Ivan Szelenyi

IVAN SZELENYI

POVERTY AND SOCIAL STRUCTURE IIN TRANSITIONAL SOCIETIES The First Decade of Post-Communism Plovdiv, Bulgaria November 2013

IVAN SZELENYI

3 POVERTY AND SOCIAL STRUCTURE IN TRANSITIONAL SOCIETIES

© Ivan Szelenyi, author, 2013 © Poverty and social structure in transitional societies. The First Decade of Post-Communism, 2013 © Rumyana Boyadzhieva, editor, 2013 © Georgi Hristov, translator, 2013 © Publishing College of economics and administration – Plovdiv, Bulgaria, 2013 © Print and publishing „Janet 45“, Plovdiv, Bulgaria, 2013

ISBN 978-954-92776-9-2

5 SYNOPSIS

Preface ......

Preface ...... 9

Introduction: theory and data ...... 23

Chapter 1: . Memories of socialism ...... 66 Chapter 2:. The losers of market transition ...... 88

Chapter 3:. Poverty under post- communist capitalisms ...... 107

Conclusions ...... 130

BibliographyLiterature cited ...... 141

Appendix ...... 147

9 ACKNOWLEDGEMENTS

This book is based on data from the research project “ „Poverty, ethnicity and gender during market transition.”.“. I was principal investigator of this project, Rebecca Emigh, Eva Fodor and János Ladányi were my co-P.I’s. The project was funded by the Ford Foundation. Data were collected in 1999 and 2000 by an international team in six European post-communist countries. Members of these research teams formed “ „workgroups”,“, which met at Yale University during the 2000-2001 academic year and during the Fall Semester of 2001 in order to conduct preliminary data analysis.

I have to thank the dedicated work of Rebecca Emigh (UCLA), who played a crucial role in conceptualizing the research, coordinating the project, developing the research instruments and cleaning, organizing the survey and ethnographic data. János Ladányi (Budapest University of Eco- nomics, Hungary) and Eva Fodor (Dartmouth College) helped me in every stage of the research and they spent time at Yale duri8ng the phase of preliminary data analysis. My special thanks are also due to Gail Kligman (UCLA) who was senior research consultant to the project. She offered all along intellectual inspiration and participated in the spring 2001 workgroup. I am also grateful to all those who participated in the workgroups at Yale University and who helped to project in other ways. Members of the working groups were Adrianne Csizmady (Hungary), Henryk Domanski (Poland), Judit Durst (Hungary), Roman Dzambozovic (Slovakia), Gábor Fleck (Hungary), Joanna Jastrzebska- Szklarska (Poland), Livia Krajcovicova (Slovakia), Petar-Emil Mitev (Bulgaria), László Péter (Roma- nia), Livia Popescu (Romania), Elzbieta Tarkowska (Poland), Ilona Tomova (Bulgaria), Gabriel Troc (Romania), Tinatin Zurabishvili (Georgia). From Yale University three graduate students (Christy Glass, Janette Kawachi and Lucia Trimbur) and one post-doctoral fellow (Eric Kostello) also worked on the project.

Ivan Szelenyi

10 11 PREFACE

I wrote this book in the spring of 2002 while I was on Sabbatical leave from Yale University in Max Planck institute für Bildungsforschung in Berlin from data we generated in 1999-2000 in Bulgar- ia, Hungary, Poland, Slovakia, Romania and Russia with a grant from Ford Foundation. Our initial plan was to use this is a raw material for a book I intended to co-author with Christy Glass and Janette Kawachi, my students at Yale and Gail Kligman my friend and former colleague at UCLA. I finished alone this text in June 2002, I never had a chance to have time together with the rest of the crew so my draft remained incomplete and was never turned into the collective work we initially planned. In the Preface to the A Critique of the Political Economy (1859) Marx mentioned The German Ideology and he wrote: „We abandoned the manuscript to the gnawing criticism of the mice“ (The German Ideology was written in 1845/46 and not published until 1932). So I left Poverty and Social Structure in Transitional Societies also to the gnawing criticism of the mice until a few months ago my old friend and collaborator Petar-Emil Mitev asked whether I still have the manuscript and whether I might be interested to see it in print both in Bulgarian and English. Be very frank about it: Poverty and Social Structure in Transitional Societies is no German Ideology. It will not change the discipline of sociology, even not our understanding of poverty and society of post-communism but I hope the data presented in this book will be of some historical interest, it not only adds some more information to our rather incomplete understanding of the extent and social determinants of poverty during the first decade of post-communism, but to the best of my knowledge this is the only multi-national study which made an effort to reconstruct from survey data the „memoires“ of socialism a decade after the fall of communism. A lot has changed since 2000 when the data was collected and since the summer of 2002 when I wrote the last sentences of this book (I left the text unchanged, just updated a few references, but I did not make any effort to evaluate the changes of poverty and review the relevant literature since 2000). So the purpose of the Preface is to briefly summarize the changes in the past 13 years focusing on the question of ever increasing „varieties“ of post-communist capitalism. In the year 2000 I identified three types of post-communist capitalism: In Europe I made a distinction between a neo-liberal and neo-patrimonial way out of communism. Largely driven by the data – and my limited knowledge of the politics of the European post-communist societies – I drew the boundaries between neo-liberalism and neo-patrimonialism largely along the „religious divide“. (I called the Asian version of post-communism „capitalism from below“ and I will return to this proposition later in this Preface). The boundaries of the two European post-communist systems – so I hypothesized – were between Western and Eastern Christianity (and Islam). Hence I treated Bulgar- ia, Serbia, Romania – in retrospect arguably a bit cavalierly – as neo-patrimonial systems, belonging to the type of post-communist capitalism what one could observe in Russia or the Ukraine. In the Western part of formerly communist Europe the communist parties melted down, the former communist political elite largely disappeared, or its reformers now recast themselves as social democrats and followed closely the rules of liberal political democracy. In neo-liberal post-commu-

12 nism the new regimes implemented rapid deregulations of the finance system, foreign trade, prices and privatized public ownership largely in market conform ways (typically auctioning former state owned enterprises on competitive auctions). As a result FDI played a crucial role in privatization. From the former elites mainly the technocratic fraction of the elite could also benefit from privatization (they had inside knowledge concerning the real value of public firms put up for auctions, they were likely to be seen to be credit-worthy given their connection and expertise by banks who gave loans to support privatization than ordinary citizens). Countries which adopted the neo-liberal route to post-communism paid a heavy price – especially if they applied „shock therapy“ – there was a massive loss of jobs (about a third of jobs disappeared), the GDP declined by up to 30 percent and poverty rates (those in extreme poverty) skyrocketed from 1-2 percent to up to 6-7 percent. Neverthe- less in year 2000 it appeared that after all the neo-liberal strategy of transformation is beginning to work. By the year 2000 all Central European countries which took the neo-liberal route achieved or surpassed the level of economic development in 1988, all of these countries were on growth trajectories, they were on their way to join the European Union and there was reasonable hope the gap in terms of economic development between Western and Central Europe will narrow rapidly. Each of these countries had some political turmoil, but on the whole they had reasonably well functioning democratic polity. In the Eastern part of formerly socialist Europe there was substantially more continuity in the political power of former political elite. The process of economic liberalization tended to be slower and paternalistic connections in the privatization process were more prominent. Russia under Yeltsin took the lead for such a neo-patrimonial type of transformation. The market institutions were slow to evolve, paternalistic relations were retained within firms, the financial system was hardly functioning, „money disappeared.“ There was widespread use of barter and in particular in the privatization process the actions of public firms were highly manipulated to benefit political clients and often those who held political office (most of them survivors from communist times). Some political bosses converted their „political capital“ into private economic wealth (Chernomyrdin, an old style communist cadre and Yeltsin’s prime minister for a while who became multibillionaire in US dollars is a prime example). There were others who benefited from the transition, young, talented men, who hanged out around the „court“ of Yeltsin. He in anticipation for their political support put them „into position“, were helped to obtain incredible wealth on highly manipulated „auctions“ (Bere- zovsky, Abramovich are prime examples). Arguably these people were sort of „appointed“ to be owners of gigantic wealth by the political ruler, by the new „tsar“, much like the aristocracy was appointed in feudal times by kings, queens, or tsars In 2000 I speculated that Bulgaria, Romania and Serbia was closer to the Russian model than to the Czech, Hungarian or Polish one. The first decade of neo-patrimonialism was an unmitigated disaster. The GDP in this part of formerly socialist Europe declined by up to 50 percent, their transitional crisis was reminiscent of the Great Depression of the 1930s, as of year 2000 they tended to lag behind the 1988 economic development and the increase of poverty was two-three times of the increase of poverty in Central Europe. Inequality was also reaching at least in Russia very high levels. This book does not deal with the East Asian, especially the Chinese ways out of communism. I called this „capitalism from below“ since after 1978 China did not touch the state owned corporate sector at all, it started to dismantle the communist economic institutions by unleashing the entrepreneurial spirit of peasants (and later smallish businessmen – some of them former cadres) and it did leave the political system basically unchanged. The results were miraculous. China made the transition from a socialist redistributive economy to a capitalist market economy not only without any eco-

13 nomic crisis, but with a sustained, often 10+ percent annual growth, with a dramatic decline of poverty and at least until the mid 1980s even with a decline of social inequalities. There has been an intense debate among economists and political scientists whether the Chinese „miracle“ has anything to do with government policies or it all can be explained by the „initial conditions“. The jury still may be out and we may not have a definite answer to this question, but in explaining the differences between the neo-liberal and neo-patrimonial regimes I insisted in the book that government policies DO matter, they are not over-determined by the initial conditions and I would retain this as a guiding hypothesis for the Chinese story as well. I believe the changes which took place in the past decade offer strong support that while initial conditions are of importance government policies do indeed matter as well. Without going into any further detail let’s just simply summarize where I was in 2000-2002. I was persuaded that the Chinese „did the right thing“, the Chinese strategy was the least costly (it had its cost: the political one, that strategy arguably could only be followed by maintaining the political hegemony of the communist party… not a pretty way to deal with politics) and it had the best returns. I was also persuaded that neo-liberalism was a better way to proceed (in conditions when the communist party collapsed hence there was no chance to adopt the Chinese „gradualist“ way of transformation) and neo-patrimonialism proved to be the worst course of action. I would not use the term „mistake“ since I believe sufficiently in the importance of initial conditions so it would be naïve to expect Russia to behave suddenly like Sweden. Remember the Shah of Iran when he was tortured by Western journalists about the oppressive policies he followed. After a while he got irritated and responded: „Are you asking me why I am not ruling like the king of Sweden? If I were the king of Sweden I would rule like him, but I am the Shah of Iran“. Now more than eleven years later (I am writing this preface in October 2013) it is reasonable to pose the question: did anything change? The simple answer is: a lot has changed and now we can add a few new members what appeared to me in 2002 as a three member post-communist capitalist family. Let me start with Europe and I will conclude this preface with a few observations on East Asian post-communism. I have no doubts that the greatest political innovator since 1989-1991 in the post communist world is Vladimir Putin. Putin in his own ways is a political genius who invented a new system of post-communist capitalism. I will call this system – following the terminology of Max Weber – neo- prebendalism. The terms neo-patrimonial or neo-prebendal was used often with similar meaning in political science in the past few decades (especially in connection with Africa) but I stick to the Webe- rian definition which is very clear to me and hopefully will be equally clear to my readers. Under Yeltsin’s neo-patrimonial system the allocation of property was rather arbitrary, it often appeared to be „corrupt“, those who received property were called oligarchs, or Mafiosi. Incidentally even in the neo-liberal system of Central Europe there was and remains a lingering doubt about the legitimacy of acquisition of property, the political left and political right accuse each others to practice „mafia capitalism“, hence passing on property to clients under not always transparent conditions. I do not have the time and space here to engage this issue in any depth but let me just briefly claim that the „original accumulation of capital“ was never a „gentlemanly“ affair. Marx describes the „sins“ of original accumulation of capital in England in colorful ways when writing about the „enclosure movements“ in England and these chapters from the first Volume of Capital are still useful readings to understand original accumulation of capitals under post-communist – no matter which branch of the family one belongs to. Let’s also not forget that those whom first attained corporate wealth in the United States between 1860 and 1900 were also referred to as the „robber barons“ and that is what

14 they were. So inevitably all original accumulators of capital are inevitable Mafiosi (not because they are bad guys, but became what they HAVE to do, „pocket“, or „enclose“ in relatively short time what used to be public property). The transition from communism to capitalism makes it even worse sine at t1 there is no private property at all, t2 has to come in 5-20 years hence the „enclosure“ would be inevitably more violent, will be seen by those who are left out even less legitimate, even as the result of „high way robbery“. So all post-communist capitalisms are mafia capitalisms, but the degree of how illegitimate the new property is, whether it took place simply in a legal vacuum or whether it happened in violation of laws will vary greatly. Nevertheless there is little or no doubt that the „enclosure“ movement in Russia was particularly shameless and what was also exceptional during the Yeltsin years how fast the „oligarchs“ after they satisfied their hunger for wealth were reaching out for political power. It is also important for me story however to point out that despite the doubtful legitimacy of new private property and hunger for power by the nouveau riche the property rights under Yeltsin were rather secure. Yeltsin made a few attempt to crack down on the oligarchs, but usually backed down, did not try to prosecute them for „economic crimes“, like corruption, tax evasion etc. This is important to appreciate why we can call the regime of Yeltsin neo-patrimonial in the Weberian sense. Weber defined patrimonial ownership as a limited (patrimonial property usually could not be alienated) but secure form of private ownership (it could be inherited and could not be taken away from its owners in the grounds of „not sufficient service to the ruler“). And now, in year 2000 comes the „new tsar“ Vladimir Putin who as a former KGB man knows all about the mud what is behind the new wealth and unlike his predecessor he is not ready at all to any power sharing for the new grand bourgeoisie. He is as impatient with the „new boyars“ as Ivan the Terrible was impatient with the „old boyars“. Very early in his rule Putin subjects the new grand bourgeoisie to „loyalty tests“ and those who do not pass it are in big trouble. He has enough dirt on them so he can put anybody in jail, but as a generous tsar he normally gives enough time to his ad- versaries to get on the plane and go into exile into London and Tel Aviv (like Berezovsky or Gusin- sky) or he locks them up (like Khodorkovsky). Now we have a new system which is a „presidential republic“ (one person rule), a „managed democracy“ (there are elections, but the media is controlled and the elections can be faked since the executive appoints those who control the fairness of elections) and where private property is only secured to those who do not have independent political ambitions and who are unconditionally loyal to the ruler. One extraordinary new tool of politics of this neo-prebendal post-communist capitalism is the criminalization of political opponents (criminalization apparently on non-political grounds… like tax evasion, corruption, bribery etc – and given the character of original accumulation of capital no one is immune to such accusations). Incidentally Putin’s neo-prebendalism economically proved to be a success. Russia is no longer a laggard in economic growth behind the neo-liberal regimes. On the contrary: during the early years of the 21 st century, until the global financial crisis hit Russia produced spectacular growth rates, it joined membership in BRICS and reestablished itself as a major player in world politics, economically but even militarily. There has been an impressive growth also of the Russian middle class and a sharp decline in poverty (Index Mundi reported 40 percent poverty in 1999 – about the same as I report in this book for 2000 – which is down is 13 percent by 2011, similar to poverty rate in Hungary in that year). Whether this is only attributable to Russia’s oil wealth and the increases of prices of raw materials, oil and gas is disputed. It is very hard to tell how much of the improvement in Russia’s economic performance is due to increased oil revenues or better governance and better industrial planning by government which has better state capacities. It is easy to give an ideological/political answer to this question, much more difficult to evaluate it in a cool-headed way empirically. Better

15 oil revenues of course helped, but state capacities (ability to collect taxes for instance) probably also improved hence we need more research and data to make an informed judgment. The second major change since 2000 was the direction the „Balkan“ States, especially Bulgaria, Romania and Serbia took. These countries were clearly moving from East to West, Bulgaria and Ro- mania joined the EU, they had few great years of economic growth during the early years of the 21 st century (surpassing the Central European countries). Their poverty rate plummeted for a few years down from 30-40% to the low teens before it increased again to 20 +. Undoubtedly these countries were moving from the neo-patrimonial system to the neo-liberal one but their political system is highly unstable as one could see from the intense conflicts in Bulgaria in 2013 (Boyko Borisov, the „man of the people“ – actually with some background in communist intelligence services – was forced to resign by mass protest against corruption, but his successor – Plamen Oresharski – did not last too long) and the rather nasty fight between president (Traian Basescu) and prime minister (Vic- tor Porta) in Romania in 2013 accusing each other of corruption, fraud, plagiarism and undermining democratic institutions. Nevertheless The Balkan States since year 2000 were drifting from East to West, from neo-patrimonialism to liberalism, though as we will see next in the example of Hungary this trajectory may not be simple and it is less than obvious that it is a one-way street. So let’s have a look at the Hungarian story after 2000, which arguably the most unanticipated and most troubling… especially if we want to consider whether the Hungarian turn from neo-liberalism what I call neo-prebendalism is just an aberration or it may be a pattern for the rest of post-communist Europe (or even China). Hungary during the 1980s (and already in then 1970s) was the most reform minded communist country in the soviet camp and introduced many market conform institutions (commercial banks, bankruptcy laws) even before the collapse of communist. Not surprisingly during the first decade of the transformation Hungary received much more per capita FDI than any other country (it was way ahead of Poland for instance). While Poland and Slovenia outperformed Hungary during the first years (Poland reached the 1988 levels of GDP already in 1995, it took Hungary a few more years) Hungary was doing fine until 2006 when it entered a lasting economic stagnation and intensi- fying political conflict. Hungary started an economic decay not only years before the Global Finan- cial Crisis, but cracks appeared on its liberal democratic institutions as early as 2006 with nasty con- frontations between massive demonstration and the security forces. In 2010 the center-right party – after eight years of socialist rule – won a decisive victory giving the party two third majorities in par- liament. While the liberal model was already trembling in Hungary since 2006 in 2010 it took a sharp turn to Putinism, or neo-prebendalism. The clearest indication of this turn is weakening of property rights and an attempt to criminalize political opponents and re-allocated property to create a loyal following. Unlike Putin, the Orban regime so far did not have the guts to take the new grand bourgeoisie on, but it targeted property which was not clearly allocated yet and re-assigned it to a hopefully loyal following. This happened with agricultural land and in 2013 with tobacco retail sale licenses. The „land reform“ under way, resembles „enclosure“ movement, it is not taken away from private owners, but land in public ownership is allocated – though in relatively small scale, tens of hundreds of acres – to always loyal followers of the ruling party. The same goes for tobacco retail licenses. Until now most food-stores had licenses to sell tobacco, now a network of tobacco shops are created which have a monopoly on selling tobacco and one has to demonstrate loyalty to the ruling party to obtain such a license. It is not the actual ownership – so far – what is reallocated – but the monopoly to run certain businesses.

16 The logic – and iron law – of neo-prebendalism is clear. In the neo-patrimonial regime – and to a lesser extent, but not to the some extent in neo-liberal reforms as well – there was enough „collective good“, which could be „enclosed“ and turned into private property and of course in the process those in political power could anticipate that the beneficiaries of these transaction will be supportive of them and their regime. Now all the collective goods were privatized so the game can only continue if exiting property rights are challenges – and it is quite easy to do it given the weak legitimacy of property that was acquired in the first instance – and the property re-redistributed to the new followers. This goes of course hand-in-hand with criminalization of owners and political opponents – cam- paigns against „corruption“, „collaborators of the former regime“, „tax-evaders“, those who are involved in „usury“ (a charge made by a leading politician against the wealthiest Hungarian banker, what in principle could land him in jail and confiscation of his property, which is close to $1 billion). This of course all anticipates an obedient judiciary, prosecutors and judges who are willing to use the words of the law against political opponents of the government and the ruling party. Given the nature of political power – its dependence on private wealth which is doubtfully legitimate – it looks like all three ways for out of communist – the neo-liberal, the neo-patrimonial and capitalism from below“ is vulnerable to the temptation of neo-prebendalism. Putin might have invented a model which can be infectious. The problem with the Putin model is not that it is not democratic – as it is criticism often. It – and especially its version under Orban in Hungary – is quite democratic. There are free elections, there is no opposition party which in free and fair elections could challenge them, the public media is controlled, but the private media is by and large free. I would like to invoke Montesquieu at this point. Montesquieu made an important distinction between „democratic“ and „moderate“ governance. Democratic governance can be the tyranny of the majority, good governance demands a separation of powers and a system of checks-and balances. The major challenge of neo-prebendal system is that it order it to work it requires a subordination of the judiciary to the executive, you need judges who will cooperate to criminalize your political opponents (and in the Putin version) to legitimate the expropriation and reallocation of property rights from one set of owners to another set of owners. Unsurprisingly government which flirt with a neo- prebendal system target the judiciary and try to create one which is under the tomb of political power. One of the great and unexpected surprises of the last decade was that Hungary which was the leading force of Western type, liberalizations seems to be shifting more clearly towards the East, to Putinism and neo-prebendalims than any of the other countries. If this is only Hungary, it is a parochial issue but if this is the way post-communist is likely to go it deserves more attention. And now let me conclude with a brief note on China. Already in 2002 in the manuscript I noted the „hybrid“ nature of the Chinese system. But at the time I did not appreciate sufficiently the sharp shift in China after 1989 towards a re-centralized system and especially with the new policy of privatization of state owned enterprise China’s relative convergence of the neo-patrimonial model. China was – I still believe that – „capitalism from below“ until the mid-late 1980s, but it started to change course in the 1990s, and especially with privatization of the late 1990s. The very fact that Chi- na had a relatively „classical“ system of capital accumulation for ten or so year is highly consequential. Many of the Chinese super-rich started from humble background, as rice farmers or brick-layers, hence by the time privatization started there was private capital accumulated in China. The fact that China did not have an economic crisis, but retained a steady fast growth is also highly consequential. Though during the last 25 years inequality was exploding in Chine (the GINI is now somewhere between 0.45 and 0.6 something…) it did not have the devastating social consequences high inequality

17 usually has, since „all boats were raising“ and poverty was sharply declining. Nevertheless it is clear the China is vacillating among the neo-liberal, neo-patrimonial and neo-prebendal ways of post-communism. Criminalizing political enemies and bringing their economic protégées down has a long history in China and it seems to be getting more severe. The Bo Xilai trial is the most extreme example. There is little reason to believe that Bo Xilai was any more corrupt than most of not all high ranking Chinese political officials (the family of former prime minister Wen owns over $2 billion, while Bo Xilai is accused of bribes for a few million dollars…). It is also rather obvious that he was a political threat to the leadership in Beijing and it is telling they use laws about „corruption“ to put him in jail. The main point of this preface: neo-prebendalism is on the raise. It is a powerful tool: it appeals to broad audiences that one has to fight corruption, those who gained property and profit by exploit- ing privatization, to redistribute illegitimately made fortunes, to put people in jail who committed „crimes against humanity“ during communist time. To take the pensions away from those who col- laborated with then regime… Revenge is sweet… If you did not make it (you might have been unlucky, too honest, stupid, lazy or whatever…) you see yourself as a victim and you want revenge. Neo-prebendalism: to punish the evil, the undeservingly successful and reallocate what they got to the victims, the unlucky ones who deserves better is a powerful ideology. It can be an effective tool to gain votes, majorities in parliaments and to serve finally „justice“. Watch out… we are in dangerous territories.

Abu Dhabi, October 4, 2013

18 INTRODUCTION

Posing the problem

This book is about markets, poverty and inequality. When markets expand and replace redistributive mechanisms does that lead to more or less inequality, more or less poverty? The answer to this question is far from obvious. Radicals of the classical type, Marx and his followers in particular suspected markets to be the primary cause of inequality and poverty. Classical liberals, from Adam Smith to Max Weber took the opposite position: for them less government or bureaucracy and more self regulating market meant less inequality and less poverty. Social democrats – such of Karl Polanyi – believed that some mix of market and redistribution might keep inequality at bay, while reducing poverty to a minimum. And jury is still out. This book is also about poverty under post-communism. After all post-communism is a historically new way of making capitalism, of creating markets. Post communist transition is an exciting laboratory – it offers another opportunity to confront old ideas with new realities. As socialism began the crumble the old question about the relationship between markets, inequality and poverty were reframed as a question of transition from socialist redistribution to capitalist markets. At least three opposing views emerged about the social consequences of market penetration in the move from classical (Stalinist or Maoist) socialism to reform communism and finally to post-communist capitalism: 1) Some – inspired by classical liberalism – argued markets undermine socialist clientelistic networks and reduce the power and privileges of ‘redistributors’. If the transition is properly managed markets might help – at least on the long run – the cause of the ‘direct producers’. To put is brutally simply: markets are good for you (Nee, 1989); 2) Others – following the footsteps of the radicals – argued the opposite: redistribution was an egalitarian system, as markets appeared already within the framework of socialist redistribution they created more inequality (and by implication at least) more poverty. The bottom line: markets are bad for you, ‘good society’ was the pure type of socialism and already reform communism began the erosion which led to an explosion of social problems with the collapse of the system (Burawoy and Lukacs, 1992; Haney, 2002); 3) Finally it was also proposed – in the sprit of the social democratic theory of the ‘mixed economies’ – that markets attacked the inher- ent inequalities of socialist redistributive economies while markets only complemented the system of central planning, but they boosted new types of inequalities (new types of poverty) one they became the ‘dominant mechanism’. The conclusion: under socialism complementing redistribution with market helped the poor; under post-communist capitalism the poor can be helped if markets are complemented by welfare redistribution (Szelenyi, 1978). At first glance there is good reason for radicals to rejoice. The fall of communism in Central and Eastern Europe was followed with an explosion of poverty and inequality. According to World Bank estimates during the late 1980s in the former Eurasian socialist countries fewer than one out of twenty-five lived below their ‘absolute poverty line’, hence survived with less than $2.15 a day. Ten years later one out of five people had to live with less than $2.15 a day (The World Bank, 2000, p. 1).

