State, Labor, and the Transition to a Market Economy. Agnieszka Paczyńska

the ability of trade unions to shape debates about the restructuring measures that were of particular concern to these groups. The resources that organized labor acquired in Poland and Egypt before debates about privatization policies began allowed them to have an important voice during the phases of design and implementation. The lack of similar resources in the case of Mexican and Czech trade unions meant that they were unable to shape public sector policies. Therefore, even in cases where organized labor seems to be losing political power, for instance, where membership rolls have been dwindling, they may still retain important resources that allow them to continue playing a significant role in policy debates. In other words, once established, institutions often tend to persist even in the face of profound change.²⁶ Changing and restructuring institutions is, of course, possible. How easy a task that will be, however, will depend on how the existing institutional arrangements have distributed power among the relevant actors and on the willingness of promoters of change to incur the political costs of pushing reforms. That is, the most significant effect of historical legacies is not that they predetermine future choices but rather that they constrain them.²⁷ They do so through their effects on the distribution of resources among the state and social actors. They therefore affect the balance of power between them and influence the outcome of policy conflicts over the direction of economic reforms.

The evidence presented in this book thus suggests that the “punctured equilibrium” or “critical junctures” model of institutional change, which argues that change is most likely as a consequence of dramatic breaks with the past, overestimates the power of a political or economic crisis to precipitate a fundamental restructuring of the institutional environment.²⁸ Similarly, it suggests that the incremental and gradual process model, which argues that modifications to existing institutions take place slowly and primarily at the margins, underestimates the potential influence of a crisis on processes of change.²⁹

      What crises do produce are windows of opportunity for change. However, while potential for change increases during these “critical junctures,” whether this opportunity will be seized or not will depend on the existing institutional environment. Many of the potential transformations are likely to directly affect various groups that had a stake in the previously established institutions and hence will be seen by these groups as directly threatening their interests. But whether these groups can successfully resist change will depend on the resources they can bring to the negotiations over the form of new institutional arrangements. Those resources in turn will depend on how institutions developed in the past. In cases in which institutional evolution had redistributed resources away from a group threatened by change, it will have difficulty in challenging such transformations, and institutional restructuring can be rapid. Where historical developments have allowed these groups to amass resources, however, there will be no dramatic breaks with the past but rather a gradual change even in the face of a crisis.

1. A recent study argues that the anger caused by the hardships associated with economic reforms and the rank-and-file workers’ perception of abandonment by both the political elites as well as their own union leadership has had a profound influence on the course of democratic consolidation in Poland. David Ost, The Defeat of Solidarity: Anger and Politics in Postcommunist Europe (Ithaca: Cornell University Press), 2005.

2. Peter Kingstone, Crafting Coalitions for Reform: Business Preferences, Political Institutions, and Neoliberal Reform in Brazil (University Park: Pennsylvania State University Press, 1999), 17.

3. See, for example, Kurt Wayland, The Politics of Market Reform in Fragile Democracies: Argentina, Brazil, Peru, and Venezuela (Princeton: Princeton University Press, 2002), 37–70.

4. See, for example, Robert H. Bates and Anne O. Krueger, “Generalizations Arising from the Country Studies,” in Political and Economic Interactions in Economic Policy Reform: Evidence from Eight Countries, ed. Robert H. Bates and Anne O. Krueger (Cambridge, U.K.: Blackwell, 1993), 444–72; Joan M. Nelson, Fragile Coalitions: The Politics of Economic Adjustment (New Brunswick, N.J.: Transaction Books, 1994), 8–9.

5. Hellman, however, argues that it is partial winners of reforms rather than losers who are the main groups blocking implementation of full reform packages. Joel S. Hellman, “Winners Take All: The Politics of Partial Reform in Post-Communist Transitions,” World Politics 50, no. 2 (1998): 204–5.

6. A number of studies of Western European unions have shown that given credible assurances of future wage prospects and, more important, a role in investment decisions, unions have often been willing to set aside demands for short-term benefits. Thus, under certain conditions, rather than being adversaries during periods of reform, unions can become important government allies and policy supporters. See, for example, Peter Lange, “Unions, Workers, and Wage Regulation: The Rational Basis for Consent,” in Order and Conflict in Contemporary Capitalism, ed. John H. Goldthorpe (Oxford: Clarendon Press, 1984), 56–73; R. Michael Alvarez, Geoffrey Garrett, and Peter Lange, “Government Partisanship, Labor Organization, and Macroeconomic Performance,” American Political Science Review 85, no. 2 (1991): 539–56.

7. This was clearly the case in Poland but is has also been evident in, for example, Zimbabwe.

8. See, for example, Kenneth S. Mericle, “Corporatist Control of the Working Class: Authoritarian Brazil Since 1964,” in Authoritarianism and Corporatism in Latin America, ed. James M. Malloy (Pittsburgh: University of Pittsburgh Press, 1977), 303–38; Youssef Cohen, “The Benevolent Leviathan: Political Consciousness Among Urban Workers Under State Corporatism,” American Political Science Review 76, no. 1 (1982): 46–47; David Collier and Ruth Berins Collier, Shaping the Political Arena: Critical Junctures, the Labor Movement, and Regime Dynamics in Latin America (Princeton: Princeton University Press, 1991), 51–55; David Collier, “Trajectory of a Concept: ‘Corporatism’ in the Study of Latin American Politics,” in Latin America in Comparative Perspective: New Approaches to Methods and Analysis, ed. Peter H. Smith (Boulder, Colo.: Westview Press, 1995), 139–42.

9. Alfred Stepan, The State and Society: Peru in Comparative Perspective (Princeton: Princeton University Press, 1978), 301–16.

10. In this book I am focusing only on the Czech Republic and not including the Slovak Republic, since during the first decade following the political transition in Czechoslovakia very few economic reforms were attempted in the Slovak Republic.

11. For example, the specter of the January 1977 riots that erupted in Egypt following President Anwar al-Sadat’s removal of consumer subsidies continues to haunt Egyptian policy makers. Author interview with World Bank official, Cairo, August 25, 1998.

12. Maurice Duverger, Political Parties: Their Organization and Activity in the Modern State (London: Methuen, 1969), 256.

13. For a discussion