Welfare States in Transition

The chapter by Scholz and Tomann strikes a tone which is timely, interesting and thought provoking. It challenges the conventional assumption in economic analysis that equity detracts from economic efficiency. The authors provide convincing evidence to show that this assumption is inappropriate when considering the economic, social and political development of central and eastern European countries. Their main premise is that social policy plays a supportive role in the transition of central and eastern European countries. This view is opposed by Herbert Kitschelt (see Kitschelt et al., 1995; Kitschelt, 1996) who argues that these states should first concentrate on creating a climate conducive to entrepreneurship, which then contributes to a middle-class basis which in turn has moderate or stabilizing influences on the political development of these countries.

The Czech Republic, like most of the other CEE countries, inherited a centralized ‘state paternalistic’ system of social welfare from an earlier communist regime. An egalitarian pension system, highly subsidized prices for housing, energy, transportation and food, free health care and easily accessible education up through university education, generous social benefits for children and families, full employment guaranteed by the state, all of this together with a relatively modest taxation of private income came to be regarded as the standard basis for the modus operandi by the majority of the Czech citizens. While subject to criticism for the low quality of health services and privileged access for certain relatively small social groups (for example, state and party nomenclature, security forces), the system as a whole had not been questioned by dissident circles and (except for social net issues related to unemployment and inflation, introduced in 1990 and 1991) had not become a priority item on the political agenda during the first two years of economic and political transition after 1989.