Stuck in Transition

LONDON – The G-8 recently asked the European Bank for Reconstruction and Development, which was created to support the post-communist transitions to democracy and market economies in Central and Eastern Europe, to put its experience to use in Egypt. But which lessons from the Eastern European transition experience are relevant for countries in North Africa and the Middle East?

An important difference is that, unlike Eastern Europe in 1989, the countries of the “Arab Spring” do not have centrally planned economies. While the state is involved in much economic activity and property rights are frequently contested, private property is nevertheless firmly established. Subsidies are common, but prices are not fixed. There may be impediments to international trade, but nothing like in Eastern Europe, which largely traded with itself in distorted and artificial ways.

So it is in the countries of the Eastern Europe of today – and the two decades of reform experiences that have brought them to where they are – that we should seek parallels with North Africa.

Despite the financial crisis, political and economic progress in Central Europe and the Baltic countries has been remarkable. On the other hand, most countries in the former Soviet Union are like much of North Africa and the Middle East – “stuck in transit.” Some, like Belarus and Uzbekistan, have not even started reforms in earnest.