19 Income inequalities also jumped, the region, which was among the most egalitarian in the world just in a decade became one of the most inegalitarian ones. GINI coefficients between the late 1980s and the late 1990s increased in all countries. In Central Europe they rose modestly from around 0.20 to 0.25 (in Poland from 0.28 to 0.33), in South Eastern Europe it increased from around 0.25 to 0.30-0.40 and in Russia it jumped from 0.26 to 0.47 (The World Bank, 2000, p. 140). So can we finally settle the century-and-half long debate? Far from it. The pure type of socialism, Stalinism may not have been as poverty free and egalitarian as the radicals like to believe; unlike the expectations of the liberals after the collapse of communism poverty and inequality exploded, but less markets and slower reform – just as the liberals would have expected – made it worse, not better (The World Bank, 2000, pp. 111-117). The glass half empty or half full? The story we tell in this book is a complex one, with pros and cons. There is no simple answer to the complex question we posed. Liberals may come back with vengeance after they let radicals to rejoice for a while and social democrats may stand in the wings waiting to be the last to laugh. This book summarized the finding of research we conducted in year 2000 in six countries (Bul- garia, Hungary, Poland, Romania, Russia and Slovakia). We conducted survey research on random samples of the adult population (with over-samples of Roma in three countries, Bulgaria, Hungary and Romania). Local graduate students affiliated with the project also carried out with funding from us and under our supervision ethnographic case studies of communities in extreme poverty (often rural Roma ghettos). This book summarizes what we learned about poverty under post communism with our investigation. Let’s walk you through first the story line of this book and to try to develop a theoretical framework for this study after this. a) The communist past was not that radiant. People do not remember Stalinism affectionately – many people reported that they tended to be poor in what they saw as an inegalitarian system. b) As socialism progressed countries which were rather different before they turned socialist were converging. By the later epochs of socialism people report similar levels of poverty and low levels of inequality. Market reform does not hurt the trend of decreasing poverty and increasing inequality as much as resistance to reform (like the one in Romania) did. Under the circumstances reform communism was not a bad idea. c) Poverty rate jumped between 1988 and 2000, BUT: d) The speed of growth of poverty was not the same in all societies, in some – and in those where market reform was more limited (hence in Russia, Bulgaria or Romania) poverty grew faster than in those countries where liberal market reforms were implemented in more consistent in rigor- ous ways (hence in Hungary, Poland or Slovakia). e) All countries experienced a similar dive into poverty during the first 3-5 years of the „transition“. Nevertheless those, which implemented the more consistent reforms, bottomed out by the mid-1990s, and in those, which did not implement consistent reform the rate of poverty kept increasing. Hence given (c) and (d) more consistent market reform might be good for the poverty rate for a country. Neo-liberal reform may be bad, but it is better than its alternative; little or incoherent reform. f) People who remember to have been poor under socialism often grew up in single mother households several siblings and/or they were Roma. The education of their fathers did not matter at all. There are no significant cross-country differences or variations. g) Those who report declining living standards after 1988 have low educational levels. Ethnici- ty (Roma may have been poor enough already under socialism), gender or the size of the family does

20 not matter much. There is much less decline in living conditions in the countries which implemented coherent liberal reforms. h) Under post-communist capitalism there is massive difference in levels of poverty across countries: countries, which implemented liberal’s reform, have much lower levels of poverty than countries, which did not. Furthermore insufficient education and resulting poor labor market performance is the main reason of poverty. Those who live in single mother households and who are Roma tend to be over-represented among the poor, but size of the family is not as important as it used to be under socialism. Now we are ready to review some of the theoretical and methodological issues of poverty under socialism, capitalism and market transition.

1. Poverty under socialism and post-communism – theoretical considerations

A. Social inequality and poverty under state socialism Let’s first review, what we know from our own previous research and from the literature about the nature of social inequality and poverty under socialism. This way we can create a baseline and we can judge whether the conditions changed by 2000 either in quantitative and/or in qualitative terms. State socialism was not an egalitarian society and people under socialism tended to be rather poor. Commentators after the fall of socialism often falsely describe socialism as an egalitarian society. IThis it was not egalitarian: neither in its ideology, nor in its practice. As far as ideology goes socialism pretended to be meritocratic (and to some extent and in some sense it was): this was a social system in which in principle each was rewarded according to its accomplishments, rather than according to its needs. Accomplishments were supposed to be measured with contributions to productivity, more human capital, or higher educational credentials people had more they were supposed to add to productivity. To put it theoretically: socialist social structure can be described as a rank order. People were allocated to various ranks depending on what their educational credentials (or cultural capital) were, political loyalty (or political capital) acting as „glass ceiling“ in the process of promotion to higher rank or office (Eyal at all, 1998). At ‘the last instance’ possession of political capital may have been the final determinant of power and privilege in socialist societies, but it typically worked its way through educational credentials. In order to achieve a higher rank (and a higher level of income or privilege) one usually needed a higher level of education. But in order to make transitions to a particularly desirable position one needed political capital, one usually could not make such a transition without being the member of the Communist Party. Furthermore, occasionally promotions to such a higher rank did occur without the appointees having earned the appropriate credentials. They were simply promoted due to their political loyalty, though normally they were expected to earn the appropriate credentials sooner rather than later. In particular during the early years of socialism such accelerated promotions of working class and peasant cadres occurred quite frequently, since the new regime did not have enough well trained cadres yet, whom they could thrust. Communist leaders also felt the need to gain legitimacy among the masses by token promotions of ordinary people to positions of authority. A special system of credentialing was put in place (variously called as Univer- sity of Marxist-Leninism, or Party Academy, evening adult courses in high schools and at universi- ties) to help the ‘prematurely’ promoted to reconcile their status inconsistencies. Thus those who were promoted to high office due to their political loyalty were helped to acquire the necessary level

21 of education by short cutting the normal process through „political education“. (BobaiLi and Walder, 2001; AndrewWalder, BobaiLi and Donald Treiman, 20001999). As a result empirical research normally finds that level of education was the best predictor of power and privilege under socialism (Ganzeboom, De Graaf and Robert, 1990; Andorka and Simkus, 1983; Kolosi). State socialism was not only poor, if you analyze the whole socialist epoch and look broadly across countries it is difficult to question that the system operated with a depressed level of consumption. To put it simply: as a general rule people were poor under socialism and looked with envy across the Iron Curtain and generally believed they had a worse life than people in similar social position in market capitalist countries. The main point we try to make is that socialism was an inegalitarian system, though this statement requires a number of qualifications: a) The mechanism which generated inequalities was fundamentally different in redistributive economies from those in market economies. While in market economies the law of supply and demand determines the degree of inequality, in state socialism credentials and political loyalty set inequalities. It follows that in capitalist economies markets determine inequalities and governments redistributive intervention counteract those inequalities, under socialism redistribution, bureaucratically defined hierar- chies set the logic and extent of inequalities, which are counter-acted by market transactions (Sze- lenyi, 1978, Nee, 1989). b) The gap between the lowest and highest incomes tended to be smaller in a socialist economy than the gap one would expect in comparable a market capitalist system. This was the result of multiple factors. Let’s name a few of those. First, socialism did eliminate certain important sources of inequalities – in particular profit or rent from private ownership of economic capital was not only illegal, but was non-existent for all practical purposes. Second, while socialism emphasized meritocracy it also claimed that equity is desirable and it tried to present itself as the „dictatorship of the proletariat.“ As a result the income gap between higher and lower credentials was typically less than in market economies. The „flower of the proletariat“ – defined the Marxist way (thus skilled workers in heavy industry, miners, welders etc) earned relatively high wages, often higher than those higher educated who were not in politically important positions (teachers and medical doctors typically had notori- ously low salaries). True, wages and salaries did not measure adequately the actual differences in living standards. Socialism operated with an overgrown sector of „collective consumption“, a great deal of consumption was not accumulated in individual wages and salaries, but was allocated through the redistributive intervention of the government in forms of fringe benefits. Those fringe benefits (subsidized better quality new housing, free tertiary education, special shops, hospitals, va- cation homes reserved for cadres) tended to go to the those with more cultural and political capital. The extensive system of fringe benefits created a greater gap in living standards, than the gap between wages and salaries. But even if could take into account these privileges (which were very difficult to measure) it is likely that a „Gini coefficient of the monetary value of living standards“ would have been less in a socialist economy at a similar level of economic development than in a market capitalist economy. Socialist countries were quite different from each other in this respect. The Soviet and Romanian ruling estate was known for its luxurious lifestyles, but the Czechoslovak and Hun- garian elite lived rather modest lives. Third, socialism was a system of „production for production sake“ (Antonio Carlo, 197880) and therefore it was a system of „dictatorship over needs“ (Feher, Heller, Markus, 1983). Until the system began to disintegrate one central aim of the system was to „catch up and overtake“ the most advanced economies. State socialist redistribution not only channeled resources from the lower income earners towards the higher income earners, it also channeled resources from consumption to production, in particular to productive investments. As the Hungari-

22 an Stalinist leader, Rakosi used to say: „You shall not eat the goose which lays the golden egg“. Let’s delay current consumption for the sake of future economic growth (and future affluence). One of the leading ideas of socialism was the „one bowl of rice“ – one should consume only as much as necessary for the reproduction of labor power (hence: „dictatorship over needs“ to put it with Feher and his collaborators). This inevitably implied that the bottom had to be elevated and the top had to be suppressed. As socialism was entering its final phase – in particular in the reform communist countries, such as Hungary and Poland – it gave up hope that it can „catch up“ with the West, it was less and less „production for production sake“, became more and more concerned with political legitimacy. As a result dDuring the last two decades the more reform oriented countries tried to buy political peace with improving living standards. The reform communist countries began to borrow widely cheap oil-dollars and tried to boost consumption. But even this reversal of the „dictatorship over needs“ was carried out in a rather egalitarian fashion. And this was inevitable: to so called „refrigera- tor socialism“ of the Hungarian Janos Kadar (so much admired by the Polish Jaruzelski) was the functional equivalents of „buying votes“ in democratic polities. The benefits of foreign borrowing had to spread rather equally, just as the costs of accelerated industrialization were spread quite widely. c) The bottom of the social hierarchy under socialism tended to be higher than the bottom in market economies at the same level of economic development. While in the classical epoch everyone tended to be rather poor and levels of consumption were repressed across the board (in comparison with market capitalist economies at the same stage of growth) the poorest of the poor improved its conditions early in the game and substantially. The single most important reason for this was that socialism was an „economy of shortage“ (Kornai, 1980), which operated with chronic shortages for all goods and factors of production, including for labor. Thus by definition labor was a scarce „commodity“, in general the system operated with full employment. There were epochs and regions with occasional unemployment. But if we speak about the whole socialist system over its whole life span one of its most unique feature was full employment, which included most of women and ethnic minorities, such as Gypsies. Before communism Gypsies were not part of regular labor markets, they rarely had permanent jobs. They were seasonal, casual workers, or were engaged in activities, where they sold prod- ucts or services (were musicians, blacksmith, bricklayers, were involved in horse-trading, fortune telling and all sorts of similar activities) rather than selling their labor power. Before socialism in Southeastern Europe many Gypsies were travelers and had a semi-nomadic way of life (Tomova, 1995). Socialist regimes settled the travelers and offered to all Gypsies permanent employment. Typi- cally Gypsies during the socialist epoch were employed at the bottom of the social hierarchy, as unskilled laborers, but often in the growth sectors of the socialist economy, thus for instance in mining, steel-mills, construction industry etc (Kemeny, 19736). They earned low incomes and carried out heavy and unhealthy work, but for the first time in history they had regular jobs and there was a regular cash inflow into their family budgets from stable wages. Socialist full employment by eliminating unemployment eliminated the major social source of extreme poverty: absence of regular income. Furthermore, socialist regimes not only enabled everyone to enter the labor force and earn regular incomes they forced everyone to live with this opportunity. There were laws against „hooliganism“ – these laws made sure that everyone had a job and had an address. Those who did not have a job or address in their identification card were treated as criminals, could be jailed or sent to labor camps. Work was not only a „right,“ it was also a „duty.“ And the same applied for housing. Public authorities offered some sort of housing for everyone, but people were also obliged to accept that housing and have an address. Unemployment and homelessness were not only „unnecessary“, but they were

23 also not tolerated. Whether there is a „culture of poverty“ (Oscar Lewis, 1966) or not has been the subject matter of intense controversy over the past decades. But if there is a „culture of poverty“ state socialism certainly wanted to get rid of it. If it were true that some people are unemployed or homeless not by necessity, but by choice this choice was not offered to them by socialist regimes. Finally, state socialism had a highly underdeveloped social welfare system, but the very basic provisions (basic housing, free education, free medical services, child allowances, minimal disability and old age pensions) on top of „compulsory“ – in the above sense of the term – regular wages and salaries were secured for everyone. Some critiques of state socialism claim that socialism operated with a „prematurely born“ welfare system; that its welfare system was overgrown and not justified by the level of economic development (Kornai, 1995, p. 131). Arguably, this is a misunderstanding. As we already pointed out, state socialism operated with an overgrown system of „collective consumption“, the value of many goods and services were not accumulated in personal incomes, but they were allocated through state redistribution. But to call this a „welfare state“ is a misnomer. Most of such redistributive action could be better seen as fringe benefits, salary supplements, allocated to higher income groups, thus arguably they constituted redistribution of income not from the better-to-do to the poorer, but from the poorer to the better- to-do. Public housing is the best example. In market economies local authorities build new public housing to house those who could not afford to buy or rent housing from their wages and salaries. In socialist countries new public housing was systematically allocated to those with higher skills (and by definition higher incomes). The poorest had to build their housing for themselves on the „market.“ And the poorest of the poor entered the vacancy chain of public housing at the very bottom (Szelenyi, 1983), thus had to live in old, small, substan- dard housing. On the whole the socialist welfare system was poorly developed: schools, the healthcare system wereas neglected. Thus for instance the gradual deterioration of the healthcare system is responsible for the declining life expectancy during the last phase of state socialism. This could hardly be called an „overgrown welfare system.“ The debate about the question whether the socialist welfare system was overgrown or underdeveloped has far reaching policy implications. If we believe that socialism offered more welfare provisions than it could afford the logical policy conclusion is that the task is to cut back on welfare expenditures and this was and is the policy of neo-liberals in the post-communist world. Post-communist countries are in great need of a social safety net that the welfare institutions they inherited from socialism are inadequate and they have to be developed. Ko- rnai and other liberals have a point when they call for a reduction of „collective consumption“ and the elimination of state subsidized fringe benefits to those who have high enough incomes to purchase for themselves and their families what they need. But the institutions, which cater for the educational, healthcare, housing and other needs of those who cannot afford to secure these goods or services for themselves at an adequate level have to be created. And this task is particularly urgent, since the „underdeveloped“ socialist welfare system did perform one function quite well: the very basic provisions at the very bottom of the social hierarchy were met. Socialism eliminated starvation, put a roof over the head of every family, secured minimal incomes, and educational and healthcare services at a very minimal level. Under post-communism the bottom fells out below the poorest of the poor with the untargeted attack against welfare provisions. d) The poor and ethnic minorities were segregated from the main-stream society in space, but the degree of such segregation was generally relatively low and it tended to decline. We treat the spatial separation of the poor and/or ethnic minorities as an important indicator, whether an underclass is in formation or not. There were clearly trends of spatial segregation by class and ethnicity under socialism. In the cities as new public housing was built outside the urban core in deteriorating inner urban areas older

24 and poorer people and ethnic minorities were concentrated. With urbanization and industrialization substantial regional change took place as well. The more dynamic, younger, better educated families were moving away from the smaller, isolated villages, which became the destinations of the poorest of the poor, who tried to escape urban poverty and poor Gypsies. Nevertheless, spatial segregation was relatively moderate. People rarely had sufficient income to purchase houses and thus to chose the area where they wanted to live. Bureaucracies allocated housing to people – the right to chose and the possibility of the better-to-do to segregate themselves into their own neighborhoods was limited. Furthermore, in some countries ideologically driven government policy aimed at the reduction of spatial segregation. In Hungary and Romania for instance socialist governments made an effort to eliminate Gypsy ghettos. And they were not altogether unsuccessful in this respect. During István Kemény’s first Gypsy survey, carried out in 1971 a substantial proportion of Gypsies still lived in separate Gypsy settlements (Kemény, 19736), by the time of his second study in 1993 the population residing in such settlements was minimal (Kemény, Havas and Kertesi, 19958). Gypsy settlements were by and large eliminated in Romania as well. Not all countries followed these policies though. The Bulgarian communists tried to assimilate Gypsies and remove them from their ghettos during the 1950s and early 1960s. But they gave up on these plans by the mid 1960s and ironically – in order to hide the failure of their policies – they build walls around Roma ghettos. The Roma ghetto in Sliv- en, which houses today about 15,000 Gypsies was surrounded by a wall during the mid 1960s. The aim was just to make sure those who travel on the train, which passes by the Nadezhda ghetto of Sliven do not see that there is still a ghetto in the area (personal communication by Ilona Tomova, 2000). The Czechoslovak communist government also bulldozed temporary Gypsy houses and replaced them often by high-rise apartment complexes, but unlike the Hungarian and Romanian governments it did retain spatial segregation. These Gypsy social housing was often built outside the main settlements (an example is for instance to so called Hamor, about two miles outside of the city of Nalepkovo)., see Krajcovicova, 2000). Thus, spatial segregation by class and ethnicity was an important feature of the socialist urban and regional system. The policies of governments to reduce such segregation had mixed results on the whole the degree of segregation under socialism – given the limited choice of residence people had – was less than what one could expect in a market economy at a similar stage of development. Over-time it is more likely that segregation was reduced, rather than it increased.

B. Varieties of post-communist capitalisms 1 Before we discuss poverty and inequality under post-communism we offer an outline of a theory of various post-communist destinations. We believe multiple types of capitalisms are emerging on or with the ruins of socialism and the dynamics, extent and nature of poverty and inequality tends to be rather different in these different types of post-communist regimes. The liberal and patrimonial types of post communist capitalism The former socialist societies during market transition followed rather diverse trajectories. During socialism there has been at least some convergence among the societies, which experimented with communism. After the fall of state socialism, however, post-communist societies are increasingly different from each other both in terms of the level of their economic development and also in terms of their economic institutions and the characteristics of their social structure. Various European

1 First thisese ideas were developed in Eyal at all, 1998. In this more developed formulation we rely on King and Sze- lenyi, 2005 (forthcoming).

25 post-communist societies – while all were implementing a revolution „from above“ – carry out the tasks of in fundamentally different ways. 2 Central Europe followed more consistently the prescription of neo-liberal reforms, they became rather attractive to foreign investors, in particular to multinational firms and those members of the former communist elite, which succeeded to reserve their privileged positions, attainted this mainly by facilitating purchase of public property by foreign investors. Central Europe is therefore „capitalism from without“, a neo-liberal type of capitalism. The Czech Republic, Poland and Hungary (possibly East Germany, Slovenia – or even Croatia and Slo- vakia – and some of the Baltic States, Estonia in particular) may be examples of this type of change. In Eastern Europe „proper“ (Russia, the Ukraine, Byelorussia, the Balkan states, such as Bul- garia, Romania, Serbia) foreign investment did not play such a critical role. These countries instead used various mechanisms to convert public property into private ownership of the emergent new domestic elite, usually recruited from members or children of the members of the former communist nomenklatura. This coincided with relatively slow emergence of market institutions, a prominent role played by barter, an involutionary adaptation of former institutions, and in particular the survival of patron- client relations resulting in a new form of capitalism, what we label „post-communist neo-patrimonialism“. These pathways produce very different outcomes. Those countries that became neo-liberal regimes have created an economy where market institutions are highly developed and economies are well integrated into the world economy. In „neo-patrimonial“ system, on the other hand, the patron-client relationships pervade the economy: between the state and enterprises, as well as between management and labor. The redistributive institutions are destroyed, to be replaced by markets deeply embedded in reciprocity and networks. Businesses cancel each other’s debts, use local monies, and engage in barter. 3 The two types have some common features as well – they both started with mass privatization of public good. 4 This strategy opened up rather unexpectedly when 1988-1989 European communist regimes „melted down“. Until the mid-1980s no one seriously considered that this would be a possibility. During this time, no scenario was developed for a way to turn an economy based exclusively on public ownership into a system of private property. East European economists, speculating about ways to escape the deepening economic crisis of state socialism. They threw their hands up and said jokingly: „We know how to make a fish-soup out of fish (thus how to nationalize private property), but we do not have the faintest idea, how to make fish from a fish-soup“. The recipe for this culinary miracle was discovered during the second half of the 1980s and it was called „shock therapy“ and „privatization“.

2 In East Asia (in particular in China and Vietnam) capitalism is emerging “ „from below”.“. In early stages of the transition the public sector is not privatized, capitalism is made in a “ „gradualist way” “ by opening up new spaces for private economic activities. Privatization of the publicly owned corporate sector enters the political agenda some 20 years after transition began. By the end of “ „the 20th century the formerly communist East Asian societies are ‘hybrid post-communist capitalism’”.“. In sharp contrast to this in European transitional societies capitalism is made “ „from above”.“. In 1989-1991 the communist political structure breaks down, the new post-communist elite gives pri- ority to the fast privatization of the public sector. 3 East Asian “ „Capitalism from below” “ also creates market-integrated systems, but they rely more on relatively small domestic capitalist enterprises co-existing with a large state owned sector, which are increasingly market-dependent themselves. We call this hybrid capitalism. 4 This is a major difference from “ „capitalism from below.” “ In Asia – given the continued dominance of the Com- munist party mass privatization of the state sector did not take place for a long time.

26 Capitalism „from above,“ in its pure form, results in neo-patrimonial systems (such as Russia, Romania or Serbia during the Milosevic epoch). However, capitalism „from above“ can be combined with capitalism „from without“ (as was the case in Central Eastern Europe and the Baltics). Both lib- eralk and patrimonial forms begin the transition with mass privatization of the corporate sector, but the technologies of privatization are different and the speed that market institutions are established are not the same either. The neo-liberal type of capitalism relies on Western multinationals. 5 In these regimes privatization is a reasonably transparent process. Public firms are auctioned off at public auctions, or ownership is transferred to workers or citizens via vouchers, which are traded on the market place. Prices are deregulated, currency is made convertible, the banking system is modernized and eventually some or most of it privatized, capital import are deregulated and so on. Under such circumstances even if corporate management is able to acquire controlling private ownership in their firms, they still have incentives to bring in foreign investors in order to attract capital and secure market access. In neo-patrimonial regimes political capitalism reigns supreme. Communist apparatchiks manage to exchange their political capital into private property, frequently using management buy-outs to achieve these aims. CreatingUnder this system a group of owners of giant corporations emerged with no experience as „capitalists“, typically without any international contacts, and with no capital for re- structuring. These structural challenges are exacerbated by the „habitus“ of former communist officials turned private owners. They are likely to be less entrepreneurial, and more inclined to be paternalistic towards their business partners and employees. In liberal regimes the domestic expert-managers carry their habituses with themselves as well, and are not immune to paternalism either. Such actors are used to operating within the system of a paternalistic state and are likely to continue their state-dependent, deferential role. Paradoxically, multinational investors need these local experts exactly because they are well networked and have such local social and political know-how. Neverthe- less, in liberal regimes foreign owners call the shots, and this, together with the existence of liberal press and democratic parliamentary institutions which guarantee some degree of transparency, limits paternalism. Thus, in neo-patrimonial capitalism markets gain much less ground than in neo-liberal regimes. Firms frequently can not pay wages. This contributes to labor markets remaining under developed, and paternalism frequently characterizes the relationship between workers and management or the new owners-managers. Thus, workers are separated from each other, and their „class- ness“ decreases. Given the weaknesses of the market institutions barter becomes an important mechanism of exchange. In this situation, the monetary system is very poorly developed, or, in Woodruff’s analysis, „money is unmade“ (1999). Workers typically must resort to food grown on garden plots or collective potato farming to survive, and they are thus increasing re-united with the means of their subsistence. These paths are only ideal types, and thus features of the various styles of capitalism will be found in all post-communist countries. There are some multinationals and modern capitalist markets

5 We call these regimes “ „neo-liberal”,“, primarily because neo-liberalism is the guiding ideology of these regimes, which were modeled on the Reagan and Thatcher vision of state-economy relations. Of course, this is an ambiguous legacy, since Reagan oversaw a massive military-kKeynesian expansion. Furthermore, many of the neo-patrimonial states, like Russia and Kazakhstan, implemented neo-liberal policies, while some of the “ „neo-liberal” “ systems, such as Poland and Slovenia , failed to implement crucial portions of the agenda (both delayed large scale privatization and instituted an industrial policy).

27 in Russia, while in Hungary, the archetype of „capitalism from without“, paternalism plays an important role not only in the political-cultural sphere, but even in the economy. Barter is not unknown in the Central European economies. 6

The first three rows in Table I.1 summarize some of the characteristics of the two European post-communist capitalist regimes. The rest of Table I.1 is an attempt to identify what forces are responsible for why countries took particular trajectories. We turn now to the discussion of these questions.

Table I.1. Varieties of European post-communist capitalism

Neo-liberal systems Neo-patrimonial sys- (Czech Republic, Hun- tems (Russia, Ukraine, gary, Poland) Rumania, Serbia) Foreign capital Dominant, multination- Secondary als Political capitalism Little Lot, dominant Domestic (petty or Some Little middle) bourgeoisie Transitional politi- Technocracy defeats bu- Bureaucracy retains cal strategy reaucracy and struggles power, uses office to ac- with former dissidents quire private property, for hegemony allies with technocracy Class formation Under way, but dual Dominant estate struc- (Collective actors) structure, with strong ture, mainly patron- patron-client relations client relations Economic dy- Some Little-none namism Size of state Medium Large State capacity Modest Little Political institutions Liberal democracy Multi-party authoritari- anism

The first three rows in Table I.1 summarize some of the characteristics of the two European post- communist capitalist regimes. The rest of Table I.1 is an attempt to identify what forces are responsible for why countries took particular trajectories. We turn now to the discussion of these questions. The origins of the liberal and patrimonial forms There are exogenous and endogenous factors, which may help us to explain why some countries followed a neo-liberal, or neo-patrimonial path and why some managed to go a long way by „building capitalism“ from below. In this paperchapter we will focus our attention to the „endogenous“ factors,

6 Some degree of the Asian type of “ „capitalism from below” “ can be found in the Czech Republic and Hungary as well. Indeed, in Poland and Slovenia there were strong elements of this path, because they severely delayed the privatization of very large state owned enterprises. Thus, they created a space for more capitalism from the ground up, even as they pursued capitalism “ „from without” “ through strategic foreign investment. Even after more than ten years after the transition, many large state owned enterprises still exist in these countries.

