Attitudes to Change in Central and Eastern Europe

Attitudes to Change in Central and Eastern Europe Dr. Marta Orviska*, Ass.Prof. Anetta Caplanova**, Ass.Prof. Jozef Medved*** and Professor John Hudson**** *Faculty of Finance, Matej Bel University, Cesta na amfiteater 1, 974 01 Banska Bystrica, Slovak Republic; email: [email protected] **Department of Economics, University of Economics, Dolnozemská Cesta 1, 852 19 Bratislava, Slovakia, email [email protected] ***Faculty of Finance, Matej Bel University, Cesta na amfiteater 1, 974 01 Banska Bystrica, Slovak Republic; email: [email protected] ****Department of Economics, University of Bath, Bath, BA2 7AY, United Kingdom; email: [email protected] JEL Classification: P27, D63, Key Words: free market, democracy, transition economies We gratefully acknowledge the financial support of CERGE-EI. We also wish to thank the participants at the CEPR/ESRC workshop on Transition Economics in London, December 2002. ABSTRACT This paper seeks to analyze attitudes to the transition process in Central and Eastern Europe. First, we analyze attitudes to the free market economy, the state of democracy, human rights and the general development of the country. Sample survey data are obtained from the Eurobarometer survey of transition countries in Central and Eastern Europe. The empirical results, obtained using sophisticated regression techniques to cope with limited dependent variables, suggest that individual attitudes become more favourable with income and education and decline with age. Self-interest is further in evidence with, e.g., farmers and the unemployed being less in favour of the free market. But public interest perceptions are also seen to influence attitudes. This is clearly the case for attitudes to democracy and the general direction of the country with the significance of free market attitudes and perceptions of human rights in addition to socio-economic variables which proxy self-interest. But by backward induction, this very significance also makes it evident that free market attitudes and perceptions of human rights are not simply based on self interest or the individual's own position. We also look at attitudes to EU and NATO membership in the 1990s, finding that the young, the rich, those who live in capital cities and the more educated tend to be in favour of membership and the disadvantaged, the poor, the elderly, the unemployed and also farmers and those in rural communities tend to be against membership. With respect to satisfaction with the democratic process, economic self interest variables, although in the main significant, are much less so than for free market approval. This suggests that the ability of a government, or rather a political system, to deliver economic benefits is only part of the equation in determining satisfaction with that system. In addition, the pattern of significance of location variables, with scepticism for the state of democracy tending to increase with the size of the locality in which the individual lives is consistent with the hypothesis that the potential for corruption, or at least misgovernment, is greater in larger communities. A more recent survey shows that in 2003, the majority of people in the majority of countries felt themselves to be at least satisfied with their lives. The exceptions to this were Bulgaria and Romania, the two poorest countries. If we compare this with 2001, we see that for most countries there has been relatively little change except for Lithuania and Slovakia which have seen sharp increases in satisfaction. However, that notwithstanding, there are many people who perceive that they are worse off than five years ago. Thus, we observe a large number of people who report that things are better even when an even larger report it has got worse. In this sense, the reform process seems to be delivering an improvement in the quality of life to some people, but a large proportion of people are being adversely affected. It has not yet proved possible to use regression analysis on this more recent data even though raw data is available. But this does present a fruitful data source for further research. Attitudes to Change in Central and Eastern Europe 1. Introduction The transition process in Central and Eastern Europe is well into its second decade. This process, the transition from a centrally planned economy to a market economy, with parallel changes in democracy, has provided a unique opportunity for economists in particular and for social scientists in general. It is not surprising, therefore, that this has generated a considerable amount of literature. Yet, there has been relatively little work done on how the people of Central and Eastern Europe view the transition process. This is slightly surprising as the importance of public opinion is implicit in much of the literature. For example, the debate between the “big bang” and the gradual approach to transition is partially predicated on the dynamic of public opinion. Amongst the work that has been done, Svejnar (2002) reports the results of a public opinion survey in the Czech Republic, Poland and Hungary. In all three countries, a majority felt it worthwhile to change the political and economic system. He links relative support to GDP growth, although this is not empirically tested. However, a majority of respondents felt that losses from