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Globalization and welfare state commitments in post-communist societies

ProQuest Dissertations and Theses, 2009
Dissertation
Author: Ting Jiang
Abstract:
This dissertation employs both quantitative and qualitative methods to explore welfare state commitment under globalization pressure in post-communist societies. Using times series design, based on the observations of 23 post-communist states from 1990 to 2005, this dissertation relies on data published in the World Development Indicators and Government Finance Statistics Yearbook to reveal a surprising finding: use of IMF credit is positively associated with welfare spending. This finding contradicts the consensus in the development and structural adjustment literature, which largely views policy-based conditional lending as a negative influence on receiving countries' welfare. Qualitative evidence on China and Russia's pension reforms further supports findings in the quantitative chapter: International Financial Organizations' (IFOs) involvement in policy guidance during the post-communist transition does not translate directly to retrenchment of welfare state commitment. This is because it is also in the best interest of the IFOs to maintain social safety nets in post-communist states. It is the best way to ensure a relatively stable social environment, which is the most conducive for obtaining higher financial returns from the loans distributed to facilitate the post-communist transition.

TABLE OF CONTENTS

Page

DEDICATION iii

LIST OF FIGURES v

LIST OF TABLES vi

ACKNOWLEDGMENTS vii

CURRICULUM VITAE viii

ABSTRACT OF THE DISSERTATION ix

CHAPTER 1: Introduction 1 Post-communist Transformation and 4 Welfare States Development

CHAPTER 2: Globalization, Welfare States, 9 and Communist Legacies

CHAPTER 3: Globalization and Welfare Spending Across 35 23 Post-communist States Data and Methods 45 Results 57

CHAPTER 4: Evolution of China and Russia’s Pension Systems 64 and Reform Attempts

CHAPTER 5: Pension Reforms in China and Russia 91

CHAPTER 6: Conclusion: Post-communist Welfare States 110 Commitment in the Globalization Era

REFERENCES 118

APPENDIX A: Comparison between Socialist and Western 126 Welfare States Using Esping-Anderson’s Welfare State Typology

APPENDIX B: Coding, Means, and Distributions for Dependent 127 and Independent Variables

iv

LIST OF FIGURES Page

Figure 1.1 Trend in use of IMF credit among 23 post-communist 23 states (1990-2005)

Figure 1.2 Trends in use of IMF credit in relation to welfare expenditure 24 among 23 post-communist states (1990-2005)

Figure 3.1 Government welfare spending as % of GDP in Central and 47 Eastern Europe (1990-2005)

Figure 3.2 Government welfare spending as % of GDP in 9 of the 12 48 Commonwealth of Independent States (CIS) (1990-2005)

Figure 3.3 Government welfare spending in three Baltic States (1990-2005) 48

Figure 3.4 Government welfare spending in two of the four successor 49 states of Yugoslavia (1990-2005)

Figure 3.5 Government welfare spending as % of GDP in two Asian 49 State (1990-2005)

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LIST OF TABLES Page

Table 3.1 Models of Internal and External Influences on 58 Welfare Spending

Table 3.2. Correlation Matrix 59

Table 5.1 Comparison of China and Russia’s Pension Systems 107 and Reforms

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ACKNOWLEDGEMENTS

I would like to express the deepest appreciation to my committee chair, Professor Feng Wang, who has been extremely supportive during my years in the graduate program. He encourages me to explore the less travelled path and has been my life mentor since my first day on campus. Without his guidance and continuous support this dissertation would not have been possible.

I would like to thank Professor Dorothy J. Solinger, who introduced me to Political Science, and whose expertise and enthusiasm in China has continuously fueled my own research interest. She has also been a great mentor and has supported me fully throughout my years in Irvine.

I would like to thank Professor David J. Frank, who has continuously supported my academic endeavors and inspired me with his expertise in globalization. I would also thank Professor Yang Su, who has been a good mentor and convinced me that I can do it. In addition, a thank you to Professor Catherine Bolzendahl, whose expertise in welfare states and time-series design has proven to be invaluable assets in helping with my dissertation research.

I also want to express my gratitude to UC Institute on Global Conflict and Cooperation (IGCC) and Center for Asian Studies at the University of California, Irvine. IGCC’s Dissertation Fellowship and three research grants from the Center for Asian Studies provided generous financial support for this dissertation project.