28 thus to factors, which are rooted in the class structure, the dynamics of struggles among different factions of elites, political institutions and development of civil society. It would be foolish, however, to deny that exogenous factors are not consequential. Most importantly the level of economic development countries achieved prior communism, and, to some degree, were able to retain under communism as well as the proximity of markets in core countries are likely to play an important role. It cannot be accidental that the only countries which are bordering the European Union, and which were traditionally more developed, created neo-liberal capitalism. One possible argument is that the more developed countries were able to adopt the neo-liberal policies, since they could afford to pay the rather high price of neo-liberal shock therapy. Less developed countries, however, may have experimented with some shock but they had to suspend it before it could work since their population could not tolerate more pain (hence shock without therapy – see Gerber and Hout (1998)). Thus, the argument could be made that the better economic performance in Central Europe may have nothing to do with their economic policies, or the path their capitalist development took, but can be explained simply by the fact that they were stronger economies and closer to Western markets. This exogenous explanation is not without merit, but it has its limits. First of all, during the socialist epoch the gap in the level of economic development among the socialist countries narrowed and just began to grow again after the fall of communism. And there are also curious exceptions to such economic determinism. For instance, how can one explain the unusual success of the Baltic sStates, which were for half a century parts of the Soviet Union. Sure, they were relatively better developed regions of the USSR, nevertheless they were within the USSR and during the 1990s they comfortably outperformed the countries of the Balkans. In addition to geography and prior-level of development, let us add a possible cultural explanation to the different routes various societies took. We do not know how far this analysis could be pushed, but it certainly deserves attention that the reconfiguration of post communist states occurred along religious lines. It may be just an artifact, or it may have something to do with elective affinities between religion and modernization, but the various types of post-communist capitalisms corre- spond to various religions. All neo-liberal regimes are dominated by Western Christianity; neo-patrimonial states are either Orthodox or Muslim 7. It is beyond our competence to assess how important this fact may be, we just have to note that such an affinity between religion and type of moderniza - tion seems to exist. Now let us turn to the effect of those social structural variables, which are more easily within our analytical reach. The transition from communism to capitalism was the outcome of both inter and intra-class struggles. On the whole classes were not particularly well formed under state socialism. Socialist society can be better described as a rank order, rather than a class stratified society. Nevertheless, classes were in formation and in particular the strength of the working class had far reaching consequences for how intra-class struggles among various factions of the ruling elites unfolded. Arguably, in Central Europe, in particular in Hungary and Poland, the power monopoly of the political apparatus had been challenged for quite some time by an emerging alliance between en- lightened technocrats, usually operating within the communist party, and critical intellectuals. The formation of the working class was the most advanced in Poland of course, where the collective action of workers in 1980 almost brought down the rule of the communist political apparatus. While, using the real or imagined threat of Soviet intervention, the bureaucracy cracked down on the work-

7 Hybrid capitalism happened to be in the Confucian and Taoist part of the world.

29 ing class movement. However, this sufficiently weakened the bureaucracy so that it could be defeat- ed by the revived alliance of the technocracy and intelligentsia. Hungary followed a somewhat similar patter. While the Hungarian working class never engaged in the kind of collective action taken by the Polish working class, it was sufficiently a threat to the communist apparatus that it had to try to buy political peace by opening up the second economy to workers and peasants. The resulting petty bourgeoisification in Hungary played a substantial role in eroding the ideological hegemony of the communist bureaucracy and laid the groundwork for the Hungarian technocratic-intellectual alliance to defeat the bureaucracy. In both countries the political apparatus was wiped out in 1989. It lost political power altogether, and therefore had neither the will nor the capacity to carry out a project of political capitalism. The ideology of the victorious technocratic-intellectual elite by 1989 was neo-liberalism. The technocratic-intellectual alliance did not last for too long (Szalai 2001). The intellectual elite turned against the technocracy, which was now seen as part of the former communist establishment. In 1990, in both Poland and Hungary the newly formed Socialist Party suffered humiliating defeat. The intellectual themselves were split into a liberal and patriotic-Christian wings and the last decade can be described as struggles among these various political forces. Nevertheless, despite the political differences all of these intellectual and technocratic elites, they followed neo-liberal policies, and in particular, cooperation with foreign investors. Hungary and Poland are in many respects the „purest types“. The alliance of classes or elites may have been somewhat different in the other neo- liberal regimes, but our key hypothesis is that in all of these regimes the communist bureaucracy was unseated by an alliance between reform minded technocrats with liberal and patriotic-Christian intellectuals. This alliance received some initial support from the working class, which for the most part was demobilized after the defeat of the communist bureaucracy. In those countries that wound up with the neo-patrimonial system, the communist political apparatus was able to retain its power and defend the privileges of its clients as well. Communist ideology was of course instantly abandoned, but the former communist parties were not taken over by technocrats and transformed into right wing social democratic movements as it happened in the neo- liberal regimes. Instead the core of the political apparatus retained control over the successor parties and turned the communist ideology into nationalist, often xenophobic ideology. Iliescu in Romania and Milosevic in Serbia are prime examples. The transformation was more complex in Russia, where the successor party lost political power, but Yeltsin followed policies, which were quite similar to those of Iliescu and Milosevic. In those countries where working class resistance, political or economic, did not weaken the political apparatus, the technocratic and intellectual opposition could not smash the political bureaucracy. Instead, it adapted a nationalistic, xenophobic rhetoric and the practices of political capitalism. 8

8 Arguably, China followed most closely the scrip described by Konrad and Szelenyi (19789). In 1978 the political bureaucracy formed an alliance with the technocratic intelligentsia, and in fact accepted the leadership of the technocrati- cally minded faction of the party elite during the years of Deng Hsiao Ping. The bureaucracy and technocracy keep each other under control to the present day. The technocracy did not allow the political apparatus to implement a political capitalist scenario (it had little incentive to do so anyway, since it was not deprived from its political power and many of its economic privileges). The communist bureaucracy, on the other hand, put strict limits on how far the technocracy could go in its attempts to ally with the intelligentsia and to pursue neo-liberal policy. Workers and peasants coulld take advantage of the resulting “ „balance of power”.“. Thus Nee is probably correct to a large extent when he sees the “ „direct producers” “ benefiting from transition in China, while they proved to be the losers in the two other systems.

30 Thus, we argued that the patters of class conflict and intra-class alliances determine which path to capitalism is selected. This does not have to be thought of as an alternative geography, or culture. These factors affect the opportunity structure of different segments of class structure. For example, the fact that a country is closer to Western Europe and more culturally similar make an alliance of technocrats and multinationals seem much more possible. Thus the exogenous factors are mediat- ed by the patterns of class conflict and intra-class alliances. Social consequences of various pathways, changes at foundations of society So far we focused on what happened at the top of the social hierarchy, but what path former communist societies took is also impacted by and influences processes in the very foundations (or at the bottom) of societies. The transition from socialism to market capitalism is a transition from a rank order to a class stratified system. But the formation of classes is a historic task, which is likely take more than one generation and how far the social structure is at the end indeed transformed into classes also remains to be seen. In this process liberal and patrimonial regimes – just like in their progress to make markets – proceed differently. In neo-liberal regimes there is a more pronounced trend toward class formation. This trend has its limitations for sure. Since international capital is calling the shots there is not much of a domestic propertied class – hence it is a process of making capitalism „without capitalists“. The new petty bourgeoisie, which was emergent from the second economy during late state socialism in Hungary and Poland suffered a defeat as pro big business policies gained ground and as shock therapy opened up domestic markets to foreigner investors and exporters. The working class, which was forming in Poland powerfully during the early 1980s was demobilized as soon as communism collapsed, it is hardly a collective actor and could hardly be seen as a class for itself. Nevertheless labor markets operate according to free market rules, labor is to a large extent separated from the means of subsistence and production, price of labor is set by supply and demand, if demand is insufficient labor remains unsold, relationship between management and labor is transactive negotiated. Paternal- istic dependence of state redistribution is greatly reduced. Under theise circumstances poverty is primarily determined by structural conditions. The main source of poverty is absence of employment, those will become and remain unemployed, who do not possess adequate human capital and therefore they often will be locked into long term unemployment and poverty. The consolidation of market institutions and the making of this new structural poverty coincides with the emergence of a middle class. This new middle class offers upward mobility chances to workers and even to ethnic minorities, such as Roma and this serves an important liberal ideological function. It makes possible to ‘blame the victims’ hence some of their fellow workers, or some of the fellow Roma did make it to the middle class. Under such circumstances the long term, structural unemployed – especially if they are Roma – may be defined as an underclass. In patrimonial systems class-formation is slower and even more contradictory. The relationship between labor and management is primarily paternalistic. Labor and management are bound to each other by mutual loyalties, not just by interests. The workers will have an obligation to turn out at work even if management is in arrears with wages; management will have obligations to „look after“ the welfare of their workers even if they do not necessarily need them at this point in time. As the state institutions of socialism collapse and are not replaced by capitalist welfare institutions the functions of those institutions are now taken over by management. Neo-patrimonial regimes initially legitimated themselves with the ideology that they have to protect people, their citizens or employees against the high costs of transition, especially the high

31 costs of shock therapy. The advocated therefore gradualism and emphasized social responsibility. They might have spread to costs of transition more broadly, producing an exceptionally wide poverty, with a large population of „working poor“. Since meritocratic criteria, possession of skills, human capital regulate primarily the entry to jobs with a large population of working poor poverty will be less determined by class factors. It can be almost accidental, influenced by interpersonal networks or simply regulated by demographic factors who end up in poverty and who does not. Underprivileged ethnic minorities such as the Roma will be treated as a political problem, they will not be dealt with in economic ways. Hence the Roma will be treated as one category, in caste- like manner. While liberal regimes create an underclass, patrimonial regimes exclude their underprivileged ethnic minority into an under-caste. Poverty in liberal regimes is focused or targeted on groups which are defined by achievement type of criteria (such as possession of human capital), underprivileged ethnic minorities are frag- mented along class lines, some being mobile into the mainstream others locked into a new underclass. Patrimonial regimes spread poverty broadly and ascriptive criteria are more important in the determination of poverty. Ethnic minorities are also treated this way, politically as a single category, defined as an under-caste.

C. The post-communist experience – the effects of market transition on inequality and poverty Many of the social consequences of market transition of formerly redistributive economies have been discussed extensively in the so-called market transition debate (See American Journal of So- ciology, 1996 issue and elsewhere). To date, this debate has focused on three central questions. First, has market transition really occurred (Nee, 1989), or have these economies simply been decentraliza- tion of redistribution (Walder, 1996; YuXie, 1996), transformed by a path dependent transformation (Stark, 1991)? Second, has inequality increased (Walder, 1996; Lin, 2000; Kostello and Szelenyi, 1996) or decreased (Nee) as economies have moved from redistribution to market integration? Finally, who has emerged as the beneficiaries, or „winners“ of the reform —ordinary people (Nee, 1989), former elites (Hankiss, 1991; Rona-Tas, 1994; Staniszkis, 1991; Walder and Li, 2001), foreign investors, multinational corporations(King), or new elites (Eyal, Szelenyi and Towsley, 1998)? Clearly absent in this debate has been questions regarding the extent and nature of poverty as a consequence of market transition. This book intends to correct this omission as we bring issues of poverty into the center of the debate. In order to develop a guiding theoretical framework for our analysis, we first must cast the scope of market transition debate more broadly to include theories about inequality and poverty during transition. For our purposes, the most notable figures in the debate over inequality and transition are Kuznetzs (1955) and Lal-Myint (1996). Kuznetzs hypothesis, first formulated in 1955, assumes a curvilinear relationship between economic growth and social inequality. The so-called „Kuznetzs curve“ assumes that in economically underdeveloped societies, inequality is generally fairly modest. At the beginning of economic take-off, inequality increases sharply, and once high levels of economic development have been achieved, inequality declines again. Victor Nee’s „market transition theory“ complements Kuznetzs in interesting ways. Nee does not consider the effects of economic growth, but he offers a powerful – though highly controversial – hypothesis about the relationship between changes in inequality and increased economic liberalization. Nee – at least in his 1989 article – hypothesized that with more markets and less redistribution

32 the allocation of assets and incomes may become more equal. If one adds to this assumption the hypothesis that market liberalization may induce more dynamic growth (at least that is what one would expect on the basis of neo-classical economics) one may be able the create a combined Kuznet- zs-Nee hypothesis. It may be accepted by Nee as a friendly amendment to his theory that at the time of actual „transition“, when the old system breaks down and the new system is not quite operating yet an increase of inequalities is plausible, but it inequalities may gradually decline as productivity benefits of the market induced economic growth are realized and the social benefits from growth begin to „trickle down“. Given the robust economic growth China experienced during its „transition“ (in contrast with the economic meltdown for former Soviet Union and the former European socialist countries had to suffer from) it is therefore not that surprising that Nee hypothesized about equaliz- ing impact of the markets already in early stages of transition, while liberalization was accompanied in Europe – given the depth of the „transformational crisis“ – with increases and in some countries with explosion of inequities. Lal and Myint (1996), in their study of non-transitional economies, arrived at a very different hypothesis than did Kuznets/Nee. Lal and Myint do not find evidence that inequality declines with economic growth or, by implication, with freer markets. After all, neo-classical economists assume that a high degree of inequality is necessary, given the constant need for economic incentives for higher productivity and faster growth. Intervention by the welfare state, for example, which aims at reducing inequality, will limit economic growth because it will distort the proper functioning of free markets. Lal and Myint, however, do suggest that freer markets and more dynamic growth eventually reduce absolute poverty, if not inequality. From this theory, one can create a Lal-Myint Curve, which would illustrate that during the early stages of economic take-off, even absolute poverty may increase, given the destructive effects of markets on traditional social networks, for example. Once market-induced growth is firmly established, however, the benefits of growth will „trickle down“. While relative poverty may remain stable once growth has been achieved – after all, relative poverty is more a measure of inequality than poverty as such) – absolute poverty will be substantially reduced. Patterns of economic growth and social change in the United States during the Clinton years seem to offer some support to the Lal-Myint hypothesis. While during the last decade of the 20 th century the United States was becoming more inegalitarian at least some indicators of absolute poverty began to improve. Often seen as correlates of extreme poverty, employment was up during this period, the number of people on welfare was reduced, crime and drug use was down, etc. In order to incorporate the Lal-Myint hypothesis into our analysis of poverty in market transition, we must consider two issues. The first one of which is specific to transitional economies, the other is a general question, equally applicable to advanced Western economies as well. The first question concerns whether the two divergent transition strategies are consequential for the extent and nature of poverty. Did the strategies of the patrimonial systems deliver on the political promises of protecting citizens from the pains of the transition, or did these strategies simply delay the inevitable, or even intensify the negative consequences of transition? And what can we say about the neo-liberal strategies? Is there any evidence of trickle-down prosperity, or has the trickle down approach proved to be a false promise, at least so far? Overall, Lal-Myint would predict a reduction in poverty as a result of neo-liberal policies and increases in poverty as a result of patrimonial transition strategies. The second question is more general, and has implications for advanced market economies as well as for transitional economies. Let’s assume that the Lal-Myint curve accurately describes the dy-

33 namics of economic growth, namely, that growth leads to reductions in levels of absolute poverty. Does it necessarily follow that economic development will eventually lift all boats? What if poverty becomes linked to ascriptive criteria, such as race/ethnicity and/or gender, and thus poverty becomes racialized and/or feminized? Would the Lal-Myint curve hypothesis still apply? In other words, would we still expect the economic conditions of such groups to improve absolutely? It is conceivable when shock therapy is instituted on a society, certain categories of people – for instance a certain ethnic minority, or single mothers may become locked into permanent poverty. Thus post-communist „shock therapy“ may have produced a „new poverty“ (Tarkowska, 2001). Stat- ed differently, „shock therapy“ may be responsible for the formation of an „underclass“ (Ladanyi, 2001). The purpose of this book is to test whether a „new poverty“ has emerged during post-communist transition, and whether we can speak of the formation of an „underclass“ during the last decade of the 20 th century in Central and Eastern Europe. The „underclass formation“ hypothesis will be supported to the extent to which: A) poverty becomes a life-long, or long-term, phenomenon for the people or groups concerned; B) it becomes increasingly likely that the children of such people or groups will also live in poverty during their adult life. Gunnar Myrdal used for the first time the notion of underclass (19632, 1964). Myrdal coined the term to designate those who were left out of the benefits of the big post-war economic boom – the boom was so overwhelming that „all society“ benefited, except those who were locked outside the society and pushed into an „underclass“ position. Julius Wilson (1978) adjusts the notion in interesting ways. There are three important innovations in Wilson’s work: (1) For Wilson the force, which drives underclass formation is de-industrialization of the 1970s: in the US a „class“ is now created, which previously had decent jobs – often with respectable skills and incomes – which disappeared as a result of de-industrialization; (2) Those hit the most with de-industrialization tend to be African- Americans, who live in inner urban ghettos. Thus members of the underclass are not just those who lost jobs or who are poor, their poverty tends to be racialized; (3) Nevertheless this racialization occurs with the „declining significance of race“. This implies, that once one controls for class the race effect weakens or disappears. This happens since some African-Americans are not affected by de-industrialization and the new poverty. The same time, when the new underclass of the inner urban Black ghetto poor was formed a robust process of Black middle class formation was also under way. Blacks are not separated from the rest of the society as a social category or a caste, their exclusion only takes place if race interacts with certain class characteristics. Evidence from the US indicates (Stack, 1974; Casper, McLanahan and Garfinkel, 1994; Rodgers, 1996) that poverty also tends to be feminized. In particular minority women and women from poor families are more likely to become single mothers at a young age and if that happens, their poverty may not be simply a life cycle phenomenon., Tthey and their children, including their male children may be locked into life long poverty. Feminization of poverty can be interpreted very broadly. So for instance one may even consider feminization of poverty within the household. Women may live in poverty in non-poor or not so poor households, since they may carry the burden of poverty more than men. Women also tend to be over- represented among single senior adults and tend to be poorer than single old males. These are socially non-trivial problems, but since in this book the focus of our interest is the interaction of ascriptive characteristics and class characteristics in the making of an „under-class“ we limit our attention only

34 to female headed households with children under 16 and we want to explore whether, much like underprivileged ethnic minorities they also tend to be poorer. There is some prima facie evidence that market transition may be accompanied by racialization and feminization of poverty as mechanisms of underclass formation. The Roma minority seems to be affected by post-communist de-industrialization in analogous ways as African-Americans were in inner urban areas in the United States during the 1970s. Roma tended to be concentrated during the state socialist epoch in heavy and construction industries, which suffered the most severe job losses with the fall of communism. They lost jobs, became de-skilled and have little prospect ever finding a job again. They also tend to be locked into urban and rural ghettos in extreme poverty. Furthermore, much like African-American in the US, the process affects some Roma than others. The formation of the Roma underclass in urban and rural ghettos is complemented by them making of a Roma middle class, arguably in neo-liberal regimes more so than in patrimonial ones, where the more traditional social order is more likely to be preserved. We know little about feminization in general and single motherhood in particular in transitional societies. It has been reported, however, that out-of-wedlock birth increased substantially during the post-communist epoch. . Some of this is likely to be a life-style choice. Middle class women (and men) may just not want to get married, but they are ready to bear children nevertheless. This does not necessarily lock people into poverty. If out-of-wedlock birth is a life style choice the parent may co-habit and share resources, or even the single mother may be middle class and reasonable well off. Thus single motherhood may only lock someone into poverty if single motherhood interacts with social class or possibly with ethnicity. Thus this book is guided by a somewhat reconstructed version of Lal-Myint hypothesis. Lal- Myint theory was specifically devised to test the effects of economic growth, our own theory tends to test the effects of market penetration, or economic liberalization. From Lal-Myiant we hypothesize that economic growth (and we add: liberalization) in unlikely to reduce inequality, but we will expect it to have some „trickle-down“ effect, thus to reduce absolute poverty and to do so more suc- cessfully in countries, which follow the more closely the neo-liberal strategy of transition. We assume, however, that the relationship between market penetration and poverty is likely to be curvilinear (this gives a Kuznetzs twist to our reconstructed Lal-Myint hypthesis) – thus at the time of „take- off“, early stages of market penetration, when shock therapy is applied one may get rather high poverty rates, though those rates tend to decline as the benefits of growth begin to trickle down. Nevertheless, we anticipate that such „trickle down“ is likely to have its limitation. In neo-liberal regimes we anticipate that racialization and feminization of poverty will lead to an underclass formation and if ethnic minority status or single motherhood interacts with negatively privileged class position those who are locked into such situation may not see the benefits of economic growth.

2. Data and methods

Data This book is uses statistical data generated by surveys conducted in the six post-communist countries of Bulgaria, Hungary, Poland, Romania, Russia, and Slovakia during the Ffall of 1999 and the Winter-Spring of 2000. In addition to survey data, we rely on ethnographic studies conducted in all of these countries during the same time period. The Ford Foundation supported both the survey and fieldwork components of the research project. Ivan Szelenyi was the principal investigator; co-

35 principal investigators were Rebecca Emigh, Eva Fodor, and Janos Ladanyi. Our research team included a group of senior scholars and advanced Ph.D. students in each country. The surveys were based on random samples of the general population in each country. In Rus- sia, we selected 2,500 households on a national random sample west of the Urals; in the other countries the sample size was 1,000. In Romania and Slovakia, the sample was selected using the „random walk“ method, thus the primary sampling unit was the household. Individual respondents were selected from the household roster using a Kish table. In all other countries, various lists of individuals constituted the sampling frame. Overall, the samples are sufficiently representative, with the exception of Slovakia, where less educated, lower income groups, and Gypsies are under-represented. Our data also include over-samples of sub-populations, including the poor and the Roma. While both groups are of particular theoretical interest, both comprise too small a proportion of the overall population to conduct statistically reliable analyses using a general population sample. During the past few years, various survey research agencies have asked interviewers to identify the Roma. For example, Szonda-Ipsos and TARKI in Hungary have used this technique a number of times. Other studies used other methods to identify Roma. For instance, some scholars and Census designers have relied on self-identification and/or classification by expert (such as social workers). In our analyses, we decided to use a combination of all three methods. Thus, we first relied on interviewer identification to generate an over sample by conducting screening interviews, in which we did not ask the respondents to report their ethnicity. Next, in the actual survey instrument, we asked respondents whether or not they self-identify as Roma. Once the interviewer completed our interview he/she was asked for the second time (the interviewer may have been the same or may have been another person than the one who classified during the screening interviews) to classify the respondent by ethnicity. This time the interviewer knew how the respondent self-identified, and this may have had an effected on his/her judgment. Finally, after the survey interviews were completed, we asked experts in those locations where Gypsies were reported to live to identify Gypsies among our respondents. These various systems of classification give us different estimates about the size of the Roma population. While there are cross-country differences in the extent of the discrepancies in all countries fewer people identify themselves as Roma than identified by experts. Finally interviewers tend to identify all those who are classified as Roma by experts as being Gypsy, but they cast their net more broadly and often classify people as Roma, who are not believed to be Gypsies by the experts and who do not identify themselves as Roma either. As a result we believed using interviewer classification is the most effective way to over-sample Roma. Whether all people classified this way as Roma are „really“ Gypsies or not is another question. Nevertheless it is unlikely that people who will be regarded by expert as Gypsies, or who call themselves Roma would not be classified as such by the interviewers. If we „err“ by this method, we err by casting our net too broadly, but the net will catch all other classificatory systems, thus the „error“ can be corrected by comparing various classifications. To create an ethnic over-sample in the three countries (Bulgaria, Hungary, and Romania) where there are sizeable populations of Roma, we worked closely with market research firms that carry out omnibus surveys on a regular basis. Over a period of a year, together with the market research firms, we screened between 10,000-19,000 households. To the omnibus questionnaire, we added a short questionnaire that asked the interviewer to tell us whether any given household or any member within the household was Roma. We then asked the interviewer his/her degree of certainty in that assessment. (We also asked the interviewer to explain on what basis he/she classified any giv-

36 en respondent or household as Roma.) Using this method, we accumulated an extensive list of Roma addresses, which constituted our Roma over-sample. Relying on similar methods, we also generated an over-sample of the poor in four countries (Bulgaria, Hungary, Poland, and Romania). We did not create a poor over-sample in Russia because our pretests indicated that the general population sample would include enough poor households to conduct statistically reliable analyses. In Slovakia – due to the inability of the survey firm to sample the bottom of the social hierarchy – we had to abandon our attempt to create an over sample of those in extreme poverty. As with the ethnicity over-sample, the poverty over-sample was determined using screening questions attached to the omnibus surveys of the market research firms. Interviewers were asked a series of questions designed to identify extremely poor households (e.g., Are there signs of undernourishment in the household? Is the house dangerous and/or unhealthy?, etc). If the interviewer answered positively to any question, the household was selected into the poverty over- sample. In the actual survey, respondents were asked detailed questions regarding living standards in order to measure the reliability of interviewer assessments. The poor over-sample ensures our ability to statistically compare the Roma and the non-Roma poor. In this paper we do not analyze data from the poverty over-sample. The Roma and poor over-samples are random samples and we know the probability of being selected into each sub-sample. Furthermore, though we analyze interview-identified poor and Roma respondents with great interest, we believe poverty and ethnicity are „social constructions“. There- fore, we do not accept interviewer assessments as the „true“ measure of who is poor and who is Roma . In our analyses of Roma ethnicity, we analyze both interviewer-identified Roma, as well as self-identified Roma. We rely on multiple indicators from the survey questionnaire to guide our analyses of the poverty over-sample in order to determine households in extreme poverty. Our survey data are complemented by ethnographic case studies. In each country we selected extremely poor communities. These communities were primarily rural villages, with the exception of one urban center. Most communities were Roma „ghettos“, while others – particularly those in Poland, Russia, and Georgia – were simply poverty stricken or were predominated by a poor ethnic group other than Roma. Junior members of the research team received yearlong fellowships to conduct field projects in these communities. Ethnographic data collection methods were coordinated at a number of project meetings. Reports of these case studies can be found at: www.yale.edu/ccr/. (From the web-site, select the link for „Poverty Project“, followed by the link for „Final Reports“. There you will find the complete set of ethnographic case studies.) Survey data are also posted at the same we- b-site, though access to data is restricted until January 1, 2003 to members of the research team. The selection of the six countries was driven by our research questions. The countries differ both in terms of ethnic composition and in terms of which ideal-type of „post-communist capitalism“ best describes their economic system. Overall, there are two sets of questions for which our research design can provide answers: First, we explore whether the divergent paths leading from communism to „post-communist capitalism“, discussed in Chapter 1, are consequential for poverty outcomes. To answer this question, we compare the „neo-liberal regimes“ of Hungary, Poland, and Slovakia to the „neo-patrimonial systems“ in Bulgaria, Romania, and Russia. Second, we test hypotheses concerning poverty and ethnicity. More specifically, we test whether the presence of a sizeable ethnic minority – namely, the Roma – which tends to have some „elective affinity“ with poverty changes the character of poverty or not. In particular we explore whether the presence of such an ethnic minority leads to racialization of poverty. In other words, is

