The process of democratic transition – key concepts and approaches

The concept of states in transition involves a group of countries whose economy is changing from centrally planned economy to a free market economy (Feige, 1994). The notion of transition became one of the most studied socio-political notions at the end of the 20th century. Following the collapse of communism in the late 1980s, countries of the former Soviet Union, as well as Poland, Hungary, and Bulgaria, started abandoning central planning and turned towards market capitalism. The process of transformation of centrally planned economies into market economies, a decade later, resulted in diversification of the states, given that some countries are perceived as a ‘success story’, such as Poland, Slovenia, Hungary, and the Czech Republic, while others continue to experience problems and languish at various phases of the process. Moreover, the successful transition states have also reached a satisfactory level of liberal democratic consolidation.

Even though usually described under the single term ‘transition’, different systemic changes take place within that process and regularly involve a set of different developments ranging from economic or democratic changes, as well as extensive social alterations. The transition process mainly involves several simultaneous processes¹² such as liberalization, which involves determination of price structures in free markets and lowering trade barriers, as well as privatization, referring to the transfer of public into private ownership thus establishing a viable financial sector and restructuring companies. This process also implies macroeconomic stabilization, which infers control over inflation i.e. enhanced fiscal and monetary policies.

Finally, it is generally accepted that transition process should always be accompanied by legal and institutional reforms, aimed at establishing the rule of law, redefining the role of the state, and introducing competition rules.

In the period of the beginnings of transition, socialism as a social order and economic model ceased to be an alternative to the capitalist economic model worldwide. The inefficiency of the system and the lack of motivation among workers are often stressed as the main causes of

12 See Transition Economies: An IMF Perspective on Progress and Prospects; November 3, 2000, https://www.imf.org/external/np/exr/ib/2000/110300.htm#I

39 its collapse (Cvijanović, Mihailović and Simonović, 2014), as well as the false growth of economic activity¹³. As mentioned above, there are a number of successful transition cases, mainly including former Soviet Union and Eastern and Central European states. These states also had centrally planned economy and functioned in an isolated economic system disregarding market demands. Most of these states initiated transition processes in the 1980’s, undertaking efforts to transform centrally planned economies to a market economy.

Similar to the other European post-socialist countries, the transition process in Serbia initiated approximately in the same time. Serbian economy in that period was characterized by comparable conditions, including direct state administration followed by the system of self-management¹⁴, both leading to system inefficiency (Cvijanović, Mihailović and Simonović, 2014; Stojiljković, 2011). The factual situation was not recognized, and the process of

"socialization of losses" started, whereby the state was concurrently implementing the same approach towards companies with poor financial health which had a domino effect on strong companies. The overall effect of these processes has led to the collapse of socialism and the abandonment of the so-called "socialist paradigms” (Stojiljković, 2011).

Serbia is one of the countries that approached the process of reform focusing on macroeconomic stabilization, liberalization and privatization, as the main principles of the Washington Consensus (Stefanović and Mitrović, 2012). The process was aimed to allow for the market forces to set prices rather than a central planning organization, removal of the trade barriers, privatization of the state-owned companies and restructuring of a financial sector to facilitate macroeconomic stabilization and the private capital flows.

However, in the 1990s the country was still a part of Yugoslavia and it was experiencing regional conflicts and war, while other socialist economies were undertaking efforts towards transition. For a whole decade, financial situation in Serbia was marked by the economic sanctions, hyperinflation and a crash of the economic system. Following the democratic changes after October 5th 2000, the process of (economic) transition of Serbia initiated, in the period when the basic preconditions for its implementation were met. The changes in the

13 It was not the growth that creates, but the growth that destroys the value of the company.

14 In such an economic system, there was no clear and direct connection between the results and the evaluation of the work.

40 domain of economy started in that period and are still ongoing^. Namely, the whole process involved the transition of former socialist system into the market economy, which creates a new business environment and a new institutional infrastructure. Liberalization of trade relations and capital balance enabled the integration of Serbia's economic system into international financial and commodity flows (Djuricin, 1996). It could therefore be considered that economic transition in Serbia was significantly delayed when compared with other states in the region or other transition states.

