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Economic Liberalism and Its Rivals


  • Page extent: 366 pages
  • Size: 234 x 156 mm
  • Weight: 0.65 kg

Library of Congress

  • Dewey number: 337.47
  • Dewey version: 22
  • LC Classification: HF1557 .D37 2009
  • LC Subject headings:
    • Former Soviet republics--Foreign economic relations
    • Former Soviet republics--Economic policy
    • Liberalism--Former Soviet republics

Library of Congress Record


 (ISBN-13: 9780521866538)

Economic Liberalism and Its Rivals
Cambridge University Press
9780521866538 - Economic Liberalism and Its Rivals - The Formation of International Institutions among the Post-Soviet States - By KEITH A. DARDEN

1    A Natural Experiment

In 1921, after the Bolshevik forces defeated the White Armies of the Russian Empire and completed their reconquest of tsarist territories, they found themselves in control of a vast and heterogeneous swath of Eurasia. The inhabitants of their new dominion were overwhelmingly rural – primarily peasants or nomads – the vast majority of whom were unschooled, illiterate, and devoid of national identity, instead identifying themselves by their family, tribe, or village, or simply as “people from here.” Aside from the fact that they were all now subject to Soviet control, the peoples of Eurasia had very little in common with one another. They spoke more than 150 different languages and countless dialects. Most were linked to their countrymen by neither road nor rail. Heterogeneity, insularity, and isolation were the order of the day.

Seventy years of Soviet control changed all of that. Over the subsequent decades, the peasants and nomads were systematically collectivized, educated, electrified, urbanized, industrialized, nationalized, organized, terrorized, surveilled, and ruled in much the same way across the vast territory of the Union of Soviet Socialist Republics (USSR). The result of this methodically imposed project in social and political engineering was that by 1991, whether one lived in Tashkent or Tula, one was governed by identical political institutions, participated in the same centrally planned economy, and studied similar types of texts in similar schools. As famously dramatized in The Irony of Fate, a Brezhnev-era comedy, one even walked streets with the same layout and the same names, lived in the same apartments, sat on the same furniture, and ate off the same dishes. In short, by 1991, both the formal structures of the state and the informal organization of everyday life had become standardized throughout Soviet territory in a way that is historically unprecedented.

It is precisely because of the peculiarity of the region's history that it provides an excellent opportunity to explore the underlying sources of international order. As a result of the high level of Soviet standardization, the collapse of the Soviet Union into 15 independent states initiated a unique natural experiment in the formation of international institutions. As new states, the 15 former Soviet republics had no prior international institutional membership; all were starting from scratch. Moreover, the legacy of Stalinist planning created what statistical methods typically cannot: a level of control akin to laboratory conditions. In short, the collapse of the USSR left 15 states with remarkable historical and institutional commonalities, facing very similar economic choices and at the same moment in history.

A careful examination of the results of this experiment will provide the core theme of this book. In particular, I will examine why, despite all of their political, economic, and institutional commonalities, the post-Soviet states followed different courses with respect to membership in international economic institutions. Since achieving independence in 1991, the post-Soviet states have chosen three distinct institutional arrangements for governing their trade relations with other countries, and the divergence is quite stark. By the end of their first decade of independence, Kyrgyzstan, Estonia, Latvia, Georgia, and Lithuania adopted free trade policies and secured rapid entry into the World Trade Organization (WTO). Russia, Belarus, Kazakhstan, and Tajikistan had formed a regional economic union and a customs union (CU) with a protectionist common external tariff. Uzbekistan, Turkmenistan, and for much of the decade Ukraine and Azerbaijan pursued autarkic strategies, erecting barriers to trade and eschewing membership in international trade institutions. In sum, with the freedom of political independence, the new states forged three different paths during the 1990s: rapid entry into Western multilateral institutions, the formation of a regional bloc, and the pursuit of national autarky. Similar states made very different choices (Figure 1.1). Why?