37 the cleavage between the poor-and-not-so-poor drawn more sharply if poverty and ethnicity interacts, is the boundary, which surrounds the ethnically labeled poor more difficult to cross? Is the ethnically labeled poor ismore likely to live in life-long poverty, pass its poverty onto the next generation and live spatially segregated ways than the poor who belongs to the ethnic majority? Does the ethnically labeled poor constitute an „underclass“ (in the above defined sense of the term), or even if it does not is it on its way to form an underclass. To answer such questions, we compare Poland and Russia with Bulgaria, Hungary, Romania, and Slovakia. Measurement of poverty We use various measures of poverty in this book, some rather conventional, others less conventional. (1) Subjective measures of poverty. In order to assess the changes in living conditions between 1988 and 2000 we asked two sets of ‘subjective’ questions about poverty. Those questions whichwere identical for 1988 and 2000. We call these questions ‘subjective’, since they explore the ‘lived experiences’ of poverty by the respondents. (We call those measure ‘objective’, which assess incomes or expenditures in monetary terms.) The first set of subjective measures we call here the ‘experience of poverty’. We asked four questions which aimed at capturing the subjective experience of absolute poverty. We asked our respondents, whether they went to bed hungry recently since they could not afford to eat enough food, whether they could eat enough mean and whether they had adequate clothing (shoe and winter coat). 9 We call those ‘very poor’, who reported experience with hunger, people were regarded as ‘poor’ if they reported deprivation in at least one of the three other indicators and those were regarded as ‘non poor’ who did not report any deprivation. The second set of subjective measures we call indicators of ‘relative deprivation’. We asked people whether their family earned in 1988 (is earning in year 2000) below average, average and above average incomes? 10 This proved to be a good question: people seem to enjoy answering it and the story, which is emerging from thethese answers is not only sensible, but occasionally rather robust. We struggled a lot, however,to try understand what people exactly want to tell us by answering iit. People (the response rate is excellent, over 90%) are unlikely to have a good idea, what the ‘average income’ may have been, or even what it is at the time of the survey. Hence up to 80 percent of the respondents even in the general population sample might tell us that they earned ‘below average incomes’ (as this is indeed the case in 2000 in Bulgaria). Is this a meaningless answer? Far from it! We believe those who report us ‘below average’ income wanted to tell us their sense of frustration. They do not know what average income is, but they want to tell us that there are (were) people who are (were) doing better than they did. They might be wrong in their judgment, nevertheless the fact that they feel this way tells us something important about their state of mind. The answers to this question can be seen as subjective experiences of relative poverty, hence measures of relative deprivation. (2) Objective measures of poverty. We also collected data to be able to calculate the ‘objective’ poverty measures and here we followed the procedures applied by the World Bank. 11 We asked

9 For exact wording and coding see Appendix 2. 10 See exact wording of the question in Appendix 2. 11 We are grateful to Jeanine Braithwaite and Dena Ringold – both from the World Bank – for their assistance in con- structing our questionnaire and working out the strategy of data analysis of expenditure based measures of poverty. The World Bank also offered some financial support to our project and received in exchange our data for analysis when the data were made available to members of our project, thus well before it was released into the public do- main. We are grateful to the World Bank for their financial and professional support. The World Bank team produced

38 questions about incomes and expenditure, or consumption. The World Bank developed a methodology to evaluate well-being (and establish poverty lines) on the basis of household consumption (money expenditures plus the value of food produced on a household plot), rather than on the basis of income 12 . In our questionnaire we used an abbreviated version of the World Bank instrument and we rely occasionally on consumption on other occasions on income based measures. Following the conventions of the World Bank we calculated two types of ‘poverty lines’ from these data. We calculated an absolute poverty line set as $2.15 and $4.30 per person consumption (or income). In order to make comparison across countries possible in converting the currencies into US$ we used purchasing power parity (PPP) exchange rates as established by the IMF and World Bank. PPP rates measure the relative purchasing power of different currencies over equivalent goods and services. 13 We also calculated the relative poverty line set at 50% of the median income. Both poverty lines are calculated per capita and also per equivalent adult. Conversion from per capita into per equivalent adults takes into consideration that how the well- being of a household is influenced by the size and age and gender composition of that household. 14 A comparative evaluation of subjective and objective measures: One may object that the subjective measures we use are unreliable. How reliable are the subjective and objective measures? What is the purpose of using subjective measures at all? There is indeed a problem of reliability with the subjective questions. For instance will people understand the same way what is the meaning of ‘being hungry’, or will it have a different meaning for poor people and not so poor people? Will people remember in a reliable way their past subjective experiences? What speaks fortThese questions are justified is by the high response rate and by the ease with which people seem to responded to such questions. Responses to questions about income or even consumption are much more problematic. While people may offer somewhat interpretation when they were ‘hungry’, they simply might not know at all how much for instance they spent for instance on „detergents“ etc. We are prepared to be rather aggressive about this: our subjective measure may result on more reliable answers than questions about incomes or consumption. There were other good reasons to use these „subjective“ measures in this study. First of all one contribution what our study could make to the extensive work on poverty is to assess the changes in poverty over time in the former communist societies where no reliable income data are available for much of the socialist epoch. It is just not possible to generate retrospective income data for such a long historical period, and our poverty measures are working well. This is demonstrated by the powerful trends we could detect and also by the high response rate to in the case of these questions. Fur - thermore we also believe – and we try to demonstrate this in this chapter – that though the Roma is also income poor its poverty isn income, or consumption underestimate the depth of Roma poverty. There is some cash inflow into Roma families (child-allowances, pensions, disability pensions, social assistance payments and the like). Given their poorer living conditions and other problems Roma can be starving and living in unhealthy and overcrowded conditions even when the inflow of monetary resources into their households are not that much lower than in poor non-Roma households.

an excellent report from our data (Revenga at all, 2002). In this chapter we occasionally used their data and we ac- knowledge it when we do so. 12 For reasons of consumption based measurement of well being and poverty see Appendix A in Making Transition Work for Everyone, Washington D.C., 2000, pp. 367-377. 13 Making Transition Work for Everyone, p. 370. 14 See the conversion method in Appendix 2.

39 Organization of the project, collaborators Upon completing our survey and ethnographic data collection, we received funding from The Ford Foundation to bring teams of scholars from post-communist countries and the U.S. to Yale Uni- versity to collectively analyze our results. From September 2000 through December 2001 during each semester a different workgroup —composed of 6–8 scholars per team – met consecutively at Yale University in the Center for Comparative Research. During the fall 2000, we conducted preliminary cross-national comparisons of the poverty data; during the spring of 2001, we worked on the issues of ethnicity and poverty; and finally, during the fall of 2001, we focused on the „feminization of poverty“. On November 18-20, 2000 a workshop was organized. The first draft of the book „Poverty and Social Structure“ was posted on the internet: www.yale.edu/ccr and the manuscript was discussed by members of the collaborative research project who did not take part in the workgroup. The dis- cussants were: Henryk Domanski, Livia Popescu, Iveta Radicova (Slovakia), and Dina Ringold (The World Bank, Washington D.C.). So far an edited volume was published from the project (Rebecca Emigh and Ivan Szelenyi (eds). Poverty, Ethnicity, and Gender in Eastern Europe During Market Transition. Westport, CT. Praeger, 2001). A special issue of Review of Sociology of the Hungarian Sociological Association, No. 2, 2001 in English and Szociologiai Szemle, No. 4, 2001 in Hungarian was published under the editorship of Ivan Szelenyi. Contributors to the special issue are: Christy Glass, Henryk Domanski, Eva Fodor, Janette Kawachi, Gail Kligman, Janos Ladanyi, Petar-Emil Mitev and Ivan Szelenyi. The special issue was published in Bulgarian, Polish and Romanian languages.

40 Chapter 1 MEMORIES OF SOCIALISM

Introduction

The expectations and dreams of rapidly increased material well-being unleashed by the collapse of communism were simultaneously understandable and unrealizable for the majority of east Europeans. The costs of transforming command economies – including sharp increases in unemployment, inflation, and the cost of living, accompanied by notable decreases in real wages, and state sub- sidization of basic social and public goods – were far greater than most had anticipated. Newly acquired freedoms were often constrained by economic possibilities themselves differentiated by class, ethnicity, gender and generation. An emergent re-stratification of everyday life materialized in form and practice, with the extremes of quickly amassed fortunes and the depths of poverty visible for all to see. To the extent that redistributive economies relativized and masked inequalities across a broad spectrum, so marketization seemingly fostered them. For many, there was something increasingly out of sync between the pictures of their lives as imagined after the collapse of communism and their experiences thereafter. What some observers label as nostalgia for a familiar sense of minimal security and well-being is more aptly understood as a re-evaluation of the past in the context of a changing present. Contrary to western popular images of life under socialism – the scarcity of basic goods and lack of basic individual freedoms foremost among them – the perceptions of those who lived under socialism are not necessarily so bleak? With life turned dramatically upside down, offering both unexpected opportunities and curtailed access to them, we wondered how people remember their lives during different periods of socialist rule. Did they perceive their lives during various periods of socialism as better or worse?; easier or harder? People’s memories of state socialism are the focus of this chapter, in particular, their recollections of experiences of poverty under socialism. Here, it is important to emphasize that memory is itself the result of a reflexive, interpretive process of (re)collecting or (re)membering. This process locates the past in the present, providing a reassessment of the former in light of the latter. The past as remembered is thus not a stable, objecti- fied memory of experience, but rather, a reconstitution of it that meaningfully engages ongoing experience as well. 15 Such experience incorporates public „official“ memories and personal, individual memories. It must be added that memories of communism are themselves over-determined. During the communist era, private memory was highly suspect and subordinated to the state’s construction and control of official, public memory in the form of rewritten histories. Private memories were re-

15 It is beyond the scope of this chapter to review the ever-broadening literature on memory, personal and/or collective (see, for example, Halbwachs, 1980; Olick and Robbins, 1998; Olick, 2003; Gillis, 1994, special issue, “ „Memory and the Nation”,“, Social Science History 1998; and special issue, “ „Grounds for Remembering”,“, Representations 2000). With respect to the communist period, “ „memory” “ work has tended to excavate the excesses of communism – repression, vi- olence, and violation – rather than the everyday experiences of life under communism. For examples of the latter, see Kligman, 1998; Verdery and Kligman, 2011).

41 pressed, relegated to the recesses of the mind. 16 Since the collapse of communism, those official histories are themselves being reinterpreted, often revised according to current ideological assumptions. Moreover, personal memories transformed into autobiographies, memoirs, and oral histories have flooded the public sphere, as communism is subjected to personalized and public remembering and reassessment from diverse perspectives and in diverse forms. In this general context in which „memory work“ is being carried out, we wanted to gain a sense specifically of memories of poverty during the communist era. To that end, we surveyed people about their recollections at three distinct points in time so as to gain a range of experiences of poverty over the communist period. First, to establish a base line for comparison, we asked people to remember, when they were fourteen years of age, how they and their families lived; 17 we then asked the same questions for 1988 and for 2000. As discussed below in greater detail, we posed questions designed to get measures of poverty in different epochs of socialism, roughly categorized as pre-socialist (respondent was fourteen in 1948 or before), Stalinist (was fourteen between 1949 and 1959), or socialist (was fourteen between 1960 and 1988). In the end, we had an overview of how people recalled their living conditions, their experiences with poverty in early adulthood, in the last year of socialism, and again a decade after the collapse of communism. 18

1. Methodological considerations

What can we be learned about experiences of poverty from retrospective survey data? 19 We asked respondents if they recalled when they were fourteen, whether they went to bed hungry, whether they ate meat in a typical week, whether they had a warm winter coat, or a second pair of durable shoes. 20 The responses to these questions yielded an „absolute measure of poverty“. Through- out this chapter, if a respondent reported memories of going to bed hungry, we refer to this as „deep poverty.“ If s/he reported experiencing at least one of the other three indicators, we refer to this as „poverty.“ The response rate for this set of questions was excellent: approximately 95% of the respondents could recollect their experiences at age fourteen and in 1988. This measure is a substitute for more conventionally constructed poverty lines based, for example, on median income or PPP. 21 It was not possible to gather reliable income or expenditure data

16 See, for example, Milosz, 1994; Sherbakova, 1992; Watson, 1994; Kaneva, 2006). Diaries and memoirs are important sources of memory to the extent that these were written and preserved. 17 In the survey research it is customary to ask people about their living conditions, parents occupation etc, when they were 14 years old in order to establish their life chances when they entered young adulthood. 18 In this book we use the terms ‘socialism’ and ‘communism’ interchangeably to designate Soviet type societies. On particular we label the epoch, which followed the collapse of the regimes as ‘post-communism,’ though by other au- thors it is occasionally also referred to as ‘post-socialism’. 19 As discussed in the introduction, measuring poverty is a complex matter. Throughout our study, we utilized multiple means of measuring poverty. 20 We discuss the meaning of hunger as a measure of absolute poverty below. Similarly, a warm coat and durable or good shoes suggest that people are able to protect themselves in a basic way against nature’s elements. 21 As discussed in the introduction, Purchasing Power Parity (PPP) is a method of measuring the relative purchasing power of different countries’ currencies over the same types of goods and services. Calculating PPP involves con-

42 retrospectively hence our analysis of poverty before and during state socialism relies on respondents’ memories. However, we do not feel that the lack of more standardized, conventional poverty measures hinders our historical analysis in any significant way. After all, income-based measures of poverty are themselves proxies for the phenomenon we are attempting to uncover: what were the material conditions of everyday life in which people lived before and during state socialism? As proxies, income-based measures often do not reveal important nuances in the experience of poverty, as was discussed in the introduction. Overall, we believe that respondents’ recollections of hunger and other material conditions, subjective though they may be, are perhaps the strongest available indicators of the experience of poverty during state socialism. Indeed, when we compare the same subjective measures against more conventional measures available for the year 2000 (see chapter four), we do not find a significant difference in poverty rates. The central question regarding the validity of our retrospective measures remains: what can we actually learn from recollections about past experiences of poverty during socialism? To be clear: this data cannot be used to make statements about the extent or nature of poverty during a given year or epoch of socialism. Firstly, we have a representative sample of people who lived in the countries we studied in the year 2000. We do not have a representative sample of people who lived in these countries during socialism. Secondly, our survey data do not measure the „objective“ conditions of our respondents’ lives at earlier time points. They were simply asked to share memories of their past experiences. To reiterate, such memories are shaped not only by their past experiences, but also by their present circumstances and their hopes and fears for the future. Hence, the „memories of socialism“ surveyed in our study offer a particular kind of history of socialism. It is a history of how socialism lives on today in the recollections of people who grew up under that system. This, like all such recollected histories, is a selective history, based on memories that are as much about who these people are today and who they want to be tomorrow as it is about the „facts“ of their pasts. At the same time, it is necessarily a selective history of those who have lived on in the countries of our study. Those who died, who were killed, or who emigrated have not told us their experiences of poverty under socialism. Nevertheless, it would be inappropriate to over relativize the meaning of these „remembered histories“. While memories about earlier times are selective--and their selectivity is shaped by the social conditions and motivations of respondents at the time of data collection – memories are still formed out of real life. Memories are interpretations or re- constructions of real events and experiences; they are not intentional lies. They have a „real“ and an „objective“ core. How, then, may we interpret the meanings of the answers to the questions we asked our respondents? Those who went to bed hungry because they could not afford adequate food supplies would be regarded as poor under any circumstances. Nonetheless poverty reported this way is subjectively experienced. Being hungry is not just a physical condition; it is one that is socially interpreted. „I am starving“ has different meanings for different people under different social and historical circumstances. For some, going to bed hungry may mean: „I cannot eat as much as I would like“; for others, „My body does not get enough calories, I am undernourished, and I may die years earlier than someone who is adequately fed“. Although hunger is differently experienced by different people and verting local currencies into a common currency and eliminating the differences in price levels between countries. Be- cause goods and services may cost more in one country than in another, poverty lines based on PPP allow for comparisons of poverty rates across countries. Standard thresholds using PPP measures are $2.15 and $4.30 per capita per day. Our absolute measure of poverty was a substitute for an indicator such as $2.15 per capita daily income in PPP. Our relative measure was a substitute for indicators such as household earnings below fifty percent median income.

43 is subjectively interpreted, reporting the experience or recollection of hunger offers a reasonable, if not the best retrospective measure of absolute poverty. The measures of poverty we just described capture ‘absolute’ poverty. Absolute measures of poverty have been criticized by sociologists for good reasons (Townsend, 1962). One indeed does not have to be hungry, however, to consider oneself or to be considered poor. People may feel poor, believe that society does not treat them adequately, and assert that in comparison with other people, they are not as well off. Termed by sociologists as „relative deprivation“, this phenomenon is as „real“ as an empty stomach in the evening, a light coat on a cold winter morning, or the chill a bare or thinly-cov- ered foot feels in the snow. With our survey we collected data on incomes and expenditures in year 2000, therefore we can measure with some precision ‘relative poverty’ namely where our respondents are located in the income hierarchy. 22 Measures of relative poverty and relative deprivation are therefore indeed important, but they have their limitations for cross-national comparison. Relative measures of poverty reflect primarily differences in inequality. Often poorer countries have lower level of inequality than more affluent ones and as a result relative poverty indicators may find ‘more poverty’ in a more affluent society, than in a poorer one. In this chapter we present data only about experiences with „absolute“ poverty.

2. What are the memories of socialism?

So, how do people remember socialism? Did people who came of age during later periods of socialism remember less or more poverty than people who turned fourteen during earlier periods of socialism? And did such differences vary across countries? As discussed above, memories of the past are simultaneously and selectively shaped by current social conditions as well as by interpretations of previous experiences. Thus, people’s retrospective responses represent their assessments of how they were faring in the year 2000 when the data were collected combined with and in relation to their assessments of how they fared during various periods before and during state socialism (depending on when they were age fourteen). With regard to our study, and as will be discussed below in greater detail, we generally found that people remember state socialism overall as a period in which poverty declined for most. Furthermore, cross-country differences seem to have narrowed somewhat during the socialist epoch. Memories of pre-socialism varies quire a bit across countries. Hungarians have far the most benevolent memory of their lives in pre-communist times, over 70% of them do not remember any experience with poverty and only 16% of them report hunger. The other East European countries are rather similar between 30 and 50% of those who turned 14 before 1949 remember their families as not poor at all and roughly a third of them report experiences with hunger when they turned young adults. It is interesting that Bulgarians and Romanians are rather similar to Poles and to Slovaks. Nei- ther Poles, nor Slovaks have particularly positive memories of their pre-communist lives. It is conceivable that the Hungarian data reflect as much the post-communist ideological hegemony as they

22 As noted previously, we do not have reliable retrospective income data therefore we cannot do over-time analysis of relative poverty. We asked, however, our respondents the second set of questions regarding their family’s income: was it below average, average, or above average, when they were 14? In 1988? In 2000? This question is often used in survey research to evaluate how people see their family located in the hierarchy of incomes. There is no reason to be - lieve that people actually know what average incomes are or were at one point in time. When they report below average incomes they express frustration of being slotted below average, hence we call this a measure of ‘relative deprivation”.“. These data are included in Appendix 1, but they are not systematically analyzed in this Chapter.

44 do the actual experiences of people in pre-socialist Hungary. In eight out of the first twelve years of post-communism in Hungary right-wing, conservative parties were in power and they made an effort to rehabilitate the image of pre WWII Hungary. In Poland the experiences with the war may darken the picture for the pre 1949 times. In Slovakia people may recall the pre-socialist epoch more negatively since it was the epoch of the ‘first republic’, Czechoslovakia, hence Slovak resentment against Czechs may color their memories and turn it darker. It is conceivable that Slovaks today, after independence from the Czechs and in keeping with national sentiments, are inclined to think in darker terms about the First Republic. 23 Nevertheless the cross-country differences are large enough to claim that Hungarians who turned 14 before 1949 experienced less poverty in pre-communist times than people in the other countries. It is also safe to say that Bulgarians and Romanians experienced about as much poverty as Poles and Slovaks. In fact Bulgarians and Romanians remember less ‘deep poverty’ than Poles or Slovaks do. During „classical Stalinism“, Russia was by far remembered as the poorest of the countries studied. Our older Russian respondents remembered their youth during the 1930s and 1940s as having been far poorer than do people of the same cohort living in the other countries sampled. And this is not all the effect of the war. We have enough respondents in Russia who turned 14 before 1940 and among a third of them reports of having been „very poor“ at that time. It is also interesting that people remember pre- war Soviet Russia not only as poor, but as relatively inegalitarian as well. 24 Hence in Russia Stalinism, even the ‘golden age’, therefore the 1930 is not recalled as a system, which could deal with extreme poverty and which at was egalitarian. Memories of people still living in Russia in 2000, who had lived through the Stalinist era do not remember the epoch particularly kindly. 25 In the East European countries respondents who were young at that time remember the decade of Stalinism (1949-1959) in similar ways across countries than the previous cohort recalled the pre-socialist times. On the whole the proportion of those who told us that they were not poor during the Stalinist epoch is smaller than the same proportion reported for the earlier cohort (see Ta- ble 1.1). In all of the other countries surveyed – with the exception of Hungary – the early socialist or Stalinist period was recalled as an improvement over the pre-socialist epoch. Poverty was sharply reduced after Stalinism, during the 1960s or later. Throughout the entire post-Stalinist epoch (1960-1988), in what we refer to as the socialist period, it is noteworthy that in every country, those who were young adults reported less and less exposure to poverty (see Table 1.1). Socialism seems to have indeed had an homogenizing effect with respect to class distinctions both across and within countries. Hungary is remembered as slightly better off than the other countries during the whole post-Stalinist epoch, though the gap between reports from Hungarians and other respondents narrow greatly if we compare the reports for post-Stalinist and pre-socialist times. Slovaks have almost identical memories of this epoch than Hungarians and Poles do not paint a much darker

23 And they tend to be kinder toward the entire socialist era. Slovaks may feel that throughout the socialist era, Czech- Slovak “ „fraternal” “ relations were more balanced, with Czechs having been less privileged than during the First Re- public. And indeed Slovaks paint a rather rosy picture of the whole socialist era what they describe in almost identical terms than the Hungarians. If we had a Czech component in our study, we could expect that Czech respondents would offer a mirror image of the Slovak experience, looking at the socialist period more negatively than the pre-socialist period. 24 More than half of the people who were young adults in before 1959 recounted that their family earned “ „below average” “ incomes --a much higher proportion than anywhere else (See Appendix 1. Table A1.1.1). 25 The memories of higher levels of poverty in Stalinist Soviet-Russia can be of course attributed to its lower level of economic development. Nevertheless it is surprising that despite the strong ideological commitment of Stalinism to egalitarianism and reduction of poverty according to the recollection of people who reached early adulthood at those time how little it could deliver on those promises.

45 picture either. Bulgarians and in particular Romanians are somewhat less sanguine, but even in this countries at least ‘deep poverty’ is sharply reduced, almost to the same level as in other countries.

Table 1.1. Experience of poverty at age 14 by cohorts

and by country (general population sample) 26

Country Cohort Degree of poverty (in %) Altogether Very poor Poor Not poor 100.0% (N) Bulgaria Pre-socialism 19.1 48.6 32.3 219 Stalinism 13.3 43.5 43.2 214 Socialism 2.4 44.9 52.7 364 Hungary Pre-socialism 16.3 10.8 72.9 291 Stalinism 18.1 8.6 73.3 146 Socialism 3.9 14.0 82.1 379 Poland Pre-socialism 36.5 20.3 43.2 157 Stalinism 19.1 29.5 51.4 138 Socialism 7.2 18.6 74.2 490 Romania Pre-socialism 21.7 36.8 41.5 224 Stalinism 16.1 30.1 53.8 200 Socialism 7.3 37.9 54.8 433 Russia Stalinism 35.1 49.1 15.8 800 Socialism 4.1 66.7 29.2 1,255 Slovakia Pre-socialism 32.9 5.0 62.1 186 Stalinism 13.8 9.7 76.5 139 Socialism 3.6 14.5 81.9 440

Poverty was sharply reduced after Stalinism, during the 1960s or later. Throughout the entire post-Stalinist epoch (1960-1988), in what we refer to as the socialist period, it is noteworthy that in every country, those who were young adults reported less and less exposure to poverty (see Table 1.1). Socialism seems to have indeed had an homogenizing effect with respect to class distinctions both across and within countries. Hungary is remembered as slightly better off than the other countries during the whole post-Stalinist epoch, though the gap between reports from Hungarians and other respondents narrow greatly if we compare the reports for post-Stalinist and pre-socialist times. Slovaks have almost identical memories of this epoch than Hungarians and Poles do not paint a much darker picture either. Bulgarians and in particular Romanians are somewhat less sanguine, but even in this countries at least ‘deep poverty’ is sharply reduced, almost to the same level as in other countries. Russia is far the worse off, though there is continued reduction of poverty, in particular in the memories of those who turned 14 during the 1980s. Although state socialism did not eradicate differences in poverty among the countries studied, it did narrow the gap among them, at least in the ways people still alive in 2000 remembered their lives. 27

26 Created by Janette Kawachi, June 18, 2002. 27 Data on ‘relative deprivation’ shows an even more consistent reduction of poverty in all countries, with a large (between and similar proportion of the population (about 80%, up from what used to be 40-50% in earlier times) believ- ing that their parents earned average or above average incomes when they turned 14 between 1960 and 1988. See Ap- pendix 1.

