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6 Const. Pol. Econ. 5 (1995)

handle is hein.journals/constpe6 and id is 1 raw text is: Constitutional Political Economy, 6, 5-20 (1995) © 1995 Kluwer Academic Publishers, Boston. Manufactured in The Netherlands. Democracy, Dictatorship, and Transformation: A Proposal for a Constitution-Guided Systematic Change in Formerly Soviet Republics THOMAS APOLTE University of Duisburg, Department of Economics, 47048 Duisburg, Germany Abstract. A system transformation contains complicated social dilemmas and special-interest problems. Thus it is frequently suggested that democratic decisionmaking is inappropriate for introducing a market economy in the former socialist countries. In this paper I argue that this view rests on a nirvana approach, because it neglects the dynamics of authoritarian governments. It is shown that dictatorships tend to serve even narrower special interests than democracies and are therefore usually less likely to pursue a consistent transformation policy. However, a dictatorship could, under certain cultural and social conditions, have some advantages over democracies. But those conditions are barely present in the formerly socialist countries. Moreover, a dictatorship can by its very nature not be committed and cannot even commit itself to a certain public policy. Hence, there is only one instrument to mitigate social dilemmas in transformation countries: a set of constitutional rules. Some basic properties of a constitutional approach of system transfomation are introduced in the last section of the paper. JEL classification: D72, D74, P51 1. Introduction In Germany, ordoliberalism traditionally deals with those issues that in English-speaking scholarly circles are discussed under the label of constitutionalism or comparative analysis of economic systems. Following its most prominent founder, Walter Eucken, a more or less strong and at least in the long run indissoluble relationship is postulated between the political and economic system. Since ordoliberalism enjoys a broad acceptance among German economists this hypothesis has not been challenged for nearly forty years. In Hayekian thought, there is a similar hypothesis. In discussing the origins of German fascism and Soviet-type communism, Hayek argued that political freedom in a a society depends on a system of free markets. It should be understood however, that Hayek is concerned with freedom not necessarily democracy. For Hayek, democracy is a mere tool to secure freedom rather than a value in itself (Hayek 1944: 70-77). Also, the relationship between the economic and the political system as Hayek sees it is not one of mutual dependency but consists in a unidirectional impact of the economic system on the polity in general. The state's increasing involvement in economic affairs thus leads to a weakening of those socio-political institutions that are designed to secure individual freedom. Such a process could in Hayek's view well lead to the serfdom of a totalitarian state. In contrast to the Hayekian argument, the ordoliberal perspective assumes no specific direction for the dependency between the economic and political system, rather this rela- tionship is seen as one of mutual interdependency between two subsystems of a society. Hence, not only can a loss of political and personal freedom be the result of comprehensive

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