Nevertheless, despite the described delays in transition processes, it is necessary to take into account the actual process and its accompanying factors in order to understand the concrete state of play in a given country. For instance, research by the International Monetary Fund (World Economic Outlook, 2000) suggests that countries that have combined macroeconomic stabilization with extensive structural reforms have been more successful in overcoming the decline in production in the initial stages of transition, as well as achieving significant growth in production in the upcoming period. The IMF holds that these two components are equally important for the success of the transition.

The focus on structural reforms brings to attention the role of the institutions, as key nodes of the structure of society. The perception of the necessary extensive structural reforms implies the process of democratic transition, which should accompany the economic reforms.

According to Feige (1994), the complexity of the historically unprecedented transformation process from centrally planned economy into market economy

...requires a fundamental restructuring of a nation’s economic, political, social and legal institutions, as well as its physical infrastructure.

(Feige, 1994, p. 1).

Likewise, Besley, Dewatripont, and Guriev (2010) believe that effective transition is not possible without subsequent institutional changes, given that institutions represent the core of social and economic interactions. They consider that transition may be prolonged in case of absence of changes of the formal and informal institutions. Similarly, Golubovic (1999) maintained that democratic transition is not only a change of institutions and authorities, but a qualitative shift towards the realization of a new way of life and the promotion of autonomy,

41 freedom and responsibility of citizens in making constitutive life decisions. This reference to the interaction of institutional and economic changes has been supported by other authors as well (Acemoglu, Robinson, and Johnson 2012; Greif, 2006; Stojiljković, 2011). Contrary, Sachs (2012) believes that political institutions are not always decisive in a country’s growth performance. Sach argues that this is indicated by the success of some authoritarian governments. As he claims, authoritarian leaders often have very strong motivations for national economic success, as they are often engaged in aggressive international political and military competition with other states.

On the other hand, Grief (2006) argued that the quality of institutional foundations is very important for the development, hence that the state of affairs of political institutions may indicate the causes of the differences in political orders and welfare of diverse states. As Greif (2006, p.4) explains, institutions are providing the setup for the quality market functioning by efficiently assigning, protecting, and altering property rights; securing contracts; and motivating specialization and exchange. Acemoglu, Robinson, and Johnson (2012) believe that institutions securing property rights have the great significance for economic growth.

Tridico (2011) attributed different levels of performance among transition countries to the quality of institutions, along with policies and strategies implemented, the level of democratic political institutions, participation and accountability, levels of trust and social capital, citizens’ capabilities and control of corruption. Following this line of opinion, as a part of the wider framework of the process of transition, the structural and institutional reforms in Serbia were initiated in the same period.

Acknowledging that democratic transition is a complex process, a set of other factors, beyond institutional changes, are often discussed when assessing the effectiveness (or lack of) transition. The focus of transitional studies is usually placed on political, legal and economic matters, as well as social factors.

One of the factors discussed refers to the preparedness of the nation and population to change the inherited habits and enter the system different than the one they know. Abramovitz (1986) argued that the “social capability” of the nation is an imperative determinant of growth. His understanding was that not all nations are capable to adopt and adjust to changes. Abramovitz argued that educational system, labour force and performance on the individual levels are

42 equally important as economic factors and institutional development. Following this line of reasoning, democratic consolidation is reached when a “democratic culture” is deeply embedded socially and when institutions are able to function independently.

Similarly, a Serbian author Srdja Popovic (2010), offered a comprehensive insight into two failed transitions in Serbia: one in 1990 and the other in 2000, in an effort to explain why Serbia failed to take advantage of the transitional chance both times. He indicates that the actors within the political arena framed by the dominant cultural patterns, as well as the legacies of the past played a key role in this failure. Hence it was impossible to simply implant a democratic government onto a non-democratically oriented society, as it would facilitate non-democratic elements to gain greater political legitimacy through democratic channels.