46 Of course, the actual differences in living standards may have been greater or lesser than what our respondents recall. We know that before the 1980s, shops in Hungary were full, whereas in Mos- cow and Bucuresti people stood in long lines to purchase the most basic goods. Having experienced even worse times, the expectations of Russians may have been lower, hence perhaps easier to satis- fy. 28 To reiterate, our data do not allow us to make statements about actual living standards, but it does appear that people’s memories about how bad or good their lives were converged across countries from one cohort to the next. As to the statement that the gap between countries may have narrowed during socialism (or at least it seems that people experienced socialism this way), no value judgment is intended. „Homogenization“ resulted, in part, from socialism’s better track record in transforming less developed countries. Socialism primarily instituted a strategy of extensive industrialization that produced faster growth in poorer countries that had a large agricultural labor pool, from which the process of extensive industrialization could be fed. Yet, the socialist economic system could never quite figure out how to cope with the challenges of „intensive growth“ (Kornai, 1992; Szelenyi, 1989). Hence, at least for a while, the system produced better economic results in Bulgaria than it did in Czechoslovakia or Hungary (Kornai, 1992). In this regard, the „homogenization“ we note does not necessarily represent good news for all of the countries under consideration: it suggests that in the early phase of socialist development, the more economically developed countries may have had more difficulties. Furthermore, because the region was integrated into the Soviet Em- pire, homogenization was hardly a „spontaneous“ or „natural“ outcome but, rather, was politically induced. To sum up, on the whole it does not appear that the 1950s represented a time of honey and milk. The Stalinist past is not that radiant after all. About half of those who were young adults during those years remember them as years when their families experienced substantial inadequacies in income; quite often, they also remember having experienced hunger. A similar proportion 29 had a sense of con- siderable inequalities in the face of an alleged paradise of egalitarianism. Put differently, people remember the one bowl of rice but they also believe that others fared better than they did. These trends changed rather impressively, however, between the 1960s and the 1980s. Those who turned 14 during the 1960s remembered decreasing poverty in comparison with those in the previous cohort. Conditions continued to improve for the next quarter of a century according to the recollections of respondents. The most improvement seems to have occurred in the East European countries during the 1960s; in one decade the percentage of those who experienced extreme poverty was cut by one third. In Russia, between the 1950s and 1960s, there was a dramatic change in how young adults perceived their family’s situations. Those who were young adults in the 1950s recall the USSR as having been the poorest of the countries we studied. Following the Khrushchev reforms, however, Russia began to resemble the other socialist countries though remains somewhat poorer all along. Hungary and Slovakia were distinctive. People who turned 14 during the 1970s and 1980s and who had been living in these two countries remember them as places where people did not have to starve and which were also rather fair and egalitarian. 30

28 People also stood in long lines in Bucharest in the 1980s. Although they had experienced better times, by then, they were all too familiar with the daily constraints imposed on them by the Ceausescu regime. 29 40-60% of those who turned 14 during Stalinism believed that their families earned below or way below average incomes. See Appendix 1. 30 Over 80% of people born between 1946 and 1964 in these tow countries believed that their parents earned average or higher incomes when they were 14 years old, see Appendix 1.

47 3. Who remembers what? Social determinants of experiences of poverty prior 1989

Our next task is to explore, what explains who reports experience of poverty at age 14 among those who turned 14 before 1989. In the Introduction we offered a hypothesis what is to be expected from such a comparison. So- cialism was supposed to have produced poverty, which was only a life-cycle phenomenon. Poverty – so goes the received wisdom – was determined by demographic factors, such as number of children or rural place of residence. Class factors, such as education or labor market performance did not play much of a role. The expectation is that with market transition the role of such structural factors to explain poverty will substantially increase. As a result poverty for some will become a lasting phenomenon, which may stick to those who are poorly equipped with human capital and therefore are chronically under-performers on the labor market. We also speculated that racialization and feminization might also be new features of poverty, which come into being with market transition and in a more pronounced way in liberal regimes. With the data we have we cannot test what the determinants of poverty were under socialism since we do not have a representative sample of those who were poor under socialism. Nevertheless if the hypotheses hold for socialism they may hold for our population. And indeed Table 1.2 offer some support for these hypotheses. As expected the demographic factors play a substantial role (what cannot be said – as we will show in Chapter 3 – about social determination of poverty under post-communism, where the impact of demographic factors are minimal). Number of siblings has quite a substantial effect, while class as measured here with the education of the father hardly plays any role. Cross-country differences also look unimpressive (and again in Chapter 3 we will see that cross-country variations in 2000 are quite dramatic). The descriptive data do not support however our assumptions about the novelty of feminization and racialization of poverty under post-communist liberal regimes. In Table 1.2 the strongest effect, however, seems to be attributable to the fact that the respondent lived only with his or her mother when was 14 years old. Poverty at age 14 is associated with single motherhood even more strongly than with Roma ethnicity the other major determinant of poverty. The poverty of those of our respondents, who turned 14 during socialism (and before) was already feminized and racialized and in particular it was feminized in every country. Here again the war certainly had an effect on feminization, war orphans are obviously a part of the poor children who grew up without a father, so we will have to control for cohort effects and that is exactly what we do in Table 1.3 in a regression model. Table 1.2. People who reported to be „very poor“ (suffering from hunger) when they were 14 years old if they turned 14 before 1989. 31

Amon Amon Amon Among Among Amon g all g those g those those g re- with those who whose Roma

31 Created by Janette Kawachi, June 18, 2002.

48 spon- four or who lived father dents more were only had pri- sib- born with mary lings in ru- their school ral ar- mother educa- eas tion or less Bul- 9.8 14.3 12.1 23.4 11.9 20.0 garia Hun- 10.8 19.2 11.6 26.2 13.5 16.8 gary Polan 14.9 17.0 18.1 34.8 17.6 - d Ro- 13.1 16.0 14.9 27.8 15.2 21.6 mania Rus- 16.1 25.8 20.8 29.7 17.9 - sia Slo- 12.4 18.7 14.1 10.1 18.2 - vakia

The descriptive data do not support however our assumptions about the novelty of feminization and racialization of poverty under post-communist liberal regimes. In Table 1.2 the strongest effect, however, seems to be attributable to the fact that the respondent lived only with his or her mother when was 14 years old. Poverty at age 14 is associated with single motherhood even more strongly than with Roma ethnicity the other major determinant of poverty. The poverty of those of our respondents, who turned 14 during socialism (and before) was already feminized and racialized and in particular it was feminized in every country. Here again the war certainly had an effect on feminization, war orphans are obviously a part of the poor children who grew up without a father, so we will have to control for cohort effects and that is exactly what we do in Table 1.3 in a regression model. Multivariate analysis confirms the findings of descriptive statistics. Living with mother only has a formidable effect on poverty of those respondents who experienced poverty under socialism. And this effect remains if we control for the war orphan cohorts. Cohort is the best predictor of poverty – those who were born before 1935, hence turned 14 before socialism are 4 times more likely to have experienced poverty than others. Many of these respondents turned 14 during or immediately after the war years, hence their excessive level of poverty is not that surprising. Achieving young adulthood during the years of Stalinism (they also could be war orphans) is also a predictor of poverty of young adults. But once to cohort effect is controlled for the feminization effect is still robust. Those who lives only with their mothers at age 14 are almost four times more likely to be poor that those who lives also with their fathers as well. Furthermore, in a way why fathers are absent – because they were killed in war, killed themselves by excessive consumption of alcohol, abandoned their families is not that relevant. The point is that society already before 1989 had difficulties in coping with single motherhood. It was the major source of poverty, more important for instance than the number of siblings one had in childhood and infinitely more important than the social status of the parents. Single motherhood is a good predictor of poverty when measured the same way in year 2000, hence feminization of poverty is indeed one element of post-communist capitalism. But the strength of association between single motherhood and poverty is even stronger for those who were born before 1964 when they turned 14 than in year 2000.

49 One of course should not overestimate the importance of feminization of poverty. Since there are relatively few people who lived only with their mother during their childhood in our step-wise construction of our models the fit of our model does not improve that much when we enter this variable when moving from Model 2 to Model 1. 32 The association is strong, but it affects relatively few people. We ought to remember, that here we are dealing with a subjective assessment whether the respondent was poor as a young adult or not. One possible explanation to the strong feminization effect is that it may be easier for people to see themselves as poor if they only lived with their mothers. If their father also lived in the household they may be more embarrassed to remember or to describe to strangers their life in childhood as poverty-stricken. Table 1.3. Probability (odd ratio) that respondent reported poverty (hunger) when was 14 years of age among those who turned 14 before 1989, six countries, GPS 33

Model 1 Model 2 Model 3 Full model M1 - femi- M2 - class nization Demogra- Number of sib- 1.146*** 1.146*** 1.161*** phy lings Rural birthplace 1.167 1.120 1.235 Feminiza- Respondent 3.920*** - - tion lived with mother only when 14 Class Father had pri- 1.327 1.298 - mary school education or less Mother had pri- 2.005 2.020 - mary school education or less Cohort Born before 4.471*** 4.475*** 4.904*** 1935 Born between 3.174*** 3.213*** 3.344*** 1936 and 1945 Country Central Euro- 1.287 1.337 1.314 pean countries Log likelihood -1089.321 -1105.5204 -1257.6956

One of course should not overestimate the importance of feminization of poverty. Since there are relatively few people who lived only with their mother during their childhood in our step-wise construction of our models the fit of our model does not improve that much when we enter this variable when moving from Model 2 to Model 1. 34 The association is strong, but it affects relatively few people.

32 The log likelihood statistics declined only modestly. 33 Created by Janette Kawachi, June 18, 2002. 34 The log likelihood statistics declined only modestly.

50 We ought to remember, that here we are dealing with a subjective assessment whether the respondent was poor as a young adult or not. One possible explanation to the strong feminization effect is that it may be easier for people to see themselves as poor if they only lived with their mothers. If their father also lived in the household they may be more embarrassed to remember or to describe to strangers their life in childhood as poverty-stricken. And what about ethnicity? In Bulgaria, Hungary and Romania Roma are much more likely than gadjo to report hunger if they were 14 years old before 1989. While only 10% of Bulgarian gadjo was according to this measure in ‘deep poverty’ before 1989 twice as many Roma gave such a report. In Hungary and Romania the figures are similar, 11 versus 17 and 13 versus 22% respectively (Table 1.2). Multivariate analysis 35 shows that once we control for all the major factors, which seem to effect the memory of poverty the odds of Roma to report deep poverty is 2.4 times greater than that of gadjo. Nevertheless, as one can already guess from the descriptive statistics single motherhood is even more important predictor of experiencing poverty before 1989. Among people born before 1964 those who live only with their mothers when they turned 14 are 2.8 times more likely to suffer from hunger than those who lived with their fathers and mothers. Ethnicity was therefore an important determinant of deep poverty before 1989 as well, but it was not quite as important as single motherhood. Those report experience with deep poverty at age 14 before 1989, many of them under socialism who lived with their mother when they were becoming young adults who were Roma and who had many brothers and sisters. The father’s education was not significantly associated with such experience. This is to some extent consistent with what we expected to be the determinants of poverty under socialism. Class indeed does not appear to be a factor those whose fathers were poor in human capital were not more likely to live as children in families in poverty. Since the socialist economy provided employment to all with relatively egalitarian wages, including those with low levels of education this is to be expected. Somewhat to our surprise it appears that poverty was already feminized and racialized before 1989 and in fact it was probably more feminized before 1989 than it was later. We expected no feminization or little racialization before 1989 on the same grounds as we anticipated little effect of low educational level on poverty. As the theory of „economics of shortages“ (Kornai, 1980) predicted even for Roma there was a full employment under socialism. Roma was slotted at the bottom of the occupational hierarchy as unskilled workers in mining, construction industry, steel industry etc, but their employment was stable and their wages was respectable. Therefore they should not have been in poverty before market transition when their jobs were destroyed first by post-communist de-industrialization and many of them found themselves in long term unemployment. We also believed that single mothers would have been in the labor force under socialism. There was a demand for their labor as well and there were inexpensive or free childcare institutions, which made it possible – even for single mothers and even with several children – to work full time. We anticipated feminization of poverty to occur with market transition, since demand for female labor declined and the supply of childcare institutions were reduced and their costs were increased. In pots-communist capitalism – so we expected – single women will drop out of labor force (or will not even able to join it to begin with) and therefore will slide into deep poverty. Those forces of market induced feminization and racialization may indeed working, but our data suggests that poverty may have been as much feminized and almost as much racialized as it is in year 2000.

35 See Ladányi and Szelényi, 2006.

51 Conclusions

Poverty – Stalinism, reform communism, capitalism Our data, according to the memories of our respondents, reveals that poverty decreased during the socialist era. Did this perceived decline of poverty and inequality result from the pure type of socialism, which radically eradicated market forces or on the contrary from socialist market reform? Some believe that socialism reduced poverty and achieves a reasonable level of equality only as long as market reform did not begin the process of ‘capitalist restoration’. Others see Stalinism as an inef- fective and corrupt system, socially unjust and irresponsible, which was at least partially made somewhat more livable during reform communism by market reforms. Is such a reduction in poverty the result of socialist policies or would it have occurred anyway as the outcome of economic growth? Some believe that decline of poverty and inequality would have occurred anyway as the economy grew (in fact a capitalist system, with great capacity to grow would have created more equality and certainly would have reduced more sharply poverty), others would maintain, that socialism reduced poverty well beyond what one could have expected simply on the basis of the economic growth in socialist countries. We do not have clear answers to these vexing questions. So was it socialist de-commodification or to the contrary socialist market reform which reduced poverty? The proportion of people who recalled being poor when they were 14 years old steadily declined after 1960, that is, after the break with classical Stalinism in all countries, both in reformers 36 and non-reformers 37 . Hence, in Slovakia and in neo-Stalinist Romania where market reforms were eschewed, poverty was reduced as much as elsewhere. Nevertheless, it appears that the purer the socialist model, the less persuasive was its performance in reducing poverty and inequality. Those who lived through the Stalinist era do not remember it as an egalitarian system in which everyone’s livelihood was guaranteed at a sufficient level. Socialism is remembered more positively by those who grew up in the period of market-oriented reforms under the leaderships of Khrushchev, Gomulka and Kadar. The least we can say is that as socialism began to experiment with market reforms, people living in these countries did not perceive this change as a shift towards greater poverty, inequality and injustice. As previously noted, market reform in Hungary did not result in an increase in the proportion of people who experienced absolute poverty. 38 Russia during the Gorbachev reform years is also remembered as a country in comparison with the earlier decades poverty declined. Evidence remains inconclusive also about the effects of „modernization“ or „economic growth“ versus socialist policies. One can possibly argue that the decline in poverty our respondents reported to us would have taken place anyway in a growing economy. Poverty was reduced in capitalist Greece or Spain as well, not only in socialist Bulgaria or Slovakia hence there is no reason to believe that a capitalist system would have produced the same outcomes in Eastern Europe as well. But if that were the case, why countries, which were rather different in terms of their level of economic development, began to converge once they became socialist? Furthermore, as we will see in Chapter 2, the homogenizing tendencies of socialism are dramatically transformed during market transition.

36 Hungary, Poland and in the 1980s Russia, (see Berend, 1996). 37 Slovakia, Romania and to some extent Bulgaria. Bulgaria experimented with reforms, but not as consistently as Hungary or Poland (see Berend, 1996). 38 Similarly, as can be seen in Appendix 1, the proportion of people who remember experiencing relative deprivation did not increase with market reforms.

52 While during socialism our countries were converging, after market transition they are on a divergent trajectory, in some countries (Bulgaria, Romania, Russia) poverty growing faster, while in other countries (Hungary and Poland) poverty after an initial increase stabilizes and is even reduced. Why divergence now after four decades of convergence? The answer to these questions could be found in differences in level of economic development.

Social determinants of poverty before 1989 As expected before 1989 class factors such as education (in our case, when we try to explain the experience of poverty of our respondents when they were 14 years old this is the education of their father) did not play a particularly important role in the determination of poverty. Given full employment under socialism and somewhat depressed wage scales between highly educated and less educated this should not be that surprising. Therefore demographic factors – such as number of children in a household were good predictors of poverty, what may have been as a result only a life-cycle phenomenon for most in poverty. Poverty before 1989 on the other hand appears to have been already feminized (to a large extent) and racialized (to some extent). Next to cohort there is no better predictor of poverty at age 14 than the fact that someone lived only with mother at that age. Roma also tend to have more experience with deep poverty than gadjo, though ethnicity has to take the back seat in this case behind gender. We will see in Chapter 3 that marketization promotes both racialization and feminization of poverty but our findings in this chapter suggest that poverty might have been already feminized and racialized before 1989.

53 Chapter 2 THE LOSERS OF MARKET TRANSITION

In this chapter we have two tasks. First we document how much change – growth – there was in the extent of poverty in various post communist societies. We do so by using retrospective and subjective reports on experience of poverty in 1988, 1993 and 2000 and by presenting data on people’s reports on the deterioration of their living standards between 1988, 1993 and 2000. Next, we identify who the losers were of the transition, what are the characteristics of people who reported more poverty in 2000 than in 1988 and who complained about deterioration of living standards. Previous research discovered that poverty during transition skyrocketed in the former socialist societies. According to the World Bank „In 1998 an estimated one out of every five people in the transition countries of Europe and Central Asia survived on less than $2.15 per day. A decade ago fewer than on our of twenty five lived in such absolute poverty.“ 39 Our study is consistent with these claims we also find a 2-5 fold increase in poverty during the first 12 years. Our major new finding, however, focus on cross-national differences in the dynamics of poverty and on the social character of those who report deteriorating living conditions between 1988 and 2000. The key hypotheses which guide the data analysis in this chapter are the following: H1. After decades of ‘convergence’ former socialist countries during the 1990s began to diverge in term of the living standards of their population, resulting on strikingly different poverty rates in year 2000; H2. This divergence is recent, during the first 4-5 years living standards all countries appear to be declining at similar speed, but after 1993 some countries are stabilizing and entering a growth trajectory; H3. While the differences between the stabilizing and continuously declining countries have a lot to do with their ‘initial conditions’, government policies, what sort of reforms are done, how consistently and how radically make also a difference and neo-liberal regimes are the ones which stabilized and neo-patrimonials the ones, which continue the decay; H4. Next to regime type class (measured by level of education) is the best predictor who report deteriorating living conditions between 1988 and 2000; the losers are people with educational deficits; H5. Demographic factors are not good predictors of whose living conditions deteriorated and since Roma tended to be rather poor already in 1988 Roma ethnicity is not as a good predictor of declining living standards as low level of education.

1. Cross national divergent trends in poverty after the fall of communism, 1988- 2000 comparisons

39 The World Bank, Making Transition Work for Everyone, Washington, D.C.: The World Bank, 2000, p. 1.

54 In this Chapter we use the same indicators as in Chapter 1: people’s report of experience of poverty and relative deprivation. We compare three time points, 1988, 1993 and 2000. 1988 is retrospective data from our 2000 survey. Data for 1993 come from the survey conducted by Ivan Szelenyi and Don Treiman (Social stratification in Eastern Europe after 1989). In that study we asked a few questions, which were the same as questions asked in our year 2000 study. The 1993-2000 comparison is interesting, since it suggests that the developmental trajectory across countries began to diverge mainly after 1993. Dur- ing the first few years all post-communist countries experienced deterioration in general living conditions, a substantial growth in poverty rates, but some countries, arguably those, which implemented more systematically neo-liberal reforms experience stabilization after 1993. In Poland and Slo- vakia for instance the proportion of those who report experience of poverty at all according to our indicators by 2000 is somewhat lower than it was in 1988 and in Hungary only slightly higher propor - tion of the population report poverty in 2000, than they report for 1988. Countries, which either did not try, or abandon neo-liberal reforms and seem to be on some involutionary, or neo-patrimonial road face further increases in poverty and the gap between the two groups of countries, which was rather small in 1993 grew to be substantial by 2000. The proportion of „very poor“ increased in all countries between 1988 and 2000. In terms of „deep poverty“ Bulgaria and Romania, however, seems to be even worse off than Russia. About 16 percent of the respondent in these two countries reported that they experience on a weekly basis hunger, thus we classified them as „very poor.“ The deterioration is even sharper in Bulgaria than in Romania, since „deep poverty“ was relatively wide-spread in Romania already in 1988. In Bulgaria the increase of „deep poverty“ is tenfold, in Romania it is „only“ threefold. According to the memory of our respondents – and according to received wisdom too – Romania was the poorest country among the six countries in 1988. The Russian level of deep poverty is not significantly different from the figures in the neo-liberal regimes. This may have a lot to do with the involutionary character of Russian development, thus self-provisioning of food in Russia, Russians are poor, but they are not hungry since they grow their own food. The shallower measures of poverty tell us a different story. The proportion of not poor decreased in Hungary, Poland and Slovakia (from 80-95% to 70-85%) but not as fast as in the other three countries (Table 2.1). There is a dramatic deterioration of living conditions according to these measures in all neo-patrimonial regimes – in Bulgaria, Romania and Russia only about a third or a fourth of the respondent report that they do not experience any poverty in any of our measures. In 1988 all socialist countries were rather similar by these measures. Hungary was the best off, but Bul- garians remember 1988 quite favorably, more favorably than the Poles and about as favorably as the Slovaks. In the „shallow“ measure of poverty Romania and Russia were in 1988 the worse off, Bul- garia, Poland and Slovakia do better and Hungary does the best. The country differences increase substantially and the grouping of the countries changes also substantially. Table 2.1 offers a strong support to our earlier hypothesis, namely that socialism is remembered as a gradual leveling off of cross-country differences, while post-communism is a process of fast differentiation across social systems. Those countries, which do well or at least reasonably well, are clearly countries, which made the most progress on the way to market reform. The story of relative deprivation (Table A1.4 in Appendix) is somewhat different, though not completely inconsistent with the experience of poverty, reported in Table A1.4. It is clear from Table A1.4 that pour respondents see post-communist transition in the whole European region as a process of

55 increasing social inequality. The transition from socialism to capitalism is experienced by many as not having the fair deal what they used to during the last years of socialism. Some countries, such as Hungary and Poland implemented rather fast and rather radical insti- tutional change. These countries privatized relatively quickly. 40 They typically sold public property on open auctions to the highest bidders, which occasionally included foreign investors. They liberalized prices, trade, and foreign exchange, and implemented mass reforms of their banking systems. We call these countries „neo-liberal regimes“.

Table 2.1. Experience of poverty 1988 and 2000 (general population sample) 41

Coun- Year Experience of poverty in 1988 and Alto- try 2000 gether, Very poor, Poor, Not poor, in % 100.0% in % in % (N) Bulgaria 1988 1.8 7.6 90.6 866 2000 16.3 38.8 44.9 975 Hungary 1988 2.5 3.3 94.2 897 2000 6.8 11.5 81.7 930 Poland 1988 3.1 14.9 82.0 723 2000 6.2 19.5 74.3 931 Romania 1988 5.1 12.6 82.3 851 2000 16.3 27.6 56.1 1,033 Russia 1988 2.2 25.7 72.1 2,218 2000 8.0 65.0 27.0 2,336 Slovakia 1988 1.1 8.2 90.7 788 2000 5.0 10.8 84.2 964

The story of relative deprivation (Table A1.4 in Appendix) is somewhat different, though not completely inconsistent with the experience of poverty, reported in Table A1.4. It is clear from Table A1.4 that pour respondents see post-communist transition in the whole European region as a process of increasing social inequality. The transition from socialism to capitalism is experienced by many as not having the fair deal what they used to during the last years of socialism. Some countries, such as Hungary and Poland implemented rather fast and rather radical in- stitutional change. These countries privatized relatively quickly. 42 They typically sold public property on open auctions to the highest bidders, which occasionally included foreign investors. They liberalized prices, trade, and foreign exchange, and implemented mass reforms of their banking systems. We call these countries „neo-liberal regimes“. Other countries, including Bulgaria, Romania and Russia followed a more gradualist strategy of reform. We will call this set of countries „patrimonial regimes“. 43 In patrimonial regimes members of the elites, in particular managers but also workers are believed to have certain endowments, right,

40 Though this more true of Hungary than of Poland, in comparison with other countries it is true for Poland as well. 41 Created by Janette Kawachi, June 18, 2002. 42 Though this more true of Hungary than of Poland, in comparison with other countries it is true for Poland as well.