the transition process exceeded the gains. It would, therefore, appear that support for the transition process at this time was based on expectations of improvements rather than the current realization. But again, we must stress the point that this work was not extended to analyze the socio-economic determinants of attitudes. Fidrmuc (2000a, b) has indirectly analyzed such impacts in research on party political support in the Czech Republic, Slovakia, Poland and Hungary during various years in the 1990s. He found that support for reformist parties is negatively affected by unemployment, as well as by the proportion of retirees, blue collar and agricultural workers. It is positively affected by the existing size of the private sector and a higher share of white collar workers or of university educated people. In discussing this, Roland (2002) makes the obvious, but critically important point, that there is a clear pattern of winners and losers from the transition process and that support for this process depends upon the balance between them. Waldron-Moore (1999) concluded that supporters of democracy in Eastern Europe tend to favour political and economic change, are young, male, urbanized, well educated and motivated to some extent by disenchantment with the nation’s past economic performance. In this paper we will be extending this process of identifying the determinants of support for the transition process along several dimensions: support for the free market as well as satisfaction with the state of democracy and the general direction of development in the country. We will also analyze attitudes towards human rights. The empirical work will be based on accession countries and those seeking to join the EU: Poland, Hungary, Czech Republic, Slovakia, Bulgaria, Romania, Slovenia and the three Baltic States, Estonia, Latvia and Lithuania. In the next section we will consider the determinants of such attitudes from a theoretical perspective. We shall primarily focus on support for the transition process with respect to approval for the free market which will depend upon a combination of self interest and public interest or civic duty. To a considerable extent, the theoretical issues relating to both satisfaction with the state of democracy and approval for the general direction in which the country is developing are similar to those relating to the free market. Perceptions of the state of human rights, however, might be thought to be less subjective. There will then follow an empirical analysis based on data obtained from the Eurobarometer survey series, a further analysis of attitudes to EU and NATO membership and finally there will be a concluding section as well as a look at more recent data. 2. Theory 2.1 Approval for the Free Market We can view support for the free market economy in transition countries as similar to an investment decision. There are initial costs to implementing the free market, but long-term gains. The investment should be undertaken if the expected net cost of discounted benefits is positive or, alternatively, are sufficient to outweigh any uncertainty. From a purely self-interest perspective, this focuses on the utility (U) from individual expected net income gains over time. That is, the individual will approve of the free market if he/she is better off because of the changes. There are several possibilities for the exact starting point of this calculation. The first thing is the current time period with people making their evaluation of the free market purely on the basis of comparisons of the present and the future and ignoring the past. Certainly this is the relevant starting point for considerations of whether the free market system should be retained or whether there should be a return to a centrally planned system. But for questions of support for the free market economy, people may well begin their calculations at the beginning of the transition period. Since the question we shall be analyzing specifically relates to the future, we may assume that people make their evaluation beginning with the present. However, even if this is the case, then comparisons with the state of the economy at the start of the transition process may still be relevant if people extrapolate future expectations. In this case, expectations for the future performance of the free market will be based on past performance. This is an important point to which we shall return later. The probability of the individual approving of the transition is likely to decrease as he/she grows older and is thus inversely related to age. The younger the person, the greater the period in which the long-term positive benefits of the free market makes an impact on his/her utility. There is, of course, another factor that people may anticipate better public services and welfare payments upon retirement in a centrally planned system and this, too, may be expected to result in declining support amongst the elderly. The probability of support also increases with the speed with which the transition process and the long-term gains from the transition process progress. For an economy, the gains may be proxied by current GNP per capita and possibly, as discussed earlier, GNP per capita near the start of the transition process. In the majority of Central and East Europe countries, GNP per capita has not increased as rapidly as has