Heiko Fritz, 'Swans Reflecting Elephants', Europe-Asia Studies, 64(1), pp. 172-173

The paranoiac-critical method is a process in surrealistic painting by which the artist finds new ways to view the world around him. A famous application of this technique is the double image as used, for instance, by Salvador Dali in his masterpiece Swans Reflecting Elephants. The ensemble of a Siberian oil rig flanked by a couple of low sheds reflecting Cracow’s Mariacki church, the cover image of the book under review, may be considered another example of this method. Admittedly a bit brute from an art’s point of view, the image figuratively communicates what the reader can expect from the book, namely a view on economic transition in Europe and Central Asia that differs from the traditional mainstream.

Organised in six sections, the book starts with a critical appraisal of the system of state socialism, its successes and failures, and the problems leading to its ultimate collapse. This is followed by a report on macroeconomic developments throughout the last two decades. Stressing the general thrust described by the Washington consensus (WC) the third section discusses transition strategies as well as actually chosen alternatives and adaptations of these. The fundamental change in the role of the state, its capacity to act and emerging welfare regimes are subject of section four. Section five focuses on the role of business in transition addressing the development of new business, privatisation and financial intermediation. The last section concludes by identifying varieties of capitalism that emerged in transition and by discussing the impact of the global financial and economic crisis on transition economies.

A major strength of the book is its impartial and pragmatic line of reasoning. Albeit Martin Myant and Jan Drahokoupil are very critical about a transition strategy rigidly based on the WC and promoted by international organisations (IO) they do not dismiss the WC per se. Their criticism primarily addresses the overemphasis of speed in the WC strategy that reflects the interest of IO and the naivety of the neoclassical economic theory to market imperfections rather than local knowledge, intellectual heritage or academic debates in the transition economies. Throughout all the book the authors demonstrate in a compelling way that, as opposed to the shock therapy of the WC, ‘(…) on almost every point of detail, there is a case for a more considered, and hence gradual, approach.’ (119)

Critics might argue that the book does not confront the WC and, more importantly, its underlying theoretical framework with a coherent alternative paradigm on the basis of which transition strategies should be designed. In fact economic transition embedded in a dynamic social and political landscape is too complex to be grasped by an encompassing normative theory. Acknowledging the contribution of a number of middle range theories, the book pursues positive political economics.

The authors provide the most original part of their research in the conclusion only. Their innovative classification of transition economies based on the strategy chosen for internationalisation is a fine adaptation of the varieties of capital paradigm and substantially adds to this literature. Using the same classification to identify how transition economies have been exposed to the global financial and economic crisis the authors convincingly demonstrate how fruitful their approach is. This, again, can be considered an important contribution to a literature rich in articles published by architects of WC-like policies attempting to prove they were right.

Implicitly the book argues that the influence of the external environment of the countries in transition can only be underestimated. It was external actors, most notably IO, that crucially shaped the agenda, the strategy and the pace of economic transition. It is the form of international integration that has brought about a particular variety of capitalism. And it is the global crisis that puts the robustness of the transition economies to the test and renders the verdict on the chosen strategy.

The book is very well researched. The authors gathered and reviewed an enormous amount of data some of which are provided in the appendix. The list of references comprises seminal contributions from economics, political science, international relations and history as well as biographies of key figures in economic and social transition. Taking into account trajectories and experiences of all former socialist countries that have been facing the challenge of transition the geographic scope is wider than of most studies addressing new EU member states only or the CIS.

Swans Reflecting Elephants has become an icon of surrealistic painting. With interest in transition from plan to market dusking it is unfortunately too late for Martin Myant’s and Jan Drahokoupil’s book to see the same success. However, any well-assorted library ought to procure it and the book should figure prominently on the reading list of any social science course in economic transition.

Professor Heiko Fritz, Department of Economics, German University in Cairo