56 privileges, which have to be protected by a paternalistic state, or management against the blind forces of the market. Elites, especially managers – and to some extent even workers – under socialism had some de facto property rights in firms. Managers, fort instance, from the whole „bundle of property rights“ had the „right of control“ workers had security of employment. Under patrimonial regimes, these inherited rights are defended. Managers and workers may receive vouchers to legal- ize their de facto ownership in the firms they worked for management will be obliged not to lay off workers. Workers, in exchange, will feel obliged to keep working even if they do not receive their salaries. In Russia (Caleb Southworth) workers often do not receive salaries for several month, they still show up for work, since they have security of employment and their employer provides them with housing and with family plots to grow their own food. While some reformers flirted with certain features of the neo-liberal model in these countries as well, reformers who argued that the costs of rapid transition would be too costly 44 prevailed. Thus, on the whole, the privatization process in these countries proceeded more slowly than in other countries. Rather than auctioning public property on an open market where foreign investors could compete freely, these countries preferred management buy-outs, or even worker/management buy-outs (often nothing more, than a politically savvy form of management buy-out – see Lawrence King). Price liberalization was cautious and in- flux of foreign capital was controlled and limited. By 2000 a substantial gap in terms of the degree of liberalization had emerged between Hun- gary and Poland on the one hand, and Bulgaria, Romania, and Russia, on the other hand. Since 1994, The European Bank for Reconstruction and Development (EBRD) attempted to assign a measure for the degree transition progress in post-communist countries using a multi-dimensional index. As col- umn 1 in Table 2.3 shows the five countries in our study can be clearly classified into the following two categories: highly marketized, neo-liberal regimes (Poland and Hungary) on the one hand, and modestly (or low) marketized, patrimonial systems on the other hand (Bulgaria, Romania and Rus- sia). For our purposes, the key questions posed by these liberalization indicators is whether these differences in transition strategies and outcomes are consequential for emerging structures of poverty in these countries, and if so, how? Were patrimonial regimes successful in sheltering the poor from the devastation of the market, or is there any truth to the alleged „trickle down“ effects of the market? In brief, an over-time and cross-sectional analysis offers answers to both the question of the market’s effect on poverty rates, and how the extent and nature of poverty is affected by different strategies of transition. Does the growth of the market decrease poverty by raising all ships, or must the patrimonial state endure to prevent massive increases in poverty caused by market forces? In a single decade, the institution of public ownership was eliminated or reduced to levels far below that of classical social democracies of the 1950s or 1960s. In this sense, „capitalism“ was „built“ over a relatively short period of time throughout the post-communist world, despite the fact that various countries pursued strikingly different strategies in order to achieve this outcome. No theory has been offered, and no systematic longitudinal, cross-sectional comparison has been undertaken, to determine the nature of poverty during the process of transformation. With the present analysis, we in- tend to fill this gap.

43 Hebert Kitschelt calls the first type of regime “ „national consensus”,“, the second “ „bureaucratic-authoritarian”.“. See Kitschelt, Post-communist Party Systems, 1999. Our distinction between “ „neo-liberal” “ and “ „patrimonial” “ regimes attempts to be value-neutral, and describe more the socio-economic strategy rather than the political system. 44 Not coincidentally, these same reformers also had a hand, not to mention an interest, in ensuring that the “ „endowments” “ owed to the managerial elite be converted into private property.

57 Table 2.2. Economic policies, economic growth and social indicators 45

Country Cumula- Real Survey data from 1993 and 2000 46 tive libe- GDP in % of % of % of % of ralizatio 1999 popu- popu- popula- popula- n 1989- (1988= lation lation tion re- tion re- 1999 100) report- report- porting porting ing ing deterio- deterio- pover- pover- rated li- rated li- ty 47 in ty in ving con- ving 1993 2000 ditions condi- in 1993 tions in in com- 2000 in parison compari- with son with 1988 1988 Hun- 10.0 99 57 44 62 54 gary Polan 8.0 122 59 44 63 55 d Bul- 5.0 67 68 81 69 84 garia Russia 2.0 57 60 74 65 77 Roma- 6.0 70 - 69 - 72 nia

45 Transition Report 2000,. European Bank of Reconstruction and Development,. p. 21; and. Pp. 65. 46 Data are from: Szelenyi and Treiman,. Social stratification in Eastern Europe after 1989 (data from 1993); and Emigh and Szelenyi., Poverty, ethnicity and gender in transitional societies (data from 2000). 47 We only have one measure of “ „poverty” “ which was asked in identical ways in 1993 and 2000. We asked people whether their family earned average, above average or below average incomes. We regard here families who reported earning below average income as “ „poor”,“, in the sense that they experience “ „relative deprivation”.“.

58 Table 2.2 offers some prima facie evidence that there may be some relationship between market liberalization, economic growth and extent of poverty. The two countries that followed more aggressive liberalization strategies (Hungary and Poland) posted some reduction in various measures of poverty between 1993 and 2000. Those countries, which pursued the patrimonial way to capitalism, experienced major deteriorations in the social conditions of their population. There is clearly an increasing gap between the two categories of countries, though it is less obvious whether that is caused by degree of liberalization or economic growth. The more liberalized countries also post better economic growth. It is not obvious whether the slight improvement in social conditions is the result of liberalization or economic growth. We cannot tell it either whether economic growth was the result of liberalization or it was rather the precondition of it. Nevertheless one may claim that there is an „elective affinity“ between liberalization, growth and improvement in social conditions. Data in Table 2.2 do not paint neo-liberalism in particularly radiant light. A decade after the fall of communism, Hungary just approached the GDP levels of 1988 (and even Poland – the most dynamic post- communist country during the first decade of transformation – only posted a modest 20% growth over the decade). The proportion of population that reports poverty declined somewhat between 1993 and 2000, but it is still over 40%. In 2000 in Hungary and Poland more than half of our respondent believed that their conditions were worse than in 1988 (Table 2.3).

Table 2.3. Change in the standard of living in the respondent’s households between 1988 and 2000 48

Country Standard of living in 2000 compared with 1988, in % Better About A little Much All (N) off the same worse off worse off Bulgaria 5.3 11.0 23.7 60.0 913 Hun- 15.8 30.0 36.1 18.1 916 gary Poland 22.7 21.9 30.3 25.1 814 Romania 16.7 11.5 26.9 44.9 879 Russia 10.8 12.2 25.8 51.2 2.,181 Slovakia 18.8 19.0 29.1 33.1 842

We created a new variable from the question whether the household earned below average, average or above average incomes in 1988 and 2000. We combined responses given for 1988 and 2000. Those were ‘downwardly mobile’ (our most interesting category) who reported average or above average incomes in1988 and below or way below average income in 2000. The other categories are defined by the same logic. There is massive pauperisation (downward mobility into poverty) in all countries, more in neo-patrimonial systems, but quite a lot in liberal regimes. In neo-patrimonial systems between 30 and 50% of the respondents were not poor in 1988, but reported poverty in 2000. The same proportion is more modest, but it is still an astonishingly high 10-15% in neo-liberal regimes (Table A1.5 in Appendix).

59 One important finding of our research is that in terms of the initial conditions all countries were rather similar. The proportion of those who reported experience with poverty in 1988 is almost identical in all Central- and East-European countries. This may not mean that the actual conditions were identical, after all Russia or Romania were poorer than Hungary or Poland, nevertheless people remember 1988 in similar ways. The BIG difference is in change: in people’s experience Eastern Eu- rope is hit so much harder than Central Europe and that makes one wonder whether government policies may be consequential after all. Market liberalization does not seem to be a paradise; it is only a somewhat better alternative than the paternalistic road to capitalism. Thus there is prima facie evidence that there is some relationship between degree of liberalization, economic growth, inequality and level of poverty, and the nature of this relationship requires further scrutiny. Our task in this paper is to explore these relationships and the mechanisms, which link liberalization to the extent and nature of poverty.

2. Social determinants of deteriorating living conditions, 1988-2000

Who are the losers of the transition? Who are those, who believe that they lived better in 1988 than 2000, who are those who were not poor by the end of the socialist regime, but who reported poverty more than a decade after the fall of communism? There is no obvious answer to this question. Some commentators believe that the big losers came from the middle class (Kolosi, 1991) others think the poor got poorer with the expansion of markets (Ferge, 1995). As Table 2.4 shows it is likely to vary substantially across countries who the losers of the transition were. Demography does not play a major role, households without children did not escape poverty more than the rest. Gender does not make much difference in general. Rural residents fare better in some countries and were slightly over-represented among the losers in other countries. The big losers were those who in year 2000 were either out of the labour force or were unemployed and Roma as well. While a much larger proportion of Roma reported deterioration in living standards than non- Roma, nevertheless ethnicity effect in this case is modest. Arguably Roma were already in 1988 quite badly off, so there was not much more how worse they could get. It is also notable that gender does not make much of a difference either. On the whole: it is class (a combination of low level of education and exclusion from the labour market), which explains who believes to be ‘much worse off’ in year 2000 than they were in 1988. Downward mobility tells us a somewhat different story: here class is a good predictor who reported average or above average incomes for 1988 and below average income in 2000 in neo-liberal regimes, but that is not the case for neo-patrimonial systems.

Table 2.4. People, who reported that they were „much worse off“ in 2000 than in 1988 49

Co Amo Amo Amo Amo Amo Amo Amo Amo un- ng all ng ng ng ng ng ng ng try pop- hous rural sin- sin- house hous Rom ula- e- hous gle gle holds, e- a tion holds e- moth wom wher holds

60 with holds ers en e , no head wher chil- of e dren house head hold of has hous pri- e- mary holds schoo is out l edu- of cation work or less force Bul 60.0 62.4 66.1 61.0 65.4 69.6 68.9 74.8 gar ia Hu 18.1 18.3 17.7 26.9 16.9 21.7 37.3 41.3 n- gar y Pol 25.1 24.6 22.1 26.3 29.5 31.4 46.3 - an d Ro- 44.9 45.7 40.5 52.3 50.2 46.5 57.7 68.2 ma nia Ru 51.1 54.7 56.0 54.6 57.2 57.6 61.2 - ssia Slo 33.1 33.1 34.7 36.4 38.3 41.6 57.7 - vak ia

While a much larger proportion of Roma reported deterioration in living standards than non- Roma, nevertheless ethnicity effect in this case is modest. Arguably Roma were already in 1988 quite badly off, so there was not much more how worse they could get. It is also notable that gender does not make much of a difference either. On the whole: it is class (a combination of low level of education and exclusion from the labour market), which explains who believes to be ‘much worse off’ in year 2000 than they were in 1988. Downward mobility tells us a somewhat different story: here class is a good predictor who reported average or above average incomes for 1988 and below average income in 2000 in neo-liberal regimes, but that is not the case for neo-patrimonial systems The most astonishing – though upon reflection – sensible finding is the relative weakness of ethnicity effect both on deteriorating living conditions and downward mobility. Roma in Bulgaria and Romania is only somewhat more likely to have moved down into poverty after 1988 than non- Roma, though the difference between the two ethnic groups is much greater in Hungary (Table 1.6). If this holds in multivariate analysis it shows that Roma was already poor in 1988, therefore there was not much room left for Gypsies to be downwardly mobile. They were already poor. In Table A1.7 in Appendix we use a different definition of „downward mobility“. Here those are regarded as downwardly mobile who did not report poverty in any of the „four questions“ (hunger, not enough meet, no second pair of shoe, no warm winter coat) in 1988, but report poverty

61 at least in one dimension in 2000. The story with this measure is not that different from the story, when downward mobility was measured with „relative deprivation“.

Table 2.5. Probability (log odds) that respondent’s household is much worse off in 2000 than it was in 1988, GPS for the six countries

Model 1 (full Model 2 Model 3 model) M1 – class M2 – class Demogra- Number of .961 .978 .952 phy children Rural resi- 1.000 1.099 1.104 dence Class Head of HH 1.339*** - - primary school or less Head of HH 2.151*** - not in labor force Feminiza- Single mo- 1.235 1.257 .337*** tion thers Single wom- 1.248 1.274 .298*** en Liberaliza- Hungary, .312*** .313*** .311*** tion Poland and Slovakia -2 Log likelihood -3935.4912 -4116.4113 -4123.9568

*significance at 0.05 level, ** at 0.01 level

The picture, which emerges from Table 2.5 is clear and powerful. There are three determinants of mobility into poverty: the type of regime, the level of education and employment status of the heads of households. The most robust effect is exercises by regime type – in neo-liberal regimes people are 3 fold less likely to become poor during transition than in neo-patrimonial regimes. This is the most interesting finding and it helps us to assess, whether government policies are consequential or not. Here we see the difference in the dynamism of poverty across regime types. We capture here the very process of divergence hence it is more difficult to refute these findings with reference to the differences in the initial conditions. These data speak to how different the conditions become, rather than to how different they were initially. When we try to explain who reported declining living standards we get similar results. Neither single motherhood, not number of children makes much of a difference, but households, where the head has only primary school education (or less) are almost three times more likely to believe that their living conditions turned for the worse. The models presented in Tables 2.5 are problematic. All the independent variables we use in these models describe the year 2000 situation of the households and we do not know what their situation was in 1988. Indeed some of the households who have many children may have been still child- less in 1988, single mother households may have formed or become single after 1988. But if number

62 of children or single motherhood would be a good predictor of deteriorating living standards their coefficients would be only help by the fact that such condition did not exist in 1988. And now let’s turn to the question of ethnicity. On data pooled from the general populations samples (GPS) and from the Roma over-samples (ROS) we test the relative explanatory power of Roma ethnicity. Surprisingly Roma ethnicity has only a relatively weak effect (Ladanyi and Szelenyi, 2006). This is the result of rather wide-speared shallow poverty among Roma already in 1988. So many Roma were already reporting some poverty (even-though extreme poverty such as reporting hunger was rare during late socialism) for 1988 that it was difficult to be downwardly mobile if someone was Roma. Even for the poor it is possible to become poorer (Ladanyi and Szelenyi, 2006). If we try to ex - plain who felt that their living conditions deteriorated between 1988 and 2000 Roma ethnicity plays again a role – even after one controls for ‘class’ Roma are still twice more likely to complain about deterioration in living conditions than others (Ladanyi and Szelenyi, 2006). One should note, however, that Roma ethnicity is not a particularly important predictor of who the losers are, education is a much more important factor. The market played a critical role in picking who the losers will be. It is the bottom of the society in terms of education and labor market performance who complain about deteriorating living standards, or who were not ‘poor’ in 1988 and became poor in 2000, thus were ‘downwardly mobile.’ The demographic factors, which according to earlier sociological studies was so important in identi- fying who were the poor under socialism does not play much of a role, single motherhood is barely significant, though Roma ethnicity has about as much explanatory power as the employment status of the head of the household (Table 4.5 in Ladanyi and Szelenyi). There is clearly a shift to ‘achievement’, the market measures people up in terms of their ‘human capital’ and unless the social safety net operates punishes those who are poorly endowed with human capital. This can be an important finding. We know that in 2000 Roma and single mother households – even after we control for ‘class’ – twice as likely to be poor than others. The relatively weak effect of ethnicity and single motherhood in explaining who between 1988 and 2000 the losers were suggests that Roma and single mother households were already among the poor by late state socialism, hence neither racialization nor feminization of poverty is the result of transition, it is more an ‘inherited source’ of social inequality. This would be a surprising conclusion we could draw, since it is possible to identify mechanisms, which might be responsible for marketization to create racialized and feminized poverty. The most important such mechanism would be the deregulation of the labor market. Socialism operated an economy of shortages on the labor market as well, hence it produced ‘excessive demand’ for all labor, including the labor of Roma and mothers of small children. There was near full employment among Roma and given the reasonable availability of childcare institutions a high level of employment by mother with small children, including single mothers. It is conceivable that a more deregulated labor market creates surpluses of labor and the first to be dumped will be Roma. Marketization also undermines childcare provisions making it difficult to women with small children, especially single mother to seek gainful employment. And exclusion from the labor market – after low levels of education – is an important source of poverty. It is arguable though that the labor market mechanism does not affect single women or Roma ethnicity more than others, it works through education in both instances and therefore neither racialization nor feminization was aggra- vated during the transition period.

63 3. Making sense of re-emergent cross-national divergences: long duree; initial economic and political conditions; government policies and different strategies of transition

The comparison of Tables 2.1, 2.2 and 2.3 is very instructive. It shows that the six countries we studies did not diverge right away after the fall of communism, the major changes took place after 1993. We are inclined to use this as evidence that the divergent conditions in year 2000 cannot be therefore simply attributed to the differences in the initial level of economic development. In these respect the countries were close to each other, stayed reasonably close during the first few years of post-communist transition, but they handled the challenges of transition differently. Thus we have at least some evidence, that post-communist economic policies made a difference. Countries were not on an over-determined path. Furthermore the data also suggest that neo-liberal reform, while its costs are also prohibitively high proved historically a better way to proceed that in neo-patrimonial systems. The better performance of the Central European countries in comparison with the East Euro- pean countries can be attributed to a number of factors.

1) Initial conditions There are a number of features in the ‘initial conditions’ of Central European countries which can be responsible for their relatively better performance. Geographic proximity to Western markets is one which comes to mind immediately. Hungary and Poland are close to EU markets, linked with better roads and railway links thus they are more attractive for foreign investors. One can argue that once Central Europe absorbed abut as much DFI as it can capital will move further East and will reduce the newly created gap between Central and Eastern Europe. There was a difference within these two sub-regions in the level of economic development. While there was some convergence in this respect between 1945 and 1989 enough difference remained, therefore the somewhat more affluent Central European countries found it easier to ‘bite the bullet’ and to implement shock therapy. Eastern European regimes tried it, but since they lived below the threshold, which would make the pains of shock tolerable they had to give in to political pressures and soften the reform measures. Finally there are also differences how far reform progressed prior the fall of communism. Re- form communism may have paved the road to further faster reform in countries like Poland or Hun- gary and absence of prior reform may hold back the reform process.

2) Long duree It is of course not clear how far one has to go back to find the proper ‘initial conditions’. Many of the immediate initial conditions were rather similar in the Baltic states to Russia or the Ukraine, nevertheless the Baltic States followed a similar trajectory than Central Europe. Slovakia at least in terms of no prior reform resembled more Romania or Bulgaria than Poland or Hungary, nevertheless it appears to be firmly in the Central European group. Hence it is not inconceivable that there is a longer term historical determination, such as democratic traditions, strength of middle class, or civil society, or even religion. Why Yugoslavia breaks along the lines of religious cleavages and why in one considers now the Baltic States as part of Central Europe the divide between Central and Eastern Europe is really a divide between Western and Eastern Christianity?

64 No question about it, initial conditions, even long duree factors do play a role. Nevertheless, what needs an explanation is why the process of divergence begins after a long epoch of convergence. Initial conditions and long duree cannot explain BOTH convergence and divergence.

3) Government policies and strategies of transition matter and are consequential The convergence among countries between 1945 and 1989 and the divergence during the 1990s suggest that governments have a certain degree of freedom in choosing their transition strategy and depending what strategy they choose they can do better or worse. In retrospect the Czech Republic pursued different policies than Poland and Hungary during the first half of the 1990s and it did so probably for the worse. If the Chinese way was not an option in the post-Soviet world than at least as far as poverty is concerned it appears the least damaging strategy was the reasonably consistent adaptation of neo-liberal policies. The main reason for this is foreign investments – foreign capital might be more attracted to business environment, which was created by liberal reform. The main source of economic dynamism in European post-socialist capitalism so far was foreign investment and arguably dynamic economic development is a necessary even if not sufficient condition of poverty reduction.

65 Chapter 3 POVERTY UNDER POST-COMMUNIST CAPITALISMS

In Chapter 2 we reported on the social costs of the transition from a redistributive to a market economy. When socialism was crumbling few anticipated that the costs will be so high and the circle of losers so broad. Nevertheless what we saw in the previous chapter arguably was a price what had to be paid. Looking carefully where post-communist societies are in year 2000, thus 12 years after the collapse of communism will help us to begin to develop a theory what will be the nature of poverty once post-communism crystallizes into a system or even into multiple systems, which will tend to re- produce themselves. Many commentators expected that with the fall of communism a ‘new poverty’ will emerge. Most of these commentators agreed that poverty under socialism was a life cycle phenomenon (Ferge, 1980; Bokor, 1987; Kolosi, 1987). People with many children fell below poverty line when they had to cater for their children, but as kids grew up and left they moved out of poverty as well. People may have ended up in poverty, when they were ill and if they recovered they may have moved out of poverty. Full employment of all (including near full lifetime employment of women and Roma) was a mechanism, which prevented that people could stay below the poverty line all their lives. ‘New poverty’ implies not only a growth in the volume of poverty, but also a new quality of poverty. High level of poverty may be temporary anyway, and once dynamic economic growth takes place at least ‘absolute poverty may decline, but the nature of poverty may have changed for good, the importance of demographic factors might have declined and was replaced by structural forces, such as unemployment or race. In this chapter our task is to explore who are the people who become the ‘new poor’? It is reasonable to anticipate that with a transition from redistribution to market, a move from a socialist rank order to a capitalist class stratified society achievement hence factors such as education will play a greater role. But gender an ethnicity might very well counter-act this tendency towards ‘achievement’ or ‘class’ based determination of poverty. The fall of communism also coincided with trends of reinforcement of patriarchy and surge in nationalism, even racism. In many countries during the transition to market economy female unemployment rates were higher than male unemployment rates and there has been a trend in all countries for women to drop out and stay out of the labor force in larger numbers than men do. This may be by ‘choice’, women may opt to stay at home to take care of children and husbands and may be also enforced by increasing gender segregation on the labor market. Furthermore there has been an increase in out-of-wedlock birth. This again may be by choice, thus some of those birth may occur in families where the couple decides against marriage as a life style choice. But it is not inconceivable that some of the new out-of-wedlock birth may be the result of mothers abandoned by the poverty-stricken fathers of their children. At any rate, increasing out-of-wedlock birth can certainly be seen as the ‘material base’ for feminization of poverty.

66 Furthermore, it is received wisdom, that the structural changes, which took place with market transition, affected the Roma population more than other groups. According to studies of Roma in the region (Kemény, 1976; Tomova, 1995; Zamfir, 1995) the single most dramatic change in Roma life during the 1990s has been the sharp decline in the proportion of Roma in the labor force. According previous research Roma were the first the laid off and they tend to be the last to be rehired, if they ever will be rehired. Hence while market penetration may indeed changed the foundation of poverty from ascriptive, demographic criteria to achievement, such as education and employment, but gender and ethnicity may counter-act this tendency. Our main aim in this chapter is to test: 1) Is it indeed the case that the importance of demographic factors, such as rural place of residence or family size may not be less important in explaining who ends up in poverty under post- communist capitalism than education or occupational status? 2) How important will be gender and ethnicity in explaining post-communist poverty, are these factors a ‘match’ to the effect of class, or they just transmit, or modify the effects of education and employment? Finally in this chapter we also will explore what cross-national variations we find in the extent and in the determinant of poverty. One key hypothesis of this book is that post-communism is not a single destination. While of course all post-communist societies are ‘capitalists’, but might represent rather different types of capitalism and these differences may be highly consequential for the extent and nature of their poverty. We already saw in Chapter 3 that liberal forms of post-communism capitalism navigated rather differently from neo-patrimonial post-communist regimes. The task of this chapter is to explore to what extent this was only a feature of transition or to what extent the level and social determinant of poverty may settle in a different pattern in the two major European forms of post-communist capitalism. As Table 3.1 shows the characteristics of households, which are the best indicators to predict poverty are rather similar in the six societies we studied. After all, this is not that surprising, since these household characteristics were the results of several decades of paral- lel development. It would be a surprising result, however if why these similar characteristics were to produce rather different outcomes.

Table 3.1. Household characteristics in six post-communist societies, year 2000 50

House Num Share Share Shar HH HH hold ber ur- of e of pri- unem- size of ban sin- sin- mary ployed chil- gle gle scho or out dren mo- wo- ol or of thers men less workforce Bul- 2.8 .4 70.0 6.7 15.9 34.8 15.8 garia Hun- 2.5 .4 64.0 8.2 19.6 40.4 7.7 gary Pola 3.4 .9 69.0 6.9 12.0 27.6 14.7 nd

67 Ro- 3.0 .5 60.8 5.1 12.1 30.1 18.8 mania Rus- 2.8 .8 74.3 15.9 15.8 22.0 10.8 sia Slo- 2.8 .5 56.0 8.3 15.9 17.8 11.4 vakia

Thus in our analysis we will use the following independent variables: the number of children; urban residence; education and employment status of the head of household; households of single mothers and of single women (hence the columns of Table 3.1); Roma ethnicity and ‘country’ or to be more precise the type of capitalism (liberal versus neo-patrimonial). But what is poverty? How do we measure it? In this chapter we have access to the conventional measures of poverty: income or expenditure below a certain threshold. We could not use these indicators so far, since for historical analysis we could not generate retrospective income or expenditure data. But now our subject is now social condition at the time of our survey, in year 2000 we will utilize these indicators. These are regarded indicators of ‘objective poverty’ and distinguish those from ‘subjective poverty’ measure we used so far for historical comparison. The table below summarizes the type of measures used as ‘dependent variables’ in the analysis to follow.

Various measures of poverty:

Subjective: Objective: ‘the lived experience ‘income/expenditure of poverty’ poverty’ Absolute: (for cross Respondent reports Expenditure below $XX national comparison) experience of ‘hunger’ PPP per capita per day Relative poverty /re- Respondent believes Below YY% of median lative deprivation: household earns below per capita expenditure (for intra-national average income comparison)

The real question is not, which measure is ‘better’, more ‘reliable’, or more ‘valid’. They both have problems with reliability and validity. It is not obvious for instance whether respondents want to tell us what is their income or even expenditure, or even if they know what their expenditures are. Furthermore assigning to a household or an individual a ‘poverty line’ may mean that we call a household poor, or not poor though it may not experience it that way. There are similar problems with the subjective measures. The level of inter-subjective validity of reports by respondents both about absolute and relative poverty may not be great. What passes as ‘hunger’ for a certain respondent may not be felt or reported as hunger by another. When a respondent reports ‘below average income’ it is the most likely that the respondent does not know what ‘average income’ may be in that society at that point in time – thus how could such a response be reliable? Thus objective or subjective measures are not better or worse they are different and tell us different stories. Subjective measures inform us what the ‘lived experience’ of poverty is, while the objective measure identifies those of us who are ‘income/expenditure poor‘, and these two may not overlap.

