Why Belarus Would Not Be Capable of Repeating the South Korean Path and Fall Into a Developmental Trap?

By Alexei Pikulik

http://www.belta.by/newnimages/001032_00000590269.jpgBy now it is becoming clear that the Belarusian authorities continue postponing politically risky economic reforms and see their consolidated, and repressively -capable state apparatus as a comparative advantage in managing the economic institutional change once it starts. This process unfolds as Russia is constantly increasing its pressure on Belarus concerning broad-scale economic reforms. Furthermore, it is becoming clearer that the reform process is unlikely to be opened to the broad public: accountable reforms go against the rational corporate interests of Belarusian and Russian political and economic elites.

All these contain two interconnected systemic risks. Firstly, the depoliticized and non-transparent economic reforms conducted in a low-accountability regime are likely to lead Belarus into a serious developmental trap, in which state-capture by vested interests (Hellman, 1996) (certain forms of oligarchization and cronyism), and external economic dependence will be most likely. Secondly, the non-transparent reforms will have long-term 'path-dependent' effects and the new capitalistic order of Belarus will be dominated by an asymmetrical distribution of property rights, severe economic distortions, and a predominance of 'bad institutions'.  Are there ways to avoid the trap?

This working paper contributes to the old chicken/egg debate revived by the Liberal Club in June 2012 (market-making or democracy building first?). It is based on the critical overview of the relevant scholarly work in political economy and economic sociology literature and builds upon the experience of some Latin American, East-Asian and East and Central European countries.

It argues that the Belarusian elites should take the developmental risks of the economic reforms conducted by an illiberal state seriously, and sacrifice parts of their short-term rents of non-transparent reforms for the sake of the country's long-term developmental perspectives. It suggests the authorities to meaningfully open the process of economic reform to the public, and argues that this is paradoxically in the best interests of Lukashenka (not necessarily of his elites).

The entire text is available here