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CURRICULUM VITAE

Ting Jiang

1998 B.A. in English Language and Literature, Zhejiang University

2001 M.A. in Sociology, Texas Tech University

2003 M.A. in Sociology, University of California, Irvine

2009 Ph.D. in Sociology, University of California, Irvine

FIELD OF STUDY

Globalization and Welfare States

FELLOWSHIPS

2008 SAGE/Pine Forge Teaching Innovations & Professional Development Award ($500) ASA Section on Teaching and Learning in Sociology

2006-2007 IGCC Dissertation fellowship ($20,000) UC Institute on Global Conflict and Cooperation (IGCC)

2002-2006 Summer/Spring Research Fellowship ($10,700) School of Social Sciences, University of California, Irvine

2002-2004 International Peace Scholarship ($12,000) Philanthropic Educational Organization (P.E.O) Foundation

1999 Chancellor’s Endowed Fellowship ($3,000) Texas Tech University

RESEARH GRANTS

2004-2009 Research and Travel Grant ($2,934) Department of Sociology, University of California, Irvine

2004, 2005, 2009 Graduate Student Research Grant ($3,200) Center for Asian Studies, University of California, Irvine

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ABSTRACT OF THE DISSERTATION

Globalization and Welfare States Commitment in Post-communist Societies

By

Ting Jiang

Doctor of Philosophy in Sociology

University of California, Irvine, 2009

Professor Feng Wang, Chair

This dissertation employs both quantitative and qualitative methods to explore welfare state commitment under globalization pressure in post-communist societies. Using times series design, based on the observations of 23 post-communist states from 1990 to 2005, this dissertation relies on data published in the World Development Indicators and Government Finance Statistics Yearbook to reveal a surprising finding: use of IMF credit is positively associated with welfare spending. This finding contradicts the consensus in the development and structural adjustment literature, which largely views policy-based conditional lending as a negative influence on receiving countries’ welfare. Qualitative evidence on China and Russia’s pension reforms further supports findings in the quantitative chapter: International Financial Organizations’ (IFOs) involvement in policy guidance during the post-communist transition does not translate directly to retrenchment of welfare state commitment. This is because it is also in the best interest of the IFOs to maintain social safety nets in post-communist states. It is the best way to ensure a relatively stable social environment, which is the most conducive for obtaining higher financial returns from the loans distributed to facilitate the post- communist transition.

ix

Chapter 1 Introduction

The declining significance of communism is one of the most noticeable transformations at the end of the twentieth century. China’s moving away from a centrally planned economy, the collapse of the East European communist regimes, and the disintegration of the Soviet bloc and the USSR signify the arrival of the post- communist era. This unprecedented transformation curiously coincided with another historical juncture: the globalization process, which has swept through every corner of our human society. With the demise of a Soviet-centered international regime, post- communist societies found themselves either voluntarily or involuntarily pulled into the tidal waves of globalization, having to play by the rules in order to survive and prosper. Whether or not post-communist transition is directly triggered by globalization is debatable, its impact on post-communist societies is real. Globalization process interacts with remaining influences of the socialist era, creating new challenges for the capitalist transition, for example, post-communist welfare state restructuring. Growing up in socialist China, I had the extraordinary opportunity to witness China’s reform and later the transition from a centrally planned economy to a market economy. Among all the growing pains associated with this epochal transformation, I have been most concerned about the future of the socialist welfare system. Benefits associated with the universal welfare provision in urban China, for instance, free movies, and ice cream coupons, remain my fondest childhood memories. What average citizens are most concerned about during the capitalist transition is the impact of reform measures

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on the quality of their lives. The prospect of being thrown into the market without the support of a paternalistic government is scary 1 . Since the early 1990s, there has been increasing interest about the post-communist transition. The majority of the scholarship is focused on its economic and political dimensions, for example, the rebuilding of the market and the introduction of capitalism, as well as the establishment of democratic institutions. The social dimension of this transformation, especially the post-communist welfare state development has not received comparable attention. In addition, existing welfare state literature has largely focused on the experiences of advanced Western democracies. The institutional chasm between socialist and democratic regimes makes existing welfare state models and theories less powerful in explaining post-communist welfare state development. In addition, different diverse welfare state responses under globalization pressures make further exploration necessary. This dissertation examines globalization pressures from the International Financial Organizations (IFOs), primarily those from the World Bank and International Monetary Fund (IMF) as manifested in welfare spending commitment and policy formulation in the field of pension restructuring. The following questions will be explored throughout the chapters.