68 As a result a household may be ‘income/expenditure poor’, though it may cope well, or it may not be poor in income/expenditure but may cope poorly therefore be in poverty. We will see for instance that income/expenditure wise rural households tend to be poorer than urban ones, nevertheless by the subjective measures the opposite may be the case. The same holds for Roma and for single mother households. Both Roma and single mother households ‘objectively’ tends to be less ‘poor’ (they receive various welfare payments) than subjectively (their crucial needs may not be met by a relatively higher cash income). We need therefore BOTH the subjective and objective measures, the first is likely to give us a better description of feminization and racialization of poverty, the second will be a better measure of class effects. And let’s now turn to the question of absolute and relative poverty. The notion of absolute poverty was under attack for a long time by sociologists (Townsend, 1962) and for good reasons. Ex- cessive emphasis on absolute measures, such as under-nourishment would prevent researchers of more affluent societies to identify in their societies those who are poor (even-though they may not be as poor as the poor in poverty-stricken countries). Therefore sociologists for good reasons often advocated relative measures of poverty, such as those who earn 50% or less of median income. These relative measures are indeed useful to identify, who are poor in a given society, but by definition they are not very useful in cross-national comparison. These ‘relative poverty‘ measures if looked at from the perspective of cross-national comparison tell us more about inequality than poverty. As we will see for instance if we measure poverty as the population, whose median expenditure is 50% or less of the median Poland appears to be a poorer country than Bulgaria, which not only contradict common sense but is also disconfirmed by other data available to us. No matter how sympathetic we are to the argument that poverty was not eliminated, but rather transformed in the more affluent countries, nevertheless we should be able to distinguish among poor those who are even poorer. Yes, there are poor people in Sweden as well, but it is also true that the poor of Bangladesh would love to be poor in Swe- den. For cross-national comparison therefore we need indicators of „absolute poverty“, such as measured by absolutely low level of incomes or expenditures or with our „subjective“ measure of absolute poverty, hence the „four questions“ and most importantly the proportion of people who report experience of hunger. Finally there is a lively debate among scholars who poverty and living standards in general whether income or expenditure is a better way to understand poverty. The World Bank in particular is committed to „expenditure“ measures of living standards (see World Bank, 2000). This is a reasonable position. If in survey research one asks questions about expenditures rather than incomes it is more likely that one can catch what the informal economy and self-provisioning may provide to the households. In our study we adopted the World Bank questionnaire in an abbreviated form. The World Bank developed a sophisticated methodology to measure expenditures, but this requires two lengthy interviews with each household. We could not afford to collect data in such a detail, so we reduced the expenditure measurement, which did fit our research purposes in close consultation with World Bank experts. Like the World Bank itself, we also collected data on incomes. In fact the difference between the income and expenditure measures in our survey proved to be rather margin- al. In this book we use the expenditure indicators. We do not want to minimize the importance of the difference of income and expenditure measures nevertheless in conceptualizing measurement of poverty in contrast with the „subjective“ measures they appear to be the variants of the same family. We believe the larger difference is not between income and expenditure, but between subjective and objective measures of poverty.

69 Our key hypotheses are: H1. We expect the demographic indicators to be weaker than class factors, such as education and employment status; H2. The explanatory power of class variables will be stronger in neo-liberal regimes than in neo-patrimonial ones; H3. In post communist society poverty will be feminized and racialized, hence while predicting poverty coefficients for single mothers/single women and Roma ethnicity will be significant and sizeable; H4. Feminization and racialization of poverty will be stronger in neo-liberal regimes, than in neo-patrimonial ones; H5. Cross-regime variations will be as strong (or stronger) as the effect of other variables; H6. Class will be a better predictor of income/expenditure poverty than race and gender, but we expect similar levels of poverty as a lived experience in single mother households; H7. Absolute level of poverty may be reduced by neo-liberal reform, but we expect more variation by individual country in relative poverty, or inequality. We begin our analysis with the data – subjective measures of poverty – we used in Chapter 1 and 2. First we present descriptive statistics and next we use some simple multivariate analysis to explore the social determinants of poverty. The most interesting finding in Tables 3.2 is the strength of the „single mother household“ variable. Those who report „hunger“ is well over-represented among single mother households and generally also among single women households. The ‘feminization“ seems to be as strong an effect than low education and that stands for all countries, for neo-liberals and for neo-patrimonals, though education is indeed – as expected in H2 – more important in the neo-liberal regimes as a predictor of poverty. Compare for instance the education effect in Bulgaria and Poland in Table 4.2: absolute poverty in Poland in the whole sample is 6%, but it jumps over 10% among those who do not have higher than completed primary school education. There is an education effect in Bulgaria as well, but here the national average of 16% poverty compares with 23% among the poorly educated. Also as we anticipated differences among the two types of regimes (H5) are substantial and occasionally greater then differences within countries. The most striking figure is reporting hunger in Bulgaria and Hun- gary: among Hungarian Roma the proportion of those who report hunger is only slightly higher (20%) than among the general population on Bulgaria (16%). In other words the non-Roma Bulgarians in Bulgaria are almost as poor as Hungarian Roma are.

Table 3.2.

70 Determinants of poverty – Very poor households (% of households reporting ‘hunger’ in 2000)

Amo Amo Amo Amo Amo Among Amo Amo ng ng ng ng ng house- ng ng all hous rural sin- sin- holds hous Rom hous e- hous gle gle where e- a e- hold e- moth fe- HH has hold hous hold s holds er male primary s e- s with hous hous school wher hold no e- e- educa- e s chil- hold hold tion or head dren s s less in out of labor force Bul- 16.1 15.1 11.6 32.2 21.4 23.2 30.5 66.3 garia Hu 6.7 6.8 6.3 9.8 10.6 10.0 12.9 21.1 n- gar y Pola 6.0 6.5 5.2 9.2 8.9 11.7 14.8 - nd Ro- 16.2 14.8 16.6 23.2 25.7 23.2 28.2 51.5 mania Rus 7.9 8.3 5.7 12.1 12.0 12.5 21.5 sia Slo- 4.9 4.7 4.8 9.6 4.4 13.5 18.1 - vaki a

The most interesting finding in Tables 3.2 is the strength of the „single mother household“ variable. Those who report „hunger“ is well over-represented among single mother households and generally also among single women households. The ‘feminization“ seems to be as strong an effect than low education and that stands for all countries, for neo-liberals and for neo-patrimonals, though education is indeed – as expected in H2 – more important in the neo-liberal regimes as a predictor of poverty. Compare for instance the education effect in Bulgaria and Poland in Table 4.2: absolute poverty in Poland in the whole sample is 6%, but it jumps over 10% among those who do not have higher than completed primary school education. There is an education effect in Bulgaria as well, but here the national average of 16% poverty compares with 23% among the poorly educated. Also as we anticipated differences among the two types of regimes (H5) are substantial and occasionally greater then differences within countries. The most striking figure is reporting hunger in Bulgaria and Hungary: among Hungarian Roma the proportion of those who report hunger is only slightly higher (20%) than among the general population on Bulgaria (16%). In other words the non-Roma Bulgarians in Bulgaria are almost as poor as Hungarian Roma are.

71 Finally as we expected the cross-country differences are more modest when we are looking at relative deprivation (Table A1.8) rather than absolute poverty (Table 3.2). But in this case the story other- wise is similar – very strong race effect and a feminization, which matches the impact of education. Do these findings hold up if we test our hypothesis in multivariate analysis? Table 3.3 and Ta- ble A1.9 are generally supporting the hypotheses we just evaluated, though they teach us some new lessons as well.

Table 3.3. Probability (odd ratio) that respondent reported experience of poverty (hunger) in 2000, GPS for six countries 51

Model 1 Model 2 Model 3 M1- M2 – class Femi- nization Demog- Number of children 1.167* 1.183** 1.085 raphy Rural residence .561*** .820 .834 Femi- Single mothers 1.753*** 1.802*** - nization Single women 1.851*** 2.035*** - Class Primary school or 2.844*** - - (head of less house- Unemployed or 3,481*** - - hold) out-of-labor force Liberal- Hungary, Poland .495*** .484*** .476*** ization and Slovakia Log likelihood -1955.1735 -2199.4039 -2226.1163

In Table 3.3 a strong feminization outcome is supported, both for single mothers and for single women. In the full model households, where single women live with their dependent children are twice as likely to report hunger than other households. Nevertheless, the multivariate analysis shows that „class“ when the chips come down tells a bigger part of the story than feminization. Low educa-

51 Created by Janatte Kawachi, June 18, 2002.

72 tion and employment status of the head of the household in itself has a massive effect (those households, where the head has only primary school education, are 2.8 times more likely to experience poverty than others). Furthermore as we build our models in a stepwise fashion we can see that adding the feminization variable improved significantly the fit of the models, but the improvement is much greater when we enter the education and employment status variables. This is to be expected. The coefficients for the class variables are grater to begin with and in most countries only about 8-9 percent of the households are composed of single mothers and single women. A much larger proportion of the households is affected by loss of jobs (not only unemployment, but also by early retire - ment or other forms of ‘voluntary‘ withdrawal from the labor force) hence this variable indeed should have a greater explanatory power of the overall level of extreme and absolute poverty. The model presented in Table 3.3 also offers strong support to H1 – the demographic factors are relatively weak. Number of children has only a weak effect. The coefficient of this variable is marginally significant and its size is modest. This is not quite the case for rural residence. Once we control for all of our variables rural residence becomes significant – but in sharp contrast to what we will see in the case of income/expenditure poverty in terms of lived experience of poverty those who live in rural areas are doing much better, they are about half as likely to report hunger than urban residents. When poverty is measured with income or expenditure, rural population tends to appear to be poorer than urban residents. The model also offers some support for H5: in neo-liberal regimes people report hunger less often than in neo-patrimonial systems even after we control for all the major factors, which may impact absolute poverty. If our dependent variable is relative deprivation (whether people felt that their family earned well below average incomes, Table A1.9) the story is similar, though there is one striking difference with Table 3.3: the cross-country differences are much bigger. People in neo-liberal regimes are almost four times less likely to think that their income of below average. This is a puzzling finding and may indicate that people in neo-liberal regimes are more likely to accept inequalities than in patrimonial regimes. Since neo-patrimonial regimes legitimates themselves with claims that they „shelter“ clients from pains, imposed by mark transition if it does not people challenge its legitimacy. Never- theless it is interesting how similar is the process of social determination for absolute poverty and relative deprivation for the subjective measures, since the extent of the two phenomena is so dramatically different. Nevertheless, much like in the case of reporting experiences with hunger, when the question is which households report relative deprivation we again see the relative weakness of demographic factors. In most models number of children and rural residence is not significant. Educa- tion has a robust effect, but feminization has also sizeable coefficients. And as we anticipated it: cross-country variation is even stronger, than variation by class or gender. People who live in neo- liberal regimes are four times less likely to report relative deprivation than people living in neo-patrimonial regimes (Table A1.9). In order to see the effects of race we have to look at Table 4.8 in Ladanyi-Szelenyi book. We run separate models for the three countries, where we created a Roma over-sample pooled the Roma over-sample (ROS) with the general population sample (GPS) and tested the power of race in predicting poverty. Roma if we only control for the demographic differences between Roma and non-Roma is seven times more likely to report hunger than non-Roma. When we only control ( Ladanyi-Sze - lenyi, 2006) for the impact of feminization it does not reduce substantially the race coefficient. This is not surprising, if we consider that given the strength of extended family among Roma the pro - portion single mothers and single women households is less than in the non-Roma population (see

73 Ladányi and Szelenyi, 2006)). As we enter, however, first education, next employment status into the models Roma ethnicity loses a fair bit of its explanatory power. In the full model the size of the Roma coefficient is about half of what it was in the base-line model – now Roma is „only“ four times more likely to report poverty than non-Roma. Education and employment status are also im - portant predictors of extreme poverty (coefficients are 2.7 and 3.3 respectively). Finally cross-country differences are tremendous if we include race in our analysis and they are likely to be bigger than they are if we only look at the general population. In Table 3.3 – where we did not consider the Roma over-samples – people in liberal countries were half as likely to experience hunger than in neo-patrimonial regimes. After we include the Roma over-samples – in Bulgaria and Romania people are almost 3 times more likely to report hunger than in Hungary (Ladanyi-Sze- lenyi, 2006). This tell us that Roma in Hungary is not only merely better off than Roma in Bulgaria and Romania, but there is also less difference between the Roma and non-Roma Hungarians than between Roma and Not Roma Bulgarians and Romanians. In terms of relative deprivation (Ladanyi-Szelenyi, 2006) it is quite astonishing how smaller the Roma effect is in comparison with absolute poverty. While Roma is 4.3 times more likely to report hunger than non-Roma they are only 1.9 times more likely to believe that they earn below average incomes. This is indeed surprising, since gadjo tends to believe that Roma are „complainers“, and they believe that everybody is sucking their blood but our data do not support this stereotype. And now we can begin to look at „objective“ measures of poverty, to asses, whether the subjective measures we used so far are sensible at all and whether the differences between the subjective and objective measures are indeed those kinds of differences we hypothesized earlier in this chapter. Next we look at the ‘objective’ poverty lines as measured by various levels of incomes and expenditures, expressed in US $ converted by PPP (purchasing power parity calculations) or as 50% of the median income or expenditure, measured the same way in US $.

Table 3.5. Poverty rates – 50% of median expenditure and in PPP

Country 50% of median $2.15 PPP $4.30 PPP (Expenditure) expendi- expenditure ture Per equiva- Per capita Per equiva- Per equivalent adult lent adult lent adult Bulgaria 10.9 10.7 7.5 38.4 Hungary 9.3 10.8 1.8 10.8 Poland 12.1 14.3 1.7 8.6 Romania 18.1 20.0 11.7 30.2 Russia 14.3 14.6 16.9 54.1

Source: GPS only, created by Janette Kawachi, June 18, 2002.

In all the previous data we found Hungary to be rather similar to Poland and quite different from Bulgaria, Romania and Russia. This pattern is confirmed in Table 3.5 where poverty lines are measured in terms of per capita incomes or expenditures. The clearest picture is presented if $4.30 PPP per capita expenditure per equivalent adult is used as the „poverty line“. In this case the proportion of population under poverty line is 9-11% in Poland and Hungary, while it is about 30-50% on the

74 other three countries. Table 3.5 shows one striking difference from the ‘subjective’ indicators, namely Bulgaria and Russia swap places at the bottom of societies. While in Bulgaria many more people reported hunger than in Russia, when expenditures are measured in monetary terms Russia is significantly poorer than Bulgaria. In Bulgaria 16% of respondent reported hunger, in Russia the same proportion was only 7%, if poverty line is set at $4.30 PPP of adjusted expenditures than in Bulgaria ‘only’ 38% falls below this line, while in Russia the proportion of the poor is 54%. We believe this indicates that the subjective measures might be more accurate than measures which use monetary terms. Russian are undoubtedly ‘income poor’, but given the ‘involutionary’ nature of the Russian economy, they may avoid extreme poverty (especially hunger) more since they have a more extensive system of self-provisioning. Earlier research documented (Southworth, 2006; Burawoy, 2001) that Russia did not dismantle the kolkhoz system, instead in a way it generalized it. Now even civil servants or industrial workers do not get paid (or their pay is in arrears for many months). They cope, since firms give access to them to what used to be ‘family lot’ (gardens) in the kolkhozes, hence they grow their own food and do not starve (see also Table 3.9). While the World Bank methodology using expenditures instead of incomes in measuring living standards in principle should resolve this accounting problem it may not do with sufficient precision (given the difficulty to estimate the volume and value of self-provisioning) 52 . Furthermore if we draw the poverty line as those whose per capita expenditure is 50% or less of the median than the cross country variation is quite different from the one measured with $4.30 PPP or the ‘ subjective ’ measure of ‘ reporting hunger ’ . If our aim is to predict in which country does more people have less than 50% of expenditure, than Bulgaria and Hungary has the lowest proportion of poor people (they have about 9-11% such households). Poland is closer to Russia and Romania stands out as the „ poorest “ country (the proportion of such households is between 12-18%). Since we interpret the „ relative poverty “ primarily as a measure on inequality this finding has important implications. The rate of poverty indeed seems to be highly impacted by the nature of the regime but that is not the case in levels of inequality. Bulgaria and Hungary seem to be the most egalitarian countries (data using GINI coefficients also show the same results), while the oth - er three countries are more unequal. After all, this is rather sensible. The structure of the economy and its dynamism has a lot to do with levels of absolute poverty. Indeed we gain support here for Depak Lal ’ s hypothesis. Together with findings presented already in Chapter 2 it appears to be true that more consistent liberal economic reform helps to reduce the level of absolute poverty, there is at least some „ trickle down “ in liberal, more dynamic economic systems. Inequality how - ever does not necessarily follow the same pattern. Lal speculated that inequality is increasing with economic dynamism (assuming that higher level of inequality may be necessary as an incentive to economic dynamism). Our findings from post-communist capitalism do not support this (though one can hardly expect from so few cases for such a brief time period to offer a good test of the Lal theory). What we seem to be finding here that levels of inequality may be influenced by country

52 When we adopted the World Bank methodology we indeed cut some of the questions about self provisioning, hence our data set is not quite as good as World Bank data usually are. The World Bank team in their report what they prepared from our data on Roma poverty – Poverty and Ethnicity by A. Revenga, D. Ringold and W. Tracy, March 6, 2002 – used various calculations to estimate the value of self-provisioning. We decided not to adjust the data, but to ac- knowledge that our expenditure measures to not sufficiently reflect self provisioning.

75 specific variables. It may be culture and politics, which has a greater impact what level of inequali - ty a society accepts rather then the characteristics of the economic system.

Table 3.6. Determinant of poverty – households at $4.30 PPP (adjusted) per capita daily expenditure or less (in %) 53

Bulgar- Hun- Polan Romania Russia ia gary d Among all households 38.4 10.8 8.6 30.2 54.1 Among households with 39.8 9.4 6.1 25.6 56.3 no children Among rural households 56.2 15.4 14.3 50.5 72.4 Among single mothers 37.7 12.6 11.4 39.5 57.9 Among single women 58.3 7.0 4.0 35.5 71.8 Among head of HH with 57.2 14.4 12.6 45.9 70.6 primary school or less Among head of HH who 54.9 26.1 21.9 51.4 69.8 are unemployed or out-of labor force Among Roma 73.9 33.7 - 56.6

If poverty is measured with the more conventional, monetary way (Table 3.7) the demographic factors have a stronger predictive power than in the case when we used our subjective indicators (Table 3.3). In this case number of children and rural residence is always significant and rural residence is about as strong as feminization. In general feminization and the basic demographic variables are about equal importance in predicting poverty in terms of expenditures. Class, however, keeps stealing the show. Education is not quite as important as it was when ‘reporting hunger’ was our measure of absolute poverty, but households where the head has only primary school education (or less) are twice more likely to have an expenditure below $4.30 PPP, than households with secondary school (and higher) education. And the extraordinary power of ‘regime type’ is demonstrated one more time and even more strongly than before. People who lived in neo-liberal regimes in 2000 were ten times less likely to have expenditure below $4.30 than people who reside in neo-patrimonial systems.

Table 3.7. Determinants of Absolute Poverty ($4.30 per capita daily expenditure, adjusted to equiv. adults) in five countries (Bulgaria, Hungary, Poland, Romania, Russia, GPS). Logit estimates, odds ratio 54

53 Created by Janette Kawachi, May 4, 2002. No household was below $2.15 daily adjusted per capita expenditure in Slovakia. 54 Created by Janette Kawachi, June 18, 2002.

76 Independent variables Model 1 Model 2 Model 3 Full model M1- class M2- feminization Demog- Number of chil- 1.380*** 1.340*** 1.210*** raphy dren Rural residence 2.112*** 2.594*** 2.589*** Femi- Single women 2.351*** 2.442*** - nization Single mothers 1.765*** 1.791*** - Class Elementary edu- 1.942*** - - cation and less Head of house- 2.014*** - - hold unemployed or out- -of-workforce Country Liberal countries .102*** .111*** .114*** Log likelihood -3393.6116 -3617.6351 -3686.2807

If poverty is measured with the more conventional, monetary way (Table 3.7) the demographic factors have a stronger predictive power than in the case when we used our subjective indicators (Table 3.3). In this case number of children and rural residence is always significant and rural residence is about as strong as feminization. In general feminization and the basic demographic variables are about equal importance in predicting poverty in terms of expenditures. Class, however, keeps stealing the show. Education is not quite as important as it was when ‘reporting hunger’ was our measure of absolute poverty, but households where the head has only primary school education (or less) are twice more likely to have an expenditure below $4.30 PPP, than households with secondary school (and higher) education. And the extraordinary power of ‘regime type’ is demonstrated one more time and even more strongly than before. People who lived in neo-liberal regimes in 2000 were ten times less likely to have expenditure below $4.30 than people who reside in neo-patrimonial systems. The effect of ethnicity is substantially lower if the measure of poverty is a monetary one, rather than a substantive one (such as reporting hunger, or feeling of relative deprivation). While we used such subjective and substantive indicators the effect of Roma ethnicity was about as strong as the effect of education both at absolute and relative poverty Ladanyi-Szelenyi, 2006). Now when poverty line is established in monetary terms class is the most important determinant, the importance of ethnicity is much reduced. This might mean that Roma is a ‘welfare class’, Roma households receive various transfer payments, hence their poverty is better measured in terms of low quality housing, hunger and frustration rather than by the monetary level of their expenditures. For example in Bul- garia 47% of Roma households received child allowances (while only 22% of all households receive such transfer payment). In Hungary the same figures are: 65% for Roma households and 25% of all households. In Romania: 66% of Roma households, 38% for all households. For social assistance and unemployment benefits we can detect the same trend (see Revenga, Ringold and Tracy, 2002, and Ladanyi-Szelenyi, 2002). What are the differences in the various „coping strategies“ for households, who find themselves in poverty? To what extent can families rely on the welfare state and what are their chances that make ends meet with resources generated from the second economy? Much to our surprise there is little difference across countries in welfare institutions. About the same proportion of the population is eligible to various transfer payments in all countries. The only major outliers are: Russia in housing (there is still substantial public housing assistance in Russia,

77 while that was eliminated by 2000 in the other countries) and child allowances in Poland (Poland eliminated universal child allowance provisions, while the other countries retained it). Table 3.8 of course only describes the institutions of the welfare system and does not give an accurate picture of its functioning. Data in Table 3.8 describe only ’access’ and not actual transfers. The value of actual transfer may vary substantially in PPP and that has to be analyzed as well to understand how much of a coping strategy the welfare state can be for households trapped into poverty. As we already pointed out already in terms of access there are at least substantial cross-ethnic differences. Roma has been established firmly during the early years of post-communism as a ‘welfare class’, hence it is more dependent for its survival on transfer payments than other groups.

Table 3.8. Eligibility for Social Protection

Bul- Hun Pol Ro- Ru Slo- garia gary and ma- s- vakia nia sia Housing 1 8.2 5.1 9.1 7.0 43. 5.4 3 Child allowance 23.5 26.1 7.6 39.1 42. 27.9 3 Poverty assistance 7.8 7.3 6.1 3.8 2.6 10.2 Old age and disability 60.6 59.3 54.1 59.4 52. 47.6 2 Unemployment bene- 5.4 6.2 7.5 7.8 2.6 12.4 fits

Source: GPS only, created by Janette Kawachi, June 18, 2002. Notes: 1 Percent actually receiving.

Self-provisioning is substantial in all countries. In fact more people depend on self-provisioning than on the welfare institutions (and if we would calculate not only access, but also the extent of each coping strategy than self-provisioning is likely to be even more important for the general population). There are few outliers: in Russia many more people gather herbs, mushrooms, wood than in other countries, in Hungary the proportion of food consumed by the family which was produced by the households is smaller than elsewhere. The main findings: about half of the families (or more) cultivate some land and about 40% of the food consumed is self-provisioned (in Hungary only 28%). While by year 2000 transfer payments, the welfare system appears to be rather targeted (understandably with the exception of old age pension), self provisioning is more universal. Generally

78 the proportion of families which receive some transfer payments varies between 5% and 25% of the general population, the bottom half of the society depends on self provisioning. There is an interesting difference in race effect though. In self-provisioning it has just the opposite effect to what we observed in transfer payments. While Roma has more access to most forms of transfer payments than non-Roma, the opposite is true for most forms of self-provisioning (with the exception of ‘gathering’ – Roma tend to gather more, than non Roma, though they are engaged less in such an activity than Russian!) Roma cultivate less land than non-Roma and grow a smaller proportion of the food they consume than non-Roma.

Table 3.9. Self-provisioning strategies (% of Households)

Bulgar- Hun- Polan Roma- Rus- Slo- ia gary d nia sia vakia Cultivate a garden 44.0 44.4 38.4 42.2 65.3 60.1 Cultivate any agricul- 28.9 12.2 15.9 30.6 17.8 14.1 tural land Average area of culti- 1.8 1.9 16.6 2.1 1.1 1.4 vated land Gather herbs, mush- 6.4 5.0 20.1 11.9 47.4 25.5 rooms, wood Avg. share of food 40.6 28.7 36.8 39.7 40.0 21.2 from own production Keep animals 39.3 29.3 18.0 48.2 21.2 31.9

Source: GPS only, created by Janette Kawachi, June 18, 2002.

While by year 2000 transfer payments, the welfare system appears to be rather targeted (understandably with the exception of old age pension), self provisioning is more universal. Generally the proportion of families which receive some transfer payments varies between 5% and 25% of the general population, the bottom half of the society depends on self provisioning. There is an interesting difference in race effect though. In self-provisioning it has just the opposite effect to what we observed in transfer payments. While Roma has more access to most forms of transfer payments than non-Roma, the opposite is true for most forms of self-provisioning (with the exception of ‘gathering’ – Roma tend to gather more, than non Roma, though they are engaged less in such an activity than Russian!) Roma cultivate less land than non-Roma and grow a smaller proportion of the food they consume than non-Roma.

