Heft36 1 - SFB 580 - Friedrich-Schiller-Universität Jena

THE VOC EINLEITUNG APPROACH GOES EAST
Figure 1. Modes of coordination under consideration of different levels of development
high
LMEs
CMEs
level of development
TMEs
low
low
high
Source: Own elaboration
At a lower level of (capitalism) development,
TMEs can move vertically and diagonally.
The paths of institutional and economic
development are not yet fixed and can develop
towards LME, CME or a mixed form of
both. In the absence of positive feedback,
development towards a stronger role of the
state and even less capitalism is possible (e.g.
downward diagonal shift in Venezuela and
Belarus). Such upward and downward diagonal
and vertical shifts are reflected in capitalist
reforms or reform reversals and are possible
because political and economic institutions are
enforced only weakly. 25
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How does the model reflect the
transition period? At the beginning of
transition, the initial strong decline of
GDP and a lengthy and burdensome recovery
hindered positive feedbacks to stabilize
the institutional system. Weakly enforced
institutions (“frames without content”) could
be changed more easily and reform reversals
were the case in states with a low capacity
(e.g. in Russia, Romania and Bulgaria).
Transition countries, which succeeded in
increasing state capacity and enforcing formal
institutions, created a stable institutional
environment for economic cooperation and
entrepreneurship. The Visegrad states, for
instance, although having missed the chance to
build complementary institutions, nevertheless
established a stable and relatively effective
institutional system. Institutional quality in
Poland, Hungary and the Czech Republic
was increased through better enforcement,
not through better complementarity. If we
consider positive feedback and lock-in effects,
these non-coherent systems should be difficult
to reverse for a while. As long as efficiency
or effectiveness gains are possible through
improved enforcement or other means (for