Research questions 1. Previous studies have only looked at advanced western democracies where the IMF exerts little influence on their welfare states development. In the post-communist era, does the IMF factor introduce a whole new field of study for the welfare states literature? Does the

1 Interview with laid-off state enterprise (SOEs) workers in Wuhan, China, August 2003.

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role of the IFOs like the World Bank and IMF reshape the way we think on welfare reforms in post-communist societies? 2. Does the role of the IFOs like the World Bank and IMF lead to different answers to welfare states development in post-communist societies?

Welfare states under globalization In the past two decades, significant scholarly efforts on welfare states responses to globalization have centered mainly upon the experiences of advanced Western democracies. Over time, two major arguments emerged from this debate: the “retrenchment of the welfare states” thesis and the “expansion of the welfare states” thesis. The retrenchment of the welfare states thesis highlights the tremendous pressure from global economic integration, which, according to this theory, translates into a dramatic shrinking of the size of government. 2 The resilience of the welfare states thesis challenges the pessimistic visions of capital dominance over labor and public policy formulation by arguing that politics and public opinion also matter. 3

One variant of the “retrenchment” thesis, which has been commonly referred to as the “efficiency” argument, states that welfare state expansion in the past reduced economic efficiency and competitiveness and thus became a source of major economic problems, including declining productivity growth and high levels of unemployment (Cerny 1997; Scharpf 1991). Another variant of this argument maintains that high levels of welfare state spending and a highly regulated labor market are incompatible with the

2 See, for example, Gilbert (2002) , Solinger (2003a) , Kaufman and Segura-Ubiergo (2001), Garrett (2001), Garrett and Nickerson (2001). 3 For discussion on how politics and public opinion shape welfare states development, please see Pierson (1996), Huber and Stephens (2001), Swank (2002), Cook (2007), Chapter 5, and Brooks and Manza (2007).

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new realities of a globalizing economy. This global uniformity 4 puts tremendous power in the hands of new “global politicians” who are willing to cut government spending and play by the new global rules of relentless efficiency (McMichael 1996: 32; Roberts and Hite 2007: 159). By the 1990s, more and more scholars had begun to challenge the conventional orthodoxy regarding the corrosive nature of economic globalization, since empirical evidences point to the expansion of the welfare state 5 . This trend was later observed by many scholars and was synthesized as the “compensation” thesis, which stood in marked contrast with the “efficiency” thesis by arguing that globalization does not represent a drain on global competitiveness (Esping-Anderson 1994; Garrett 1998), and that welfare state regains and acquires yet further positive externalities in the globalization era (Hay 2001: 52-53).

Post-communist transformation and welfare states development Since the 1990s, debates concerning post-communist transformation have largely focused on the following topics: the impact of the communist legacy, synthesized in the debate of whether capitalism is built “on the ruins” or “with the ruins” of socialist institutional structures (King and Szelenyi 2005: 38; Gerber and Hout 1996:7, 8; Campell and Pederson 2003); paths of transformation: shock therapy vs. incremental and path- dependent (Stiglitz in Polanyi 2001: xii; Lipton et al. 1990; Campell and Pederson 2003); issues concerning the beneficiaries of the transition: whether former elite/cadres gain or

4 Agents behind such global uniformity include owners and executives of transnational corporations and international banks; and those who run the multilateral organizations like the IMF, the World Bank, and the World Trade Organization (McMichael 1996: 32). 5 As early as 1978, Cameron reported a positive correlation between social expenditure and economic openness when studying advanced Western democracies (Camerson 1978).