Popovic (2015) sees the causes of Serbia's epochal failure in the main actors, i.e. the previous political order, the dominant cultural patterns, and, after 2000, a refusal to recognize the criminal inheritance from the nineties. The impression is that in describing the failure of the 1990s, Popovic (2010) puts emphasis on actors who gain power within the political field through cultural manipulation. Popovic (2000) illustratively argued that the years of 1990 and 2000 mark the boundaries between the three periods in the new Serbian history: a) the 1990, which he refers to as a period towards barbarism, b) the period between 1990 and 2000, which he perceives as the barbaric war years, and c) the period beginning in 2000, the period focusing on democratic transition. Popovic noted that Serbia failed to get out of the black hole of the 90s for two and a half decades. The reason for this is the dominant model that he labelled as "the culture of humiliation", whereas in the nineties, the "culture of fear" dominated (Popovic, p. 401). Popovic perceives the second half of the eighties of the 20th century as a possibility for the political transformation of Yugoslavia as the emergence of the federal framework opened the first opportunity for transition. Only if this Yugoslav transition failed, the opportunity was to be used by Serbia.

Overall, the establishment of a democratic political framework in Serbia after October 5^th 2000 has failed to produce a democratic political culture that has reconciled the past with political, social, and ethnic communities in Serbia, throughout the former Yugoslavia, and with Europe. There was a need to fully restructure the old system, including dissolution of the secret police and opening up the secret government archives, allowing for a free press, and

43 enabling democratic elections. These changes were necessary for the establishment of the rule of law and good governance (Popovic, 2005), whereby the rule of law denotes that a state applies its laws but also that these laws are legitimate and valid.

This is consistent with Teitel (2014), who perceives transition as a process with the normative component of the conversion from a less democratic regime to a more democratic and liberal regime. Transition therefore implies that the whole society experiences its own political, social and cultural reconstruction. The need for such a major change stems from the insight that the former government has ruined the social capacities for concluding decent social arrangements. Hence transition, according to Teitel, involves a normative jump from the state of injustice to a more just democratic and liberal order, which is not possible without the change of normative forms and a cultural change. In some cases this implies the alteration of the identity of the given political community, such as Serbia. To summarize, even though different interpretations of democracy may be contested, the fundamental principles of democracy and the rule of law are never questioned (Laitin, 1998).

The notion of rule of law (prééminence du droit) represents a fundamental principle and a common European value recognised in the Statute of the Council of Europe and the case law of the European Court of Human Rights, along with the principles of human rights and pluralistic democracy. Explicit reference to the rule of law can be found, inter alia, in European Union treaties, as well as in the Copenhagen criteria of 1993 for accession to the European Union. The United Nations define the term rule of law as:

A principle of governance in which all persons, institutions and entities, public and private, including the state itself, are accountable to laws that are publicly promulgated, equally enforced and independently adjudicated, and which are consistent with international human rights norms and standards. It requires, as well, measures to ensure adherence to the principles of supremacy of law, equality before the law, accountability to the law, fairness in the application of the law, separation of powers, participation in decision-making, legal certainty, avoidance of arbitrariness and procedural and legal transparency.

(United Nations, 2004, p.4)

44 Despite seemingly clear understanding of the rule of law concept, there is a significant inconsistency in terminology within the Council of Europe member states, as well as different comprehension of the term. The key debates within the Council of Europe referred to the adequate term that would reflect the English language notion of rule of law as adequately as the expression “prééminence du droit”¹⁵, whereas other terms often used such as the French expression “Etat de droit” do not always adequately grasp the same meaning (Lauc, 2016).

These debates were of particular importance in terms of application of the term in some former Soviet Union (transition) states, where the notion was inappropriately understood to signify a state based on the principle of the supremacy of the laws. Therefore, the meaning of the rule of law concept and its translations have been considered within the Council of Europe and reflected by the Venice Commission. A conclusion of these considerations was that a formalistic interpretation of the term “Etat de droit” runs contrary to the essence of rule of law/prééminence du droit (Venice Commission, 2016).

