1. State Reforms for Human Development The capacity to deliver on the MDGs Dan Dionisie, Policy Specialist, UNDP CEU, July 2011

2. Warm-up o Discuss the Governance implications of the following images:

3. Governance vs Human Development Governance not one of the eight MDGs …so does Governance matter?

4. Governance reforms in Eastern Europe – a quick story of the last 20 years: act one o 1990s: reform momentum, enthusiasm o debate: ‘shock therapy’ vs ‘gradualism’ o mass privatization, ‘one dollar’ sale of state assets… emergence of oligarchs o belief in the virtue of self-regulating capitalism o focus on producing irreversible change (‘exceptional politics’) o (not on corruption, not on getting reelected) o national revival, state building o Western model o policy and institutional imports o Francis Fukuyama: “The End of History” (liberal democracy as universal proposition) o “Transition” paradigm o countries progressing on a path from A to B o EU/NATO accession roadmaps

5. o Increasing regional differentiation o starting points were very different o not all post-communist countries gravitating towards Western model o ethnic conflicts, nationalism o consolidation of autocracy in Russia, Central Asia o return to geopolitics o Samuel Huntington: “The Clash of Civilizations” (liberal democracy is not universally relevant) o “Transition” paradigm questioned o reform momentum fades; reform fatigue o “partial reform trap” (J.S. Hellman) o is transition inevitable? does it converge to destination? Governance reforms in Eastern Europe – a quick story of the last 20 years: act two

6. o The “West” became much less coherent / monolithic o Iraq war o Rumsfeld’s talk of New Europe vs Old Europe o Chirac’s insult o By the mid-2000s, Governance reforms in Eastern Europe were: o by and large a success story in Central Europe o EU accession 2004-2007 o however, with persistent Governance challenges (both due to communist past, as well as to unfinished transition) o by and large not on the agenda in many CIS countries o “Good Governance” language vs Democracy o “technocratic” reform agenda and stability of power structure privileged o alternative development models sought (e.g. China) o and then… the global economic crisis hit the region Governance reforms in Eastern Europe – a quick story of the last 20 years: act three

7. Crisis impact o Our region has been the worst hit

8. …but not all countries were hit equally

9. …not all countries hit equally (II)

10. …and what happened to Governance? o Slowdown or reversal of political reforms o political pluralism o media freedom o depoliticization o decentralization o minority rights o Labour and social rights etc. o …often in the name of economic reforms o Democracy in retreat, democratization momentum stalled o Worsening corruption perceptions o Social capital in decline (trust in institutions and in democracy, participation)

11. EIU 2010 Democracy Index

13. Freedom House – 2011 Nations in Transit

14. NIT scores – time series

16. Corruption perception: shades of red

17. EU NMS: Reversal of trend in 2009-10

18. CPI Variation 2003-2010 o Success stories in the region are scarce, but do exist: GE, MK

19. Do anti-corruption measures work? CPI vs Global Integrity rating CPI < 2 CPI 2 - 3 CPI 3 - 4 CPI 4 - 5 CPI > 5 GI rating ‘Strong’ Bulgaria Romania Poland GI rating ‘Moderate’ KazakhstanFYR Macedonia Lithuania Georgia Hungary GI rating ‘Weak’ KyrgyzstanAzerbaijan Kosovo (2010 CPI) Belarus Moldova Russia BiH Serbia Turkey GI rating ‘Very Weak’ Ukraine GI rating not available Uzbekistan (n.c.) Turkmenistan (n.c.) Armenia Tajikistan Albania 20082009

20. Some news… o Some counter-intuitive results: o RO and BG for the first time not at the very bottom in EU o SI, EE better than ES, PT, GR, IT o TK, MK better score than IT, RO, BG, GR o GE better than RO, BG, GR o Geography / geopolitics a factor, but not a fatality o Situation is deteriorating o 2010 vs 2009: 15 countries , only 11 , 3  o sharp contrast with earlier trend o correlated with crisis impact (?) – e.g. Greece, Poland o caveat: corruption perception may be a modality to rationalize hardship experience during transition o correlated with democratic decline (?)

21. o The crisis has exposed structural Governance weaknesses across the region o extremely poor forecast and analysis capacity o Romanian president and Central Bank governor stated as late as March 2009 that the country would have positive growth that year o weak policy capacity o policy development and policy adjustment (reactive policy approach) o broken policy cycles o poor evidence base, no proper impact evaluation o insufficient consultation capacity, willingness o legalistic approach to reforms o by and large continued policy imports, no input in the debate on fiscal expansion vs fiscal retrenchment Economic crisis and Governance implications

22. o weak implementation capacities constrain policy choices o “across the board” cuts instead of targeted o structural imbalance between branches of power (executive dominates, parliaments very weak) o also valid in EU NMS o …and even more in monocentric Central Asian regimes (*KGZ parliamentary grand experiment) o generally aggravated in the context of crisis responses o Romania: in Oct-Dec 2009, government determined by President, not Parliament o administrative inefficiencies, ineffective public services o politicisation of public institutions o widespread corruption Economic crisis and Governance implications (II)

23. o Political and legal /constitutional frameworks severely tested, social contract at (or close to) breaking point o political turmoil, collapse of coalitions o crisis response policies challenged legally o Latvia, Romania: Constitutional Court decision on pension cuts o Hungary: reduced Constitutional Court jurisdiction o political elites lack credibility and legitimacy for imposing tough measures (political capital is low) o … Could the crisis be an opportunity for a new wave of Governance reforms? o look less at basic legal frameworks and institutional “hardware”, more at capacities, resilience, effectiveness… (the “software”) Economic crisis and Governance implications (III)

24. o …followed by o deficit / debt crises o fiscal retrenchment, shrinking state o Need to find a better / smarter trade off between a capable state and cost containment Economic crisis and Governance implications (IV) o Initial crisis responses: o stimulus, bailouts o states “back in business”, expanding role

25. Thank you! Comments? Questions?