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suffer from the capital accumulated in the previous redistributive economy (Nee 1989; Rona-Tas 1994; Gerber and Hout 1998; Walder 2003; Mason and Kluegel 2000:11); why the socialist system failed, and whether it can be saved (Verdery 1996; Szelenyi and Szelenyi 1994; Bunce 1999; Kaminski 1999); the state’s role in economic and institutional transformations (Polanyi 2001; Evans 1995; Bandelj 2004); and last, international influences and post-communist welfare policy formulation, including the global policy network (Deacon 2007; Haggard, Stephan, and.Kaufman 2000; George and Wilding 2002; Cook 2007; Inglot 2008). State sponsored cradle-to-grave welfare provision has long been the symbol and the most tangible form of socialist intrinsic superiority of the socialist system (Chow 2000:19). Socialist welfare state is in essence a form of social contract (Stiglitz in Polanyi 2001: xiv; Polanyi 2001; Haggard and Kaufman 2000: 2): “so long as citizens do as they are told they will have not a care in the world, because the party and state will see to everything” (Kornai 1992:57). Over the years, this contract contributed to the paternalist nature of the Communist state. Via that social contract, citizens continued to receive economic security, which in turn contributed to the social and political stability necessary for socialist industrialization. Even after the capitalist transition, many citizens continue to insist on the provision of services without realizing the extent to which these reduce net earnings (Haggard and Kaufman 2000: 5). All socialist states had mature welfare states constructed after the Russian model, in which states are the sole providers and financiers of welfare programs. The Russia model was characterized by universal coverage, eligibility and distribution of benefits via work organizations in a full-employment economy, a strong sense of entitlement to

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welfare programs by their citizens (Mason and Kluegel 2000:19; Cook 2007: 3, 194), free health care, education, and childcare, as well as heavily subsidized consumer prices, housing, food, vacations, and other cultural goods and services (Kornai 1992:54; Michra 2005: 69). While full employment and universal health care are typical in advanced western welfare states, consumer price subsides and food rations are features of rudimentary welfare states in less developed countries. Thus socialist welfare states have elements found both in advanced and rudimentary forms of welfare states. On what ground post-communist welfare states stand in this debate remains unclear. Post-communist states are peculiar in that free-market ethos co-exists with socialist legacies in various social institutions, particularly in social welfare systems. Post-communist states also differ significantly from industrialized western democracies in regard to macroeconomic stability and continuing crises of balance-of-payments 6 . That is why the majority of the post-communist states have turned to the World Bank and the IMF for policy guidance as well as for the much needed loans and credits to maintain sound balance sheets and continue macroeconomic adjustment. Many of the policy recommendations come as an integral part of the loan package from the World Bank and the IMF, commonly referred to as the Structural Adjustment Policies (SAPs).

Globalization and Post-communist Welfare State Development One of the globalization syndromes identified by Mittelman is the increasing penetration of domestic political economies by global phenomena (Mittelman 2000). Sassen, too, views globalization as a set of powerful rescaling dynamics that cut across

6 There are few exceptions. For instance Hungary and Slovenia’s transition to capitalism did not experience fiscal crises and did not borrow heavily from the World Bank and the IMF to maintain balance-of- payments (Haggard and Kaufman 2000).

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institutional size and the institutional encasement of territory produced by the formation of national states (Sassen 2006: 5-6, 13, 16). The collapse of communism coincided with the peak of globalization, creating a golden opportunity for global actors to shape the future of post-communist welfare states. This opportunity has been seized enthusiastically by international financial organizations like the World Bank and IMF, both of which have long been dominated by the liberal tendency. The consequences of the World Bank and IMF’s conditional lending have largely been viewed as negative in the development literature. In broad terms, conditional lending practices lead to the following consequences: first, national autonomy in policy- making was substantially curtained; second, countries experience high level of unemployment, reduction in wages, and elimination of consumer subsidies; third, curtailed social protections, public expenditures exacerbated inequality, poverty, and deterioration of living standards. This consensus, however, has been challenged by the quantitative evidence in chapter three, where welfare expenditure is shown to be positively associated with the use of IMF credit. This dissertation employs both quantitative and qualitative methods to examine post-communist welfare state development within the context of globalization.. Chapter two discusses conceptualization of welfare states and globalization, as well as the sources of international and domestic pressures on post-communist welfare development. Chapter three quantitatively examines the exogenous influence on domestic welfare commitment using a time-series design. Chapter five, which compares pension reforms in China and Russia, serves as a case study to further delineate welfare state development under globalization pressure at the nation-state level. Chapter five is a descriptive chapter on the

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evolution of China and Russia pension systems and reform attempts. Chapter six concludes the findings and proposes directions for future research.

