Competitive Rent-Seeking, Socioeconomic Infrastructures, and Post-Communist Transition in Central and Eastern Europe

Abstract

The political and economic transformation of former Soviet Bloc Europe has been far-reaching in the last 30 years. Although most former socialist countries in Central and Eastern Europe abandoned the Communist ancien régime, not all of them managed to fully integrate liberal democracy and market economy into society. Some scholars explained this divergence in development through the dichotomous regime types. From the perspective of what propels the retreat of political power from market and with the theory of competitive rent-seeking, we demonstrate that the retreating logic is underlain by the competition between rent-seekers. A competitive rent-seeking regime dissipates the rent through distorting market mechanism and dampens both political authority and rent-seeker’s enthusiasm, providing a better prospect for economic liberalization. Through a comparative case study of transitional experiences of Hungary and Belarus, we find that countries with pre-existing socioeconomic infrastructures that facilitate the formation of competitive rent-seeking regime are more successful in economic liberalization. We suggest that the academic interest previously paid to dichotomous regime-type argument should be diverted into a deeper inquiry of the evolution of socioeconomic institutions that shape the state–market interaction.