The predominant theories in international relations have clear arguments about why states form, join, and comply with international institutions and should, in principle, have sufficient explanations for why the various post-Soviet republics would proceed along different paths. Realists maintain that international institutions are formed by powerful states to serve their own interests and to force weaker states into compliance with their demands. Liberals suggest that states join international institutions to reduce transaction costs or to enable a winning coalition of commercial interests to profit from them materially. More recently, constructivist scholars have taken the position that states join institutions and select policies that are consistent

Image not available in HTML version
FIGURE 1.1. International economic institutions of the post-Soviet states.Note: Kyrgyzstan formally signed the Customs Union agreement but never adopted the common external tariff. See Chapter 8.
with their identity; in other words, a state's self-conception will determine what it wants and the institutions to which it wishes to belong. Each of these schools of thought makes attractive claims that I will examine later in detail, but a few comparisons make clear the need to look beyond traditional theory for our explanation.

Take, for example, the cases of Moldova and Estonia. Aside from membership in the Soviet Union, these two small countries hold in common many of the factors that traditional theories would draw on to explain a country's choice of international institutions. Constructivists would note that both countries were late additions to the Soviet Union; neither country's present-day territory was fully subsumed into the USSR until after World War II. In both countries, strong anti-Russian and anti-Soviet nationalist organizations mobilized popular sentiment for independence during the waning years of the USSR, and both governments boycotted the 1991 referendum on the preservation of the Soviet Union. Realists would note that upon becoming independent, both Estonia and Moldova were small, militarily feeble countries with significant Russian minorities. Moreover, the economic profiles of the two countries were quite similar: both countries relied heavily on agriculture, depended on subsidized energy imports from Russia, and traded almost exclusively with other Soviet republics. On the basis of the similarities outlined previously, conventional theories would predict that these two

countries would follow analogous routes with respect to their membership in international institutions.

Indeed, in the early 1990s, both countries behaved much the same way. Both rejected membership in the Commonwealth of Independent States (CIS), and both cut their major economic ties with Russia and turned to Western partners for their energy supply. And, unfortunately, both countries suffered several years of sharp decline in gross domestic product (GDP) following the breakup of the Soviet Union. Yet in 1994, the paths of these two countries radically diverged. Estonia began to pursue rapid entry into the WTO and the European Union, while Moldova reversed course by joining the CIS. Moldova, in fact, began to privilege trade with its former Soviet partners and even sold its national energy network to the state-owned Russian firm, Gazprom. Given these two countries’ strong nationalist pasts, analogous production profiles, and similar weaknesses with respect to their neighbors, the emerging differences in their institutional trajectories have been puzzling.

The story of Belarus and Ukraine is similar. These two countries, like Estonia and Moldova, held in common most factors that conventional theories consider to be important in explaining states’ motivations to join international institutions. Neither country predated the Soviet Union or had a significant history of self-rule; in fact, both were essentially administrative units created by Soviet bureaucrats. Both countries’ economies were constructed according to an identical plan, producing the same highly industrialized workforce and the same distribution of production across different sectors. In both countries, anti-Russian or anti-Soviet nationalism was, at best, a “minority faith”; consequently, in the 1991 referendum, both countries voted overwhelmingly to remain in the Soviet Union.1 When the USSR disintegrated, both countries also inherited large, advanced military forces and nuclear weapons. Yet despite these historical, economic, and strategic commonalities, Belarus has ardently advocated the formation of a customs union while Ukraine has shunned its neighbors by establishing a protectionist tariff and rejected membership in both regional and international trade institutions.

We need not restrict our view to Eastern Europe; similar comparisons exist between Kazakhstan and Uzbekistan, Kyrgyzstan and Tajikistan, and

Georgia, Armenia, and Azerbaijan. Throughout the former Soviet Union, we find countries in similar strategic circumstances, with similar economic structures, and similar forms of national identity making different institutional choices. Why?

The argument of this book is that the root of these different institutional trajectories lies in the idea-driven choices of state leaders. What differentiates the post-Soviet states have not been their economic circumstances or their inherited institutional structures, but rather the particular economic ideas of the new governing elites in each state since 1991. Amidst the corruption, violence, and impoverishment of the region after the collapse of the Soviet Union lay a political battle among groups that differ fundamentally in their economic ideas, their ideas about the way that economies function and the best means of ordering social and economic life. This book is about the nature and outcomes of this political struggle, and about how economic ideas shaped the way that governing elites of the post-Soviet countries have defined national economic interests and charted a course in international affairs.

