Is an example of a country, which implemented a shock theraphy and was well prepared for the implementation of the reforms. Hungary was better prepared for carrying out reforms at the ‘starting point’ and, unlike Poland, it implemented a strategy of gradual reforms (i.e.: Smith 2009, Winiecki 2012) Country that had a much higher level of development than Poland (also had a better macroeconomic situation - see Smith 2009). Its reforms were introduced year after Poland's. It is also an interesting case, because Czechoslovakia ceased to exist in It has been divided into the Czech Republic and the Slovak Republic. As indicated by Winiecki (2012), Slovakia implemented more populist strategy which significantly hindered the process of transformation. Lithuania is a representative of the Baltic countries, which launched the reforms one year later but maintained a more restrictive fiscal and monetary policy. Ukraine, which in the initial year was as wealthy as Poland, represents the former communist bloc countries that are currently ‘stuck’ in the middle of the transition. The case of the Baltic States and Ukraine is also interesting because those are the countries that have experienced triple (instead of a double) transformation. In addition to changing political and economic system, they had to face the costly process of separation from the Soviet Union. The last country in the analysis is Belarus, which represents the ‘outsiders’ of transformation (i.e.: Turkmenistan and Uzbekistan). Countries

4 Transition in the CEE – a comparative analysis How changes in the political system and freedom influenced the pace of transition? How was the level of public spending connected with the rate of transition? Which was better a shock theraphy or a gradual approach? Did success in transition trigger succes in relative income? Did sucess in transition trigger sucess in overall development in the region? Did sucess in transition result in increase in inequality? Did success in transition result in increase in happiness? Questions

5 Transition and Freedom Transition in the CEE – a comparative analysis

6 Transition and Freedom Transition in the CEE – a comparative analysis

7 Transition and Freedom Transition in the CEE – a comparative analysis

8 Leaders Stuck in the middle FailuresCatching Up Transition and Freedom Transition in the CEE – a comparative analysis

9 Leaders Stuck in the middle FailuresCatching Up POLAND HUNGARY Transition and Freedom Transition in the CEE – a comparative analysis

10 Transition in the CEE – a comparative analysis How changes in the political system and freedom influenced the pace of transition? How was the level of public spending connected with the rate of transition? Which was better a shock theraphy or a gradual approach? Did success in transition trigger succes in relative income? Did sucess in transition trigger sucess in overall development in the region? Did sucess in transition result in increase in inequality? Did success in transition result in increase in happiness? Questions

11 Public expenditure levels and the success rate of transition ,05,01,52,02,53,04,03,54,5 GDP growth (average annual), Average annual public spending (% GDP), Transition in the CEE – a comparative analysis

12 Public expenditure levels and the success rate of transition ,05,01,52,02,53,04,03,54,5 GDP growth (average annual), Average annual public spending (% GDP), Transition in the CEE – a comparative analysis

13 Public expenditure levels and the success rate of transition ,05,01,52,02,53,04,03,54,5 GDP growth (average annual), Average annual public spending (% GDP), Transition in the CEE – a comparative analysis

14 Public expenditure levels and the success rate of transition ,05,01,52,02,53,04,03,54,5 GDP growth (average annual), Average annual public spending (% GDP), Transition in the CEE – a comparative analysis Lax public finance Strict public finance

15 Public expenditure levels and the success rate of transition ,05,01,52,02,53,04,03,54,5 GDP growth (average annual), Average annual public spending (% GDP), Bosna & Herzegovina Hungary Slovenia Croatia Serbia Bulgaria Romania Estonia Latvia Lithuania Slovakia Transition in the CEE – a comparative analysis Lax public finance Strict public finance

16 Public expenditure levels and the success rate of transition ,05,01,52,02,53,04,03,54,5 GDP growth (average annual), Average annual public spending (% GDP), Bosna & Herzegovina Hungary Slovenia Croatia Serbia Bulgaria Romania Estonia Latvia Lithuania Slovakia Transition in the CEE – a comparative analysis Lax public finance Strict public finance Poland