In this sense, it can be concluded that the principles of good governance such as transparency, accountability and participation are a precondition for legitimate and efficient functioning of the public institutions. Good governance also implies the possibility of citizens to hold decision-makers accountable for their actions. The concept of good governance is often used to assess the evolution of the democratization process in transition countries (Regional Research Promotion Programme, 2013). Democratization commonly involves the process of change from an authoritarian or totalitarian regime towards a more inclusive democratic regime based on free, fair and competitive elections (Linz and Stepan 1996, Diamond 1999, Teorell 2010). Nevertheless, democratisation is often not simple and not always a successful process. Scholars have therefore discussed the effects of “linkages and leverages” (Levitsky and Way, 2006) as factors influencing democratisation. The framework proposed by Levitsky and Way suggests that ‘leverage’ of the West, reflected in different forms of vulnerability of governments to external pressure, has not proved to be sufficient for effective democratisation. The authors support that the other dimension i.e. ‘linkages’ has demonstrated more success in inducing democracy across the world. They refer to linkages as "soft power"

or density of diverse social or economic ties and cross-border flows between states in

15 In the French version of the Statute of the Council of Europe, in the preamble to the European Convention on Human Rights and in the Strasbourg Court’s case-law

45 transition and the EU or the USA. Essentially, the concept of linkages refers to civil society, links with international actors and other societal connections whose existence increase the likelihood of internal pressure towards democratization.

Moreover, discussions on the rule of law and democratisation in transition countries regularly refer to the differences between the medium-level and low-level developed democracies i.e.

the old and new democracies. However, Svolik (2008) argues that this difference is not suitable to explain alternative paths, apart from consolidation, through which democracies stabilize. According to Svolik (2013), many democracies stabilize when the political representatives prove themselves accountable to public demands. The problem in many, typically young, democracies is that building such accountability depends on institutional quality. Different perspectives on successful democratisation in transition countries emphasize diverse elements, such as the rule of law, clear separation of powers and establishment of effective political institutions (Fukuyama, 2014), political parties (Pridham and Lewis, 1996), local ownership (Poppe and Wolff, 2013) or the external actors (Burnell and Calvert, 2004). An interesting perspective also involves the importance of preventing the members of previous regime to continue acting in political life, as one of the main factors influencing democratisation. This is particularly important with a view to prosecution of representatives of the old regime, commonly referred to as ‘lustration’, which may have a profound social impact (Horne, 2014). Even though the fairness of such an approach may be disputable, the key dimension of this process is the break of the linkages of the old regime with the new state representatives may be beneficial in the long run, as it prevents the same structures to remain in control of the system. The process of lustration has not been performed in Serbia, despite comprehensive debates and social appeals for its implementation.

To summarize, it is understood that the rule of law, democracy, good governance and the respect of human rights standards represent specific values that should be achieved following the process of democratic transition. As reviewed above, democratic transition in Serbia was a process accompanying economic reforms, but it appears to be still ongoing while its effects are assessed in different ways.

Some authors perceive that a new transitional attempt in Serbia that took place in the 2000 has been delayed due to cultural patterns and the political order which did not allow the truth

46 about the nineties to be used for awakening of the citizens of Serbia, even though it became public. This view is often supported by reference to merely general orientation towards European values and EU integrations. Following this line of inquiry, the impact of social context has been emphasized in studies on developing and transition countries (Ivanova, 2010; Fazekas and Tóth, 2014, Perry and Keil, 2018; Volkov, 2002). Others believe that democratic transition was prolonged as there was no radical break with non-democratic heritage, corruption and crime (Stojiljkovic, 2012).

Concurrently, research in many transition countries has consistently supported that widespread corruption associated with weak governance and state institutions, facilitates

Concurrently, research in many transition countries has consistently supported that widespread corruption associated with weak governance and state institutions, facilitates