In identifying economic ideas as a critical variable, I seek to draw on, and contribute to, a broad collective endeavor spanning several decades of research in international and comparative politics that has sought to demonstrate, in the succinct phrase coined by Peter Hall, the “political power of economic ideas.”2 In doing so, I have been fortunate to enter a literature where some of the fundamental claims have been ably demonstrated. Peter Hall's landmark studies of Keynesianism and monetarism made a compelling case for the role of economic paradigms in shaping domestic economic policy. John Ruggie, in a seminal 1983 article in International Organization, detailed how the emergence of an Anglo-American economic consensus on Keynesian “embedded liberalism” underpinned the formation of the principal postwar international economic order.3 This book contributes to these landmark studies, and the rich literatures they have spawned, with new cases, new methods for identifying and testing for the effects of economic ideas, and new theory.4

The post-Soviet states also provide a challenge to these earlier accounts, as the primary explanatory factors that existing ideational arguments draw on to explain change or variation were constant across the 15 post-Soviet states. The prior political–economic institutions identified by Hall, Sikkink, Dobbin, and others as important to the selection of ideas were common to all 15 post-Soviet states. The formative experience of economic hardship, a factor

highlighted by Ruggie, was endured by each of the former Soviet republics. Similarly, the factors pointed to by some contemporary constructivist scholarship – the norms borne by representatives of the Western international institutions and transnational civil groups,5 or the dictates of “world culture”6 or “international society”7 in the late 20th century – were common to all. Thus, although the approach here shares much with the existing ideas literature, it necessarily develops an alternative because the key variables of those studies are constants in the post-Soviet cases; they cannot explain the variation.


The full explication of the theory informing this book's explanation of the institutional choices of the post-Soviet states will be the primary task of the next chapter, but its commonalities with and differences from the existing literature can be summarized by answering four basic questions central to the theory of economic ideas: Why do economic ideas matter? How do economic ideas matter? What is the relationship between ideas and interests? And why are some ideas selected rather than others?

Consistent with much of the constructivist literature, I argue that the main reason why ideas matter is that knowledge of causation is inherently imperfect. In the academic discipline of international relations, this point is not only epistemological – i.e. there are inherent limits on the capacity of the researcher to infer causal relationships – but more importantly, it is also ontological: imperfect knowledge is an elemental attribute of the actors and interactions that we study. Actors inherently lack objective knowledge of the relationship between cause and effect in economics and other matters in the world. Because of these limitations, we should not characterize

any state's actions as responding directly to the “objective” structural factors highlighted in materialist theories and models. Instead, political actors rely on inference, “paradigms,” informed conjecture, and imagination – in short, on their ideas – to identify relevant causal relationships and determine appropriate policy. Actors use their ideas about causation (quite literally) to make sense of the world; not only do states use their ideas to characterize the problems they face, but these ideas also expound the range of options available for dealing with these problems. More than simply “road maps,”8 these ideas constitute the building blocks of our understanding of the world.

This is not to suggest that actors’ ideas matter only under conditions of uncertainty, as many of the best studies of the role of ideas have assumed, or that ideas are more likely to have a bearing in situations that are novel9 or especially complex,10 or where cost–benefit analyses of different courses of action are especially difficult to calculate. By most accounts, the greater is the uncertainty, the less that actors can rely on the objective situation, and the greater the effect of their ideas.

However, the claim that I will make is somewhat different and ultimately much stronger. Because uncertainty is a constant feature of human understanding, rather than merely an occasional or variable condition, actors’ ideas play just as much of a role when actors are “certain” or highly confident of the costs, benefits, and probable outcomes of a given set of circumstances as when they experience new or ambiguous situations. Actors’ feelings of certainty, I argue, do not imply objective knowledge, but rather only reflect the degree of confidence that actors have in their ideas, and the extent to which those ideas have come to be taken for granted. Novel situations might make the contingency and fragility of mental constructs more apparent, but their subjectivity is nonetheless ever-present. In other words, it is not the case that actors sometimes calculate their interests on the basis of objective conditions and at other times resort to their ideas, but rather that actors’ reasoning always rests on a set of ideas about causation that are inherently and inescapably subjective, even when they are grounded in and consistent with known experience. For this reason, it is only meaningful to speak of actors’ economic ideas, not their objective understanding of economic causation.

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