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Chapter 2 Globalization, Welfare States, and Communist Legacies

The history of welfare state in Western Europe and the Untied States suggests that public programs that cushion individuals against the dislocation of the market have contributed to the political and social stability necessary for a capitalist economy to function effectively (Garrett 1998; Haggard and Kaufman 2000: 4). At the same time, it is also important to maintain a healthy amount of public spending, since size of government imposes serious limits to growth (Lindbeck 2000). This dissertation argues that successful welfare state reform is essential to the post-communist transition. It is also in the best interest of the World Bank and IMF to support social policies that ameliorate the social cost of transition, creating political and social stability to bring out best financial returns for their loans. The Bank made quite clear that: “the major thrust of our portfolio (in the transitional countries) consists of social sector lending. That is where it has to be to offset the terrible increases in poverty of the last few years’ (Wolfensohn 1997). Significant scholarship has dedicated to delineate the mechanism of the welfares development, including agents of reform (Haggard and Kaufman 2000), policy-making processes via the lens of new institutionalism (Muller 1999; Inglot 2008), and exogenous and internal influences on the reform (Inglot 2008; Cook 2007; Peet 2003; Haggard and Kaufman 1992). This chapter discusses competing conceptualization of globalization, models of welfare states, as well as major debates centering welfare states responses to international and domestic influences, particularly loans from the World Bank and IMF and communist legacies.

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Conceptualization of globalization The word “globalization” is a relatively new term which did not become popular till 1980s. Systematic exploration on global formation and interconnectedness, however, dated back as early as 18 th century, when Hegel discussed connections between disparate areas as well as the emerging consciousness of such connection (Eriksen 2007:1). Since Hegel, scholars, philosophers, and visionary revolutionaries have continued to enrich this debate on the development of human society characterized by the multi-level 7 , multi- faceted, interconnected of the world. Lenin and Luxemburg’s theory of imperialism, Andre Gunder Frank’s dependency theory, Rostow’s model of development, Immanuel Wallerstein’s world-system theory, represents this prodigious body of knowledge that pioneered the globalization debate and conceptualization. Scholars of all disciplines have attempted to capture the essence of globalization, which has been portrayed as fragmented, incomplete, discontinuous, contingent, and in many ways contradictory and puzzling process (Giddens 2000; Guidry et al. 2000). Earlier examples of such effort include Frobel and colleagues’ embryonic conceptualization of the “New International Division of Labor” (1980: 3) and Levitt’s coinage of the term “globalization,” (1983: 92). Since then scholarship of globalization has advanced considerably and four thematic clusters in the literature occurs: the world- system approach, the world culture approach, the global society approach, and the global capitalism approach (Sklair 1999: 143). These clusters represent the main dimensions of globalization: economic, political, and cultural.

7 Sassen (2006) used the world “multi-scaler” to describe different types of enclosure (e.g. nation-states, global cities, etc.) in the study of globalization.

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Regardless of which dimension globalization scholars examines, there exists a clear distinction between the definitions by exponents of globalization (also referred to as globalists/globalizers) and that of skeptics, represented by the world-system theorists.

Globalists’ globalization

Globalists underscore the epochal quantitative and qualitative changes in human society since 1970s. They focus on financial deregulation and the explosive growth of global financial markets over the last twenty-five years, and view globalization as an unprecedented process, creating fundamental transformation of all around the globe (Levitt 1983: 99; Mittelman 2001; Castells 1998: 336). It is widely believed among globalists that globalization is a deterministic and inevitable process which cannot be significantly influenced by traditional political institutions, including nation-states (Held and McGrew 2002: 118). Kenichi Ohmae’s borderless world (Ohmae 1999) and Thomas L. Friedman’s flattened world (Friedman 2007) are the examples of such discourse. According to globalists, globalization heightens the significance of transnational political problems, which create a growing sense of the common fate of humankind (Held and McGraw 2005: 118). In this line of literature, conceptualization of globalization emphasizes interconnections, or interdependence, a rise in transnational flows, and an intensification of processes such that the world is, in some respects, becoming a single place (Levitt 1983: 92, Tabb 1999:1; Berresford 1997: 1; Robertson 1992: 9; Porta et. al. 1999; Erikson 2007: 4).

