Equality, Participation, Transition: Essays in Honour of Branko Horvat

Development Report 1996 (World Bank, 1996) divides transition economies
into four stages: Advanced reformers, High-intermediate reformers, Lowintermediate
reformers and Slow reformers.
11.3 Optimism, linearity and reality
Ivo Bićanić 189
These optimistic expectations and linear interpretations face two kinds
of problems when confronted with empirical work. First, when taking
a wider view they are quite out of step with both the historical record
and more recent economic development. Secondly, there is an increasing
amount of empirical literature on transitioning economies which
casts a shadow on both notions.
The historical record shows, beyond any doubt, that generating
Modern Economic Growth is not the rule, and that many economies
have not succeeded in achieving it. From the very beginning, when
Modern Economic Growth emerged in Western Europe in the late 17th
century, matters were unclear. Economic historians still vehemently discuss
the causes of both the industrial revolution and its location. From a
growth and technology perspective, the case of China is most interesting
since a more advanced economy than Europe in the 16th and 17th
century never generated growth (see Mokyr, 1990). Looking at more
recent periods we see that the growth track record is mixed. In Europe,
together with the success of Germany from the mid 19th century, and
Scandinavia in the late 19th and early 20th century (see Good, 1994),
there have been notable failures in Eastern Europe (see Chirot, 1989 and
Good, 1994) and the Italian and Iberian peninsula (see Tortella, 1994).
On a wider scale, the success of the United States from the early 19th
century must be viewed together with the failures in Latin America and
South Africa in the late 19th and early 20th century (see Lewis, 1978).
The most recent experience of post-World War II indicates that growth
does not ‘emanate’ (or seem to ‘trickle down’) from those who are experiencing
it. While Europe was enjoying its ‘golden age’ of convergence
with the United States (see Crafts and Toniolo, 1997), Eastern Europe, in
spite of massive efforts, was not ‘catching up’, and neither were the less
developed countries of Africa and most of Asia. Indeed, more recent
measurements show that the inequality of the world distribution of
income is not only increasing, but increasingly becoming a twin peak
distribution (see Jones, 1997). Furthermore historical experience, rather
than pointing to long periods of stable growth, indicates that oscillations
are more common. Periods of high growth are replaced by periods
of slow growth (see Boltho and Holtham, 1992).