Conclusions

These are our main findings: 1) We do find support for the hypothesis of relative weakness of the demographic factors. In- deed number of children or rural place of residence are often not significant and when they are sig-

79 nificant their coefficients are usual rather modest, are rarely larger than coefficients for the measures of feminization. 2) Class (short of regime effect) steals the show. In particular low level of education is a powerful predictor of who ends up in poverty, no matter which measure of poverty one uses. Surpris- ingly, once one controls for education exclusion from the labor market itself is not such a strong predictor of poverty, though it almost has a statistically significant effect though the coefficient is relatively modest). Most likely that education explains exclusion for the labor market as well. 3) Poverty is feminized and racialized under post-communism. Single mothers with children under the age of 16 are about twice as likely to be poor than others. Roma ethnicity is – next to education – as the second most powerful predictor of poverty. Roma tend to be 2-7 times poorer than non-Roma. Education explains a lot from Roma poverty, but not everything. Even after one controls for education (while such a control indeed reduces the effect of ethnicity) Roma tend to be much poorer than non-Roma. Unlike the United States there does not appear to be an interaction between racialization and feminization. Given the strength of Roma extended family Roma single mothers are more likely to be looked after by their family than non-Roma single mothers. 4) Regime type, however, is the best predictor of poverty irrespective what measure of poverty we use. People who live in neo-liberal regimes tend to be less poor than people who live in neo-patrimonial form of post-communist capitalism. This is true not only for absolute, but also for relative poverty. While inequality is not being reduced by economic growth facilitated by neo-liberal economic reform (level of inequality does not vary cross-system, it rather varies cross-countries, driven by political and/or cultural factors) it appears that in neo-liberal regimes people tend to accept great inequality more than in neo-patrimonial ones. 5) Coping strategies open to the poor vary little across countries or systems. Access to transfer payments and degree of self-provisioning is rather similar in all countries. The welfare system by year 2000 appears to be rather targeted in all countries, while self-provisioning is more universal. About 5-25% of the population receive some sort of welfare payments, while half survives by using some form of self-provisioning. Roma is different from the non-Roma in this respect. Roma has been constituted as a ‘welfare class’, it qualifies for more transfer payments than non-Roma, though it participates in less self-provisioning than non-Roma. While for non-Roma the major way of coping is self-provisioning, for Roma the major way of coping is welfare assistance.

80 CONCLUSIONS

This book summarizes what the „story“ is of our research carried out in year 2000 about poverty, class, ethnicity and gender in six European post-communist societies. What are the main findings? First, societies we studied were rather different in terms of the experience of poverty of people who are still alive today if they turned 14 years old before socialism. Hungary is remembered is suffering from the least poverty, Russia before 1949 was the poorest of all countries. Poles and Slovaks remember the pre 1949 times in rather similar – and in comparison with the Hungarians rather negative – ways. Bulgarians and Romanians, however, are surprisingly upbeat about their life before socialism, their responses resemble more the Hungarian ones, rather than those given by Poles or Slo- vaks. Memories of old Russians of the 1930s are puzzling. People who turned 14 during the peak of Stalinism and were still alive in 2000 remember the 1930s as times they were hungry and when the society they lived in was unfair and inegalitarian. Semi-feudal Hungary is remembered more favorably, not only a country, where there was less extreme poverty, but, which was also fairer. People remember socialism as an epoch in which poverty was gradually reduced (though in some countries the Stalinist epoch is recalled rather negatively and in all countries the later epoch of socialism is remembered more kindly). Differences remain across countries, there is less improvement in Romania than elsewhere, Russia is catching up, more not completely. The gap, however among countries in the recollection of people narrowed. Market reform dopes not hurt the trend toward decreasing poverty and increasing equality. More markets under socialism do not generate inequality and it certainly does not create poverty. Who were poor under socialism? All what we can tell, whether people who turned 14 reported in 2000 that their family experienced poverty when they were becoming young adults. Who were they? ‘Class’ does not seem to matter, or to matter much. Father’s education does not explain their poverty, but whether they lived only with their mother when they were 14 does in a big way. So does the number of their siblings and their Roma ethnicity but there are no cross country differences. Hence our initial hypothesis, that a) socialism was a process of cross-national conversion and b) under socialism poverty was life cycle and not ‘structural’ phenomenon.

Losers of transition We asked our respondents to recall how they lived in 1988, compare it with 2000 and to assess, whether the change was for better or worse. Our results are similar to the findings of other studies. In every country the epoch of transition is remembered as one of sacrifices. In year 2000 the majority of the people believed that they lived ‘worse’ or ‘much worse’ than in 1988 – between 55 to 85 percent of the respondent gave such an answer. We also asked our respondents to evaluate whether they experienced extreme poverty in 1988 and in 2000 – again we see a jump in such responses from 1 to 5 percent in 1988 to 5 to 15 percent in 2000. Hence it is reasonable to conclude that the proportion

81 of population who lived under the poverty line increased (depending on how such a poverty line is measured) by two to five-folds during the first twelve years of post-communism. There are, however, dramatic differences in this respect across countries, or ‘regime types’. The dynamics of pauperisation also differs greatly in cross-national comparison. We conducted a similar survey in 1993 and asked some of the same questions in the some of the same countries. In 1993 the percentage of the population who reported deterioration in their living standards in comparison with 1988 was almost identical in all countries. The growth of inci- dences of poverty during the first 5 years after the fall of communism was also similar. And let’s add to this that in people’s experience the previous 40 years of socialism was an epoch of convergence. While some differences in the level of economic development and living standards remained across those countries they shrank substantially. In 1988-1993 all societies took a dive, they took it from a relatively similar starting point and the speed of deterioration social and economic conditions was also similar. The comparison of the 1993 and 2000 data on the other hand tells us a different story. In some countries we see signs of consolidation even some modest improvement in living standards and in the extent of poverty. Thus for instance in 1993 Hungary 62% of the population reported a deterioration in living standards but in 2000 only 54% gave such an answer. In Bulgaria on the other hand the same data are: 69% in 1993 and 84% in 2000 – hence the ‘dive’ continued. Levels of poverty were not only low, but were rather similar across countries in 1988 but given the different dynamism of changes during the first 12 years, and especially during the past 5-7 years by 2000 the level of poverty is strikingly different in cross-national comparison. In Hungary for instance 11% of the population lived below the poverty line set by the World Bank (this is measured as $4.30 daily expenditure per ‘equivalent adult’), in Bulgaria the respective figure was 38% in year 2000. We tried to assess poverty in another, ‘softer’ way, so we asked people whether they suffered from hunger in 2000 (‘Did you go to bed hungry last week, since you could not afford to buy food?’). 7% of the Hun- garians and 16% of the Bulgarians gave us such a response. Which countries experienced stabilization and showed lower levels of pauperisation and which continued the decline and achieved very high levels of poverty by 2000? Hungary, Poland and Slovakia constitutes the first group of countries, while Bulgaria, Romania and Russia belongs to the second group. This poses some intriguing question: a) Why do we see a period of divergence after 1993 when during the previous 40-45 years all countries in the region were on a convergence trajectory? b) Is the continued deterioration of the social conditions in Eastern Europe (Bulgaria, Romania, Russia), just a temporary phenomenon and once they bottomed out they will ‘catch up’ first with Central Europe and eventually with the EU or do we see the making of two different capitalist ‘destinations’? Survey data, collected at one or two time points are not sufficient to answer such questions, but our data call for the formulation of hypotheses along these lines. One might argue that the difference between Central and Eastern Europe is geographic and possible historical, cultural and what government policies were pursued during the last decade or so is either irrelevant or ‘over-determined’ by history and geographic location. Hence the Central European countries were economically more developed to begin with and being closer to Western markets understandably their performance was better too. The East European countries faced the challenges of transition at a lower level of economic development and given their distance from the European markets it may take more time for them to ‘turn around.’ West European and US capital once it absorbed Central Europe will move further East and generate similar economic dynamism it has been generating since the mid-1990s in

82 Central Europe. One may add to this the historical dimension: Hungary and Poland were reform communist countries, hence they started the reforms much earlier than the countries further East that should help their economic dynamism. While this is an intriguing set of arguments it would be difficult not to see that in the two regions of post-communist Europe the transition process was rather different, both in terms of the speed of transformation and the nature of the emergent new institutions. In Central Europe the neo-liberal reforms were not only implemented faster, but also with more consistency and as a result by the end of the 1990s the institutions of the market, including the legal and political infrastructure (procedural law, rational accounting and banking, stable democracy and free media) which has an ‘elective affinity’ with a market economy were more developed. In the Eastern region of post-communist Europe, while neo-liberal reforms were also attempted they were often compromised and more survived from the paternalistic patterns of state socialism. The important role barter or self-provisioning plays for instance in the Russian economy is a good example of this. Arguably therefore the divergence may not be only temporary and may not be simply the outcome of differences in the ‘initial conditions’. What we see is arguable the making of two different ‘regime types’ of capitalism, the first we may call neo-liberal (Hungary, Poland, Slovakia), given its emphasis to free markets and invisible hand and the second neo-patrimonial (Bulgaria, Romania, Russia). Governments in neo-patrimonial regimes often legitimate themselves with populist policies, they pursue slower change, and the regimes justify this with the needs to buffer the population from the pains of the transition. If such a distinction makes sense at all our finding might speak to some of the more important policy debate surrounding post-communist ‘transformation’. If socio-economic development in post- communist Europe during the past 12 years were not ‘over-determined’ by the initial conditions and geographic proximity/distance, but government policies also mattered than our data offers support to those who argued against gradualism and suggested that neo-liberal reform while it may be painful to begin with it will at least on the long run decrease the pain. There indeed is support for the idea in the data that liberal reform is likely to support economic growth and its results may to some extent ‘trickle down’ and ease poverty. There is no reason, however, for ‘market triumphalism’. The social performance of neo-liberal regimes are only impressive in comparison with the performance of neo-patrimonial system. After all in Hungary in year 2000 still 54 percent of the respondent believed that their living conditions deteriorated in comparison with 1988 – a rather devastating assessment. And the situation in Poland is even worse. Who are those who see themselves as the losers, who report deteriorating living standards 12 years after the fall of communism? If we now bracket the cross-national differences (they are the biggest ones – people in neo-liberal regimes are four times less likely to report declining living standards than people in neo-patrimonial systems) than education steals the show. Households with low levels of education are almost three times more likely to be among losers than other households – there is no other factor, which comes near to this one. Much to our surprise even Roma ethnicity has a weaker effect that education. The Roma in Bulgaria, Hungary and Romania is only one-and-half times more likely to see themselves as losers than non-Roma. Hence social determination of poverty when the respondents turned 14 (for most of them that was during some epoch of socialism) and social determination of who reported worsening conditions between 1988 and 2000 are drastically different. During socialism poverty is determined by demographic factors, such as number of siblings of the respondent, when he/she was 14, whether the

83 respondent lived only with his/her mother and the respondent Roma ethnicity. Losers on the other hand are class defined: they are the least educated and demography, single motherhood does not matter and even Roma ethnicity is relatively unimportant. Hence there is a sharp shift from ascription to achievement, from demography, feminization or racialization to class.

Social determination of poverty in consolidating post-communist capitalist systems Who are the people who are below the $4.30 World Bank poverty line? Who are the poor of post-communist capitalism? We seem to know that the extent of poverty increased substantially in comparison with late state socialism, where extreme poverty was relatively rare, due mainly to the practices of full employment. But did the character of poverty also change? Did post-communism create a ‘new poverty’? Many commentators suggest: it did. Earlier research available to us indicates that poverty under state socialism was mainly a life-cycle, demographic phenomenon. The single most important predictor of poverty was number of children. Large families, while children were dependent tended to be rather poor, but as children entered the labour market they moved out of poverty. So what could the ‘new poverty’ of post-communism mean? It is reasonable to accept that number of children will not be the major predictor in a market economy. Education and labour market performance, hence achievement rather than ascription will tell us who falls below the poverty line. Thus poverty will be a structural phenomenon, which will not necessarily go away with changes in life cycle. One carries inadequate education and resulting poor labour market performance with it for all his/her life. Our data offers qualified support to the hypothesis that the determination of poverty may have shifted from ascription to achievement with market transition. The most powerful variable to predict who falls below the World Bank poverty line is again the regime type. People who live in neo-liberal regimes are ten times less likely to be below the poverty line (when in the measurement of the poverty line the value of expenditures was adjusted to the differences in purchasing powers). Cross-country differences in poverty rates are generally greater than intra-country differences. This is almost true for Roma ethnicity. For instance in Hun- gary 7% of the non-Roma and 21% of Roma households reported extreme poverty, in Bulgaria the same figures are 16% for non-Roma and 66% for Roma! Hence Hungarian Roma does not live much worse, than non-Roma does in Bulgaria. Nevertheless there are important intra-country differences as well in the social determination of poverty. In line with the theoretical expectations outlined earlier education is the most important predictor of poverty. Households with low level of education are 4-5 times more likely to be below the World Bank poverty line than other households. Labour market performance in itself is not that important. Those households, where the head of the household is unemployed or is out of the labour force are more likely to be poor than other households, but this is no match to the education effect, probably because education itself explains poor labour market performance as well. As expected by our theory number of children has a relatively modest effect and once one controls for education the explanatory power of Roma ethnicity is greatly reduced, though even after one controls for education Roma will be twice as likely to be poor than non-Roma. Single mother households and single women are also about twice as likely to be under poverty line than other households, hence the effect of gender is about as strong as the effect of ethnicity. Thus if it is true that under socialism the number of children was the major predictor who fell below poverty line than post-communism did produced a ‘new poverty’, where number of children is secondary and low level of education predicts who will be poor in post-communist capitalism. Never-

84 theless, this is far from a full swing from ascription to achievement. While education indeed is the strongest factor poverty is also racialized and feminized in post-communist Europe. After one controlled for education single mother households (and their proportion is on the rise as well) and Roma are still about twice more likely to be below the World Bank poverty line. I would like to draw attention to the poverty of single mother households. While Roma poverty has been studies a lot the poverty of single mother households did not receive much attention. I would like to emphasize that there is a triangle of social determination of poverty under post-communism: education-ethnicity-single motherhood. One of our initial hypothesis was that feminization and racialization of poverty occurs during market transition and it is likely to be more pronounced in neo-liberal rather than in neo-patrimonial regimes. Our data do not support this assumption. It appears that poverty was already feminized and racialized during socialism hence neither single mothers, nor Roma were not among the biggest losers of transition. They were sufficiently poor during socialism, hence for them to be impoverished faster than a rapidly impoverishing society was not conceivable. It is true, nevertheless, that despite the increasing importance of low level of education and inadequate labour market performance in explaining who ends up as poor poverty during post-communist capitalist systems is also feminized and racialized, though the gap between single mother households and Roma on the one hand and the rest of the society on the other hand may not be greater in post-communist capitalism than it was under state socialism. As we pointed out the strength of Roma ethnicity is greatly reduced as we control for education, but it does not disappear. Both components of this statement are important. First, it is clear that improvement of educational opportunities for Roma is an important vehicle to reduce Roma poverty. On the other hand, it is also clear, that education in itself will not do the trick – once educational inequalities were eliminated substantial inequalities between non-Roma and Roma would remain. In particular Roma employment deserves attention, well beyond the question of equal educational opportunities. In the triple determination of poverty – education-ethnicity-single motherhood – there is an additional unique feature of post-communist societies. While in the US we expect an interaction between ethnicity and single motherhood as predictors of poverty, in Central and Eastern Europe – given the strength of extended Roma families this is not the case. Roma unwed mothers are much more likely to live with the father of their children and if they are abandoned by their partners they are likely to live with other kin, hence less exposed to risks of poverty attributable only to single motherhood.

How do people in poverty cope? To what extent can they rely on welfare institutions and to what extent do they survive by self- -provisioning? In our study we looked both at access to transfer payments and self-provisioning, two complementary mechanisms of ‘coping’. Surprisingly the structure of both of these ‘fields’ are rather similar across societies. The major transfer payment (excluding pensions) is child allowance, which provides transfer to 25-40% of the households. Social assistance and unemployment benefits are available to another 10 or so percent. The welfare system is rather uniform across these societies and typically it is rather selective, target - ed. The structure of self-provisioning is also similar. But roughly about half of the households relies on self provisioning when it comes to food, hence self-provisioning is a non selective system, univer- sally available to those who end up in poverty. Ethnicity, however, cross-cuts these trends. Roma is

85 much more likely to receive transfer payments than non-Roma. Almost twice as many Roma family receive child allowance than non-Roma households and they receive 2-3 time more often transfers in forms of social assistance and unemployment benefits than non-Roma families. In self-provisioning the opposite is true: Roma is half as likely to be able to provide for themselves than non-Roma. Post-communism led to a massive increase in poverty, but the extent and persistence of this poverty varies a great deal across regime types. Neo-liberal regimes show lower levels of poverty than neo-patrimonial systems. While during the past 5 years in the former ones there was some mod- eration in poverty, in neo-patrimonial countries the extent poverty increased. The shift to market economy happens with increasing returns to education, therefore those with low education tend to perform poorly on the job market and they are the most likely to end up in poverty. But the most important finding of our study is that there is a triple determination of poverty under post-communist capitalism. The effect of class (measured with education) is complemented by the effects of ethnicity and single motherhood. Education is twice as important as ethnicity and single motherhood, but both Roma and single mothers – after we controlled for education – are still about twice as likely to be poor than other groups. With market transition criteria based on achievement may have gained grounds but ethnicity and gender remained strong predictors of poverty.

86 LITERATURE CITED

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90 Appendix 1 STATISTICAL TABLES

To Chapter 1

Table A1.1 Experience of relative deprivation 55 at age 14 by cohort and by country (general population sample)

Coun- Cohort Extent of relative deprivation (in Alto- try %) gether Below Aver- Above aver- 100.0% average age age (N) Bul- Pre-so- 50.5 42.0 7.5 226 garia cialism Stalinism 44.5 49.0 6.5 232 Social- 19.0 58.5 22.5 374 ism Hun- Pre-so- 38.4 52.7 8.9 296 gary cialism Stalinism 40.8 54.3 4.9 145 Social- 17.1 74.6 8.3 388 ism Poland Pre-so- 50.8 42.6 6.6 158 cialism Stalinism 43.9 45.0 11.1 143 Social- 21.5 64.5 14.0 508 ism Roma- Pre-so- 37.8 43.6 18.6 230 nia cialism Stalinism 47.1 40.1 12.8 201 Social- 22.1 56.5 21.4 436 ism Russia Stalinism 58.1 35.5 6.4 829 Social- 17.4 64.8 17.8 1,256 ism Slo- Pre-so- 52.7 43.0 4.3 208 vakia cialism Stalinism 35.5 59.6 4.9 159 Social- 17.5 74.5 8.0 455 ism

Table A1.2 People who reported that their family earned below average (and well below average) incomes when they were 14 years old (%) of they turned 14 before 1988

Amo Amon Amon Among Among Amo ng all g g those those those ng re- those who who whose fa- Roma

55 “ „Far below average” “ and “ „below average” “ income was coded as “ „below average”.“. “ „Far above average” “ and “ „above average” “ income was coded as “ „above average”.“.

91 spon- with were lived ther had dents four born in only primary sib- rural with school ed- lings areas their ucation or or mother less more Bul- 34.6 47.1 42.5 53.9 41.8 54.0 garia Hun- 28.9 41.5 32.0 56.4 34.3 34.8 gary Poland 31.2 38.9 35.9 48.3 38.3 - Roma- 32.1 36.6 35.9 46.9 38.6 35.9 nia Russia 33.6 47.4 42.2 56.0 37.7 - Slo- 29.8 37.7 32.0 59.2 40.9 - vakia

Table A1.3 Probability (odd ratio) that respondent reported relative deprivation (household earned way below average income) when was 14 years of age, six countries, GPS, if respondent turned 14 before 1988

Model 1 Model 2 Model 3 Full M1 -- M2 - model femi- class nization De- Number of siblings 1.128*** 1.129*** 1.162*** mogra- Rural birthplace 1.070 1.046 1.292* phy Femi- Respondent lived 2.461*** - - niza- with mother only tion when 14 Class Father had primary 1.970*** 1.952*** - school education or less Mother had primary 1.869*** 1.873*** - school education or less Cohort Born before 1935 2.275*** 2.289*** 2.778*** Born between 1936 2.458*** 2.473*** 2.761*** and 1945 Coun- Central European .985 1.005 .963 try countries Log likelihood -1975.3703 -1985.2869 -2245.5156

To Chapter 2

Table A1.4 Experience of relative deprivation 1988 and 2000 (general population sample) 56

Country Years Experience of relative deprivation Altogeth- 1988 and 2000 er 100.0% Below ave- Average in- Above ave- (N) rage income, come, in % rage income, in % in % Bulgaria 1988 16.1 55.8 28.1 910

56 Created by Janette Kawachi, June 18, 2002

92 200 80.5 16.2 3.3 994 0 Hun- 1988 15.7 72.6 11.7 916 gary 200 44.2 50.1 5.7 946 0 Poland 1988 15.9 67.8 16.3 821 200 44.0 46.9 9.1 976 0 Roma- 1988 15.9 59.4 24.7 860 nia 200 68.7 27.0 4.3 1,046 0 Russia 1988 13.4 69.7 16.9 2,339 200 74.3 23.3 2.4 2,366 0 Slovakia 1988 8.1 83.1 8,8 845 200 44.5 49.0 6.6 990 0

Table A1.5 Mobility in and out of poverty, 1988-2000 57

Country Poor in 1988 Not poor in Never poor or All and 2000 1988 and moves out of (N) poor in 2000 poverty after 1988 Bulgaria 7.8 45.7 46.5 850 Hungary 4.2 14.7 81.1 887 Poland 11.1 15.6 73.3 698 Romania 14.3 30.6 55.1 839 Russia 24.9 48.6 26.5 2,185 Slovakia 5.9 9.8 84.3 779

Table A1.6 Households, which were downwardly mobile (were not poor in 1988, but reported poverty in 2000) 58 Cou Amo Amo Amo Amo Amo Head Hea Amo ntry ng all ng ng ng ng of d of ng pop- hous rural sin- sin- house hou Rom ula- e- hous gle gle hold se- a tion holds e- mo- wom has hold with holds thers en only is no pri- not chil- mary in dren school the edu- wor cation k- or less forc e Bul- 45.7 47.6 50.6 55.0 55.2 56.5 52.4 55.0 garia Hun 14.7 14.0 13.4 25.2 16.0 19.9 21.2 34.0 gary Pola 15.6 17.2 15.1 15.7 20.0 21.3 28.1 -

57 Created by Janette Kawachi, June 18, 2002 58 Created by Janette Kawachi, June 18, 2002

93 nd Ro- 30.6 29.1 29.5 42.4 27.6 35.0 43.9 44.6 mania Rus- 48.6 51.7 45.9 53.0 54.7 54.4 53.6 - sia Slo- 9.8 9.2 7.8 14.5 6.8 17.4 28.8 - vaki a

Table A1.7 Probability (log odds) that household was downwardly mobile (did not report poverty in 1988, but reported it in 2000), GPS for the six countries 59 Model 1 Model 2 Model 3 (full (M1- (M2 -– model) class) feminization) Demog- Number of chil- 1.022 1.014 .983 raphy dren Rural residence .776** .869 .872 Class Head of HH has 1.588*** - - primary school or less Head of HH not in 1.574*** - - labor force Femi- Single mothers 1.584*** 1.562*** - nization Single women 1.264 1.323* - Liberal- Hungary, Poland .195*** .200*** .197*** ization and Slovakia -2 Log likelihood - - -3561.4157 3391.164 3546.156 6 5

To Chapter 3

Table A1.8 Determinants of poverty – relative deprivation (% of household reporting ‘below and way below average income’ in 2000) 60

Amo Amo Amo Amo Among Amo Amo ng all ng ng ng house- ng ng house hous sin- sin- holds hous Rom holds e- gle gle where e- a holds moth fe- HH has holds hous with er male primary wher e- no hous hous school e hold chil- e- e- educa- head s dren holds hold tion or in out s less of labor

94 force Bulgar- 80.5 81.4 83.8 84.1 90.3 93.6 95.3 ia Hun- 44.2 45.0 54.5 48.4 54.1 70.6 69.7 gary Poland 44.0 45.5 53.1 64.1 66.2 68.4 - Roma- 68.7 69.9 78.6 83.7 80.3 77.5 86.6 nia Russia 74.3 77.2 79.6 82.3 83.3 81.9 Slo- 44.5 45.0 47.1 56.6 70.8 72.2 - vakia

Table A1.9 Probability (odd ratio) that respondent reported relative deprivation (well below average family income) in 2000, GPS for six countries 61

Model 1 Model 2 Model 3 M1-class M2-fFemi- nization Demogra- Number of children 1.066 1.056 .991 phy Rural residence .837 1.026 1.035 Feminiza- Single mothers 1.556*** 1.568*** - tion Single women 1.755*** 1.913*** Class (head Primary school or less 2.246*** - - of house- Unemployed or out- 2.581*** - - hold) -of-labor force Liberaliza- Hungary, Poland and .262*** .272*** .272*** tion Slovakia Log likelihood -4143.7578 -4450.8840 -4494.7045

Table A1.10 Determinant of relative poverty – households below 50% of per capita median expenditure 62

Bul- Hu Pol Ro- Ru- Slo- gar- n- an mania ssia vakia ia gar d y Among all households 10.9 9.3 12. 18.1 14.3 4.7 1 Among households 9.0 8.8 8.1 16.2 9.9 3.7 with no children Among rural house- 19.4 13.5 20. 33.7 29.1 7.2 holds 2 Among single mothers 12.8 9.9 14. 30.2 19.2 5.3 0 Among single women 11.2 7.4 6.0 24.2 10.5 8.0 Among HH with pri- 18.1 12.9 18. 31.7 19.0 11.7 mary school or less 7 Among HH who are 27.4 23.2 28. 33.9 34.8 8.9 unemployed or out-of 1 labor force

95 Among Roma 39.1 27.4 - 36.3 - -

Table A1.11 Determinants of Relative Poverty (below 50% of median expenditure, adjusted) in five countries (Bulgaria, Hungary, Poland, Romania and Russia, GPS). Logit estimates, odds ratio 63 .

Independent variables Model 1 Model 2 Model 3 Full model M1- class M2-feminization Demogra- Number of children 1.507*** 1.489*** 1.463*** phy Rural residence 2.949*** 3.579*** 3.539*** Feminiza- Single women 1.168 1.166 - tion Single mothers 1.589* 1.640** - Class Elementary educa- 2.026*** - - tion and less Head of household 2.989*** - - unemployed or out- of-workforce Country Liberal countries .661*** .655*** .642*** Log likelihood -2065.4797 -2280.7422 -2289.3441

96 IVAN SZELENYI

Poverty and social structure in transitional societies The First Decade of Post-Communism

Translator Georgy Hristov Editor Rumyana Boyadzhieva Proof-reader Kamelia Aleksieva Pre-print & Cover Kamelia Aleksieva Publishing College of economics and administration – Plovdiv, Bulgaria Print „Janet 45“, Plovdiv, Bulgaria

Plovdiv, Bulgaria November 2013

ISBN 978-954-92776-9-2