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For example, Vic George and Paul Wilding, social policy specialists, view globalization as the increasing and uneven interconnectedness and homogenization of the world in economics, politics, and culture (George and Wilding 2002: xiv). David Harvey, a distinguished geographer and anthropologist, envisions globalization as “compression of time and space” (Harvey 1989, 1990: 29). Harvey’s concept of “compression of time and space” resonated with many globalization theorists. For instance, Roland Robertson defines globalization as “… a concept refers both to the compression of the world and the intensification of consciousness about the world as a whole” (Robertson 1992: 8-9). In a similar vein, Anthony Giddens defines globalization as intensification of worldwide social relations which link distant localities in such a way that local happenings are shaped by events occurring many miles away and vise versa (Giddens 2002). Mauro F. Guillén, too, portrays globalization as a process leading to greater interdependence and mutual awareness (reflexivity) among economic, political, and social units in the world, and among actors in general (2002: 236). Sassen’s conceptualization of globalization involves two sets of dynamics: explicit global institutions and processes like World Trade Organizations (WTO) and global financial markets; and the interactions between domestic and international/global processes, for instance, the implementation of certain policies in countries facing with enormous pressure from the International Monetary Fund (IMF) (Sassen 2006: 5-6).

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Skeptics’ globalization

Contrary to the globalists, skeptics maintain the stance that globalization has been over-exaggerated. World-system theories represent the epitome of this discourse. World system theorists approach globalization from holistic and historical perspectives and argue that globalization process is overstated (Wallerstein 1974, 2003; Chase-Dunn 1998; Arrighi 1994; Hirst and Thompson 1999; Wade 1990; Giddens 1990). They came to this conclusion based on several pieces of key evidence. First, international trade, integrated political systems, and standardizations of measures have existed for a long time. For instance, Arrighi (1994) argue that the financial expansion and capital accumulation during the 1970s and 1980s were not revolutionary, but rather a renaissance story, namely, successive global hegemonies in the order of Genoese, Dutch, British, and the U.S. Chase-Dunn (1998), too, argued that if globalization refers to intercontinental economic integration, then it is nothing new. Wallerstein explicitly treats the deluged discourse about globalization as a gigantic misreading of current reality which leads us to ignore the real issues and misunderstand the historical crisis within which we live (Wallerstein 2003). Second, there existed only marginal changes in trade-GDP ratios over the course of the 20 th century. The great transformations extolled by the globalists were not that impressive. Globalization thus belongs to the continuum of capitalist development and expansion starting as early as the 15 th century, constantly affected by cyclical fluctuations (Chase-Dunn 1998; Arrighi 1994; Wallerstein 1974, 2003). James Mittelman suggests using the term “accelerated globalization” to distinguish the present day globalization from earlier international trade and capitalism expansionist drive (Mittelman 2000).

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Lastly, skeptics underscore the continuing primacy of the national interests and the cultural traditions of national communities (Held and McGraw 2005: 118). Mittelman, too, argues that globalization is an experience from below, a structure that engenders both accommodation and resistance (Mittelman 2000). The controversy revolving Starbucks coffee shop in the Forbidden City presented a perfect example of the nexus of these theses. 8

Define globalization in this dissertation Regardless of the differences between globalists and skeptics, they seem to agree on one thing: there are indeed quantitative and qualitative transformations in multiple dimensions of human society. Thus globalization in this dissertation also emphasizes on the interconnectedness of this global process, with a primary focus on the economic and political dimensions of globalization. Based on the existing globalization literature, globalization is approached from the global capitalism approach 9 and quantified in terms of total trade, foreign direct investment, and enhanced financial market integration (Garret and Mitchell 2001; Rudra 2002, 2004; Rodrik 2000; Eriksen 2007). It also employs Sassen’s dynamic view on globalization especially the interactions between domestic and international/global processes. Sources of international influences largely come from IFOs, notably the World Bank and IMF (Sassen 2006: 5-6; Mishra 2005: 62-63). Sources of domestic resistance against globalization pressures are best summarized as the “politics matters” thesis as

8 Related news report is at http://www.chinadaily.com.cn/ezine/2007-07/17/content_5437521.htm. 9

Sklair in his 1999 critical review of competing conceptions of globalization categorizes globalization studies into four thematic clusters: the world-system approach, the world culture approach, the global society approach, and the global capitalism approach (1999: 143).

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described in the following paragraphs. This dissertation focuses on such interaction during the implementation of welfare reform policies in post-communist societies.

