Political elite, civil society, and type of capitalism: Estonia and Slovenia

East European Quarterly, March, 2008 by Frane Adam, Matevz Tomsic, Primoz Kristan

A recent report on social inequality published by the Statistical Office of Estonia confirms our thesis on increasing social inequality in Estonia. According to the statistical report, inequality is evident in other spheres of life as well. Education, health, and social and cultural participation are among the most affected. A general principle can be derived from the data--by referring explicitly to the situation in Slovenia--that the higher the expenditure on welfare or social protection, the lower income inequality will be (see Social Inequality, Statistics Estonia, 2007).

Undoubtedly, Slovenia and Estonia are both successful East-Central European countries; in Estonia, however, by pursuing one of most liberal types of capitalism, the elites seemingly established a self-sufficient vision of development and are therefore paying less attention to the rising social inequality and its dysfunctional consequences. The Social Inequality report recently published by Statistics Estonia indicates that social inequality is subject to more general awareness and concern in the country.

Discussion and conclusion

The course of political development and systemic transition is determined to some extent by "path-dependence." Following the breakdown of the Soviet regime, Estonia faced some serious socioeconomic conditions. It had a choice either to stay trapped in a vicious circle of under-achievement on the on the periphery of Western Europe or to do something to break this circle and make a developmental breakthrough on the basis of radical reforms. Slovenia's situation was quite different. Its relative openness toward the West and its more market-oriented economy together with some degree of political and especially cultural autonomy--which was not the case in the Baltic countries--during the period of socialist Yugoslavia made the socioeconomic transformation less traumatic. This led to the prevalence of a notion of the relative compatibility of the Slovenian institutional setting with the West that rejected a deep and sudden break with the past, arguing for a "soft transition," in other words, piecemeal and gradual institutional changes in order to preserve social stability. This soft transition was strongly connected with the high elite reproduction, meaning that most of the old--but to some extent already "modernized" and "reformed"--communist-era elites retained their positions in the new circumstances. However, the political actors still had to make their choices. The Estonian elite decided to modernize society through widespread and rapid liberalization and deregulation, while the Slovenian (political) elite embraced a gradualist approach that led to much slower and more cautious reforms but was able to ensure a high level of macro-economic and social stability.

Both transition models have proved successful. Estonia is considered the fastest-developing state and is rapidly approaching the EU average. Slovenia, on the other hand, has succeeded in maintaining the highest GDP in the region--despite having lower economic growth (from 2002 to 2006) than Estonia--and economic stability, enabling it to adopt the common European currency, the euro, and become the only new EU member state to do so. Here, two key factors need to be mentioned. The first concerns the structural, particularly historical and geopolitical, circumstances (path-dependence). The second has a "subjective" nature and largely depends on the decisions and composition of the elite groups. Our thesis is that the type of capitalism that has evolved in each country needs to be explained within this context.