17 Transition in the CEE – a comparative analysis How changes in the political system and freedom influenced the pace of transition? How was the level of public spending connected with the rate of transition? Which was better a shock theraphy or a gradual approach? Did success in transition trigger succes in relative income? Did sucess in transition trigger sucess in overall development in the region? Did sucess in transition result in increase in inequality? Did success in transition result in increase in happiness? Questions

18 Gradual reforms or shock theraphy? Transition in the CEE – a comparative analysis

19 Gradual reforms or shock theraphy? Transition in the CEE – a comparative analysis PolandHungary Czech Rep. SlovakiaLithuaniaUkraineBelarus The year of strongest recession The dept of recession (1989=100) No. of years of recession

20 Transition in the CEE – a comparative analysis How changes in the political system and freedom influenced the pace of transition? How was the level of public spending connected with the rate of transition? Which was better a shock theraphy oraz gradual approach? Did success in transition trigger succes in relative income? Did sucess in transition trigger sucess in overall development in the region? Did sucess in transition result in increase in inequality? Did success in transition result in increase in happiness? Questions

21 Transition and change in relative income Transition in the CEE – a comparative analysis

22 Transition and change in relative income Transition in the CEE – a comparative analysis

23 Transition and change in relative income Transition in the CEE – a comparative analysis

24 Transition and change in relative income Transition in the CEE – a comparative analysis

25 Transition in the CEE – a comparative analysis How changes in the political system and freedom influenced the pace of transition? How was the level of public spending connected with the rate of transition? Which was better a shock theraphy or a gradual approach? Did success in transition trigger succes in relative income? Did sucess in transition trigger sucess in overall development in the region? Did sucess in transition result in increase in inequality? Did success in transition result in increase in happiness? Questions

26 Transition and HDI Transition in the CEE – a comparative analysis

27 Transition and HDI Transition in the CEE – a comparative analysis

28 Transition and HDI Transition in the CEE – a comparative analysis

29 Transition and HDI Transition in the CEE – a comparative analysis

30 Transition in the CEE – a comparative analysis How changes in the political system and freedom influenced the pace of transition? How was the level of public spending connected with the rate of transition? Which was better a shock theraphy or a gradual approach? Did success in transition trigger succes in relative income? Did sucess in transition trigger sucess in overall development in the region? Did sucess in transition result in increase in inequality? Did success in transition result in increase in happiness? Questions

31 Transition and Inequality Transition in the CEE – a comparative analysis

32 Transition and Inequality Transition in the CEE – a comparative analysis

33 Transition and Inequality Transition in the CEE – a comparative analysis

34 Transition and Inequality Transition in the CEE – a comparative analysis

35 Transition and Education Transition in the CEE – a comparative analysis

36 Transition and Education Transition in the CEE – a comparative analysis

37 Transition and Education Transition in the CEE – a comparative analysis

38 Transition and Education Transition in the CEE – a comparative analysis

39 Transition in the CEE – a comparative analysis How changes in the political system and freedom influenced the pace of transition? How was the level of public spending connected with the rate of transition? Which was better a shock theraphy or a gradual approach? Did success in transition trigger succes in relative income? Did sucess in transition trigger sucess in overall development in the region? Did sucess in transition result in increase in inequality? Did success in transition result in increase in happiness? Questions

40 Transition and Happiness Transition in the CEE – a comparative analysis

41 Transition and Happiness Transition in the CEE – a comparative analysis

42 Transition and Happiness Transition in the CEE – a comparative analysis

43 Transition and Happiness Transition in the CEE – a comparative analysis

44 Transition in the CEE – a comparative analysis Sources: European Bank for Restructuring and Development (2013), Transition Report 2013 (EBRD Index) United Nations Development Programme (2015), International Human Development Indicators (HDI) World Bank (2015), World Development Indicators (GINI, GDP) Heritage Foundation (2015), Freedom House Index (Freedom Index) Sustainable Development Solutions Network (2105), World Happiness Report 2015 (Happines Index)

Thank you for your attention! 45 Transition in the CEE – a comparative analysis