The World Bank and IMF as Major Sources of International Influence The impact of the World Bank, IMF and WTO on less developed and developing nations remain controversial. Majority of the literature views the threesome as an “unholy trinity” (Peet 2003). Scholars and independent research units challenges the “value-free” development policies enacted by these IFOs. Because in reality, these policies usually contain developing countries for making important choices about what types of trade and government policies to pursue (SAPRIN 2004; Arrighi et al. 2004; Wade 2003; Rodrik 1998). In other words, domestic political economy of these nations becomes increasingly penetrated by global phenomena (Mittelman 2000), which compromise receiving nation’s policy autonomy and sovereignty. Joseph Stiglitz coined the term “commanding heights” to describe the privileged position held by these three IFOs and other bureaucratic organizations that are emerging as the de facto quasi-global governance (Stiglitz 2003).

Creation of the World Bank and IMF

The World Bank and IMF were conceived at a United Nations conference held in Bretton Woods, New Hampshire in July 1944. 735 delegates from 45 10 countries spent three long weeks at the Mount Washington Hotel to create a framework of economic cooperation that would avoid a repetition of the vicious circle of competitive devaluations

10 According to Samans and colleagues (2005: xiii), delegates were from 44 countries. I used IMF’s number, which is 45 countries.

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that had contributed to the Great Depression of the 1930s (Samans et al. 2007: xiii; IMF 2009). The agreed framework was later referred to as the Bretton Woods system, whose main features were best captured by Richard Coopers’ (1986) five-point summary: greater freedom for national economic policy---employment, price stability, economic growth---to prevent another 1930s-style depression; fixed exchange rates; convertibility of currencies for trade in goods and services, the result of dissatisfaction with extensive use of exchange controls and wartime restrictions; medium-term lending to cover balance of payments deficits of a temporary nature, leading to the creation of the IMF, which became the focus of this particular initiative; the possibility for countries to alter their exchange rates, in the event that deficits turned out not to be temporary (cited in Samans 2007: xiv).

Organization of the World Bank and IMF

The World Bank’s President, normally an American national, chairs meetings of the Executive Directors and is responsible for overall management. Key Bank policies are decided by the Governors of Alternative Governors, who meet twice a year and are elected by each member nation. The bulk of their responsibilities are delegated to the board of Executive Directors. The five largest shareholders, France, Germany, Japan, the UK, and the United States, each appoint an Executive Directors, while the remaining countries are represented by nineteen Executive Directors elected by groups of countries. Of these, only China, Russia, Costa Rica, and Saudi Arabia have formed single-country constituencies (Bhattasali et al. 2004: 109).

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Membership in the IMF is open to every state that controls its own foreign relations and is able and willing to fulfill the obligations of membership contained in the Fund’s Articles of Agreement (Marer 1989: 225). Board of Governors is at the center of the IMF’s governance. There is one Governor from each member country, typically the finance minister or central bank governor. The Governors usually meet once a year, in September or October, at the Annual Meetings of the IMF and the World Bank (IMF 2009). The IMF's financial resources come mainly from the quotas that countries deposit when they join the IMF. Quotas broadly reflect the size of each member's economy: the larger a country's economy in terms of output, and the larger and more variable its trade, the larger its quota tends to be. For example, the United States, the world's largest economy, has the largest quota in the IMF. Quotas are reviewed periodically and can be increased when deemed necessary by the Board of Governors (IMF 2006).

Full document contains 137 pages
Abstract: This dissertation employs both quantitative and qualitative methods to explore welfare state commitment under globalization pressure in post-communist societies. Using times series design, based on the observations of 23 post-communist states from 1990 to 2005, this dissertation relies on data published in the World Development Indicators and Government Finance Statistics Yearbook to reveal a surprising finding: use of IMF credit is positively associated with welfare spending. This finding contradicts the consensus in the development and structural adjustment literature, which largely views policy-based conditional lending as a negative influence on receiving countries' welfare. Qualitative evidence on China and Russia's pension reforms further supports findings in the quantitative chapter: International Financial Organizations' (IFOs) involvement in policy guidance during the post-communist transition does not translate directly to retrenchment of welfare state commitment. This is because it is also in the best interest of the IFOs to maintain social safety nets in post-communist states. It is the best way to ensure a relatively stable social environment, which is the most conducive for obtaining higher financial returns from the loans distributed to facilitate the post-communist transition.