had been hoped. It declined sharply in most countries at the beginning of the transition process. Since the early to mid 1990s, however, most of the countries in our sample have generated a sustained economic growth. But only in Poland has this been sufficient to start closing the gap in relative incomes with the advanced OECD countries compared to what it was in 1989. The fact that current incomes are now probably lower than they would have been if the centrally planned economies had been preserved should have a negative impact on free market approval if either people extrapolate their expectations of future performance or, alternatively, remember the bad medicine of the past even when evaluating what is best for the future. But when the focus is on individuals, the transition process has two different impacts. Firstly it will, by assumption, increase GNP per capita in the long run, and secondly it will, by definition, widen income inequality. Planned economies have narrower inequalities than free market ones and the transition process has resulted in a substantial widening in income inequality (Svejnar, 2002). This is no accident; the success of the free market is based on rewarding the most successful and hence, in relative terms, penalizing the least successful. Thus, the impact of the transition process upon individuals is unlikely to be constant across the population and, indeed, even the speed with which the increase is approached may differ between individuals. We can proxy such differences by using a number of variables. Firstly, we must use relative household income on the grounds that those at the top end of the income scale can expect to gain from the transition process as the inequality widens. Similarly, more educated people, regardless of their position on the income scale, can expect to gain from a free market system where reward is based more on merit than perhaps is the case under a planned system. Research also indicates that men have benefited more, at least in the early years of the transition process, both politically and economically, from the free market than women (Kligman, 1994). Finally, the losers from the move to the free market obviously include the unemployed. This is particularly the case as the centrally planned economies were committed to full employment. This hypothesis is also consistent with the findings of Fidrmuc (2000a, b) discussed earlier, but contrasts slightly with findings in the USA and other market economies that unemployment has little impact on economic justice beliefs (Kluegel, 1988). Bringing all these factors together the probability that the individual will approve of the transition process can be written as: Pr (β1Xit+ εit > 0) (1) where Xit is a vector of socio-economic variables, income, education, gender, locality, employment status, age relating to the i’th individual during the period “t” impacting upon long term advantages. If we assume εit ~ N(0,σ2ε) then we can estimate the equation, either ordered or binomial, depending upon the nature of the data. However, self interest may only be one basis for evaluating concepts such as the free market. People may also make evaluations based on what they perceive to be in the best interest of the country (Hudson and Jones, 1994). This possibility is linked to that of civic duty (Frey, 1997, Orviska and Hudson, 2003). Because of this, it is possible that people may approve of the free market even though they are personally worse off under it, or indeed they may disapprove when they are in an advantageous position. An important part of the literature on civic duty is that it is enhanced by state institutions. Thus, e.g., corruption as perhaps exists on a substantial scale in Central and Eastern Europe (Hellman and Schankerman, 2000) can be expected to erode civic duty and lead to people placing greater weight on their own self-interest in any evaluation of a concept such as a free market. In the regression analysis relating to free market attitudes, we only have limited variables proxying public interest other than the same socio-economic variables which reflect self-interest. These additional variables primarily include country dummy variables. 2.2 Attitudes to Human Rights The relatively modern concept of human rights can be traced back to the earlier concept of natural rights. According to Locke (1960), God’s natural law provided that no one ought to harm another’s his life, health, liberty or possessions. The American Declaration of Independence (1776) slightly extended this to include ‘the pursuit of happiness.’ Twentieth century doctrines of human rights have been built upon these earlier concepts. Examples include the United Nations Doctrines of Human Rights and the European Convention on Human Rights as well as the constitutions of individual states. Human rights include, in addition to natural rights, what might be termed citizen rights and social rights. Specifically, they include (i) the right to life, (ii) the right to freedom, (iii) the right to property, (iv) rights related to the rule of law, (v) citizens’ rights such as the right to nationality and democratic rights and finally, (vi) the right to certain social, economic and cultural goods. It is the last of these, the social right, which is the most controversial and which, arguably, varies as living standards vary. Nonetheless, the UN Declaration, for example, clearly asserts human rights to education, work, social security, rest and leisure and a standard of living adequate for one’s health and well-being. This provides a direct route for socio-economic factors to impact on human rights, which, almost by definition, will decline in a recession. Individual socio-economic circumstances, as opposed to the general level of development of the country, should only impact upon perceptions of human rights given imperfect information about what is happening to others. Such differential perceptions may also be evident for natural and citizen rights, if again such perceptions are based on individual experience and this differs from individual to individual. For example, it may be that the authorities treat people differently, with the better off and better educated able to deal with the system more efficiently or are otherwise treated better. It may also be that those from ethnic minorities, most obviously in many Central and Eastern European countries the Gypsies, are treated differently from the majority population. 2.3 Satisfaction with the State of Democracy and the General Direction of the Country To a certain extent, these are very different questions. The first relates specifically to an evaluation of something very specific, whilst the second allows the individual to evaluate what he/she thinks is important in judging the general development of the country. However, to the extent that the government at all levels is responsible for the general development of the country, the former will depend very much upon the same factors which determine attitudes to the general direction of the country. However, the latter may include factors extending beyond democratic politics. As with the free market, both evaluations are likely to be based on self-interest, i.e., how the individual’s position fares in the transition process and also on what they see as being in the best interest of the country from a non-selfish position. To reflect the latter, we can now include the two attitudinal variables already analysed - attitudes to the free market and human rights. These will be included in addition to the standard set of socio-economic variables which reflect individual self interest and, hence, any additional significance should reflect attitudes about what is good for the country independent of self interest. However, these are unlikely to fully reflect non-self-interest or civic duty concerns. For example, the government’s attitude to the conflict in the Balkans, although not impacting directly on the individual, may have affected satisfaction with the democratic process. Similarly, problems, or perceived problems, of corruption may also affect people's attitudes to the state of the democratic process and the general direction the country is moving in. It should also be borne in mind that democracy works at both the national and the local or regional level and because of this, there may be significant differences in people’s attitudes depending on the nature of the area they live in. 3. Empirical Analysis The data is part of that which was gathered during the Central and Eastern Eurobarometer surveys that were conducted in October-November 1992, November 1995, November 1996 and November 19971. The surveys were conducted in other years, as well, but a lack of consistency in the questions effectively limited the analysis to these four years. Nonetheless, these years offer the opportunity to analyse how opinions have evolved throughout much of the transition period. The 1992 study was conducted by Gallup UK and the participating Eastern European Institutes. The remaining studies were conducted by GFK Europe and the participating Eastern European Institutes. The countries interviewed in the 1997 survey are shown in Table 1; other countries, for example Georgia, Albania and Belarus, were also interviewed in the earlier studies but in order to retain continuity of data, the analysis was restricted to the countries available in 1997. At least 100 sampling points were selected in each of the countries that were analysed. These were selected, in the first instance, via a division by major socio-economic areas. Within each of these areas, smaller electoral or administrative districts were randomly chosen. Individuals were chosen via one of four main methods, these being: (i) contacted randomly from a list of the electorate, (ii) random selection of addresses from published or specially commissioned lists, with individuals being selected via a Kish matrix or other random method, (iii) random route from a selected starting point with individuals being selected via a Kish matrix or other random method and (iv) a double clustered random address sample plus next birthday in the household. The maximum number of interviews in any one household was one. All interviews were conducted face to face in people’s homes. Table 1 summarizes the survey data on the attitudinal variables. It should be emphasized that these are proportions of the whole sample including 'don’t knows.’ Hence, these relatively low figures do not necessarily indicate that more people are against than in favour of the transition process. Nonetheless, seldom is there a majority of the population in favour of any aspect of the transition process, particularly in recent years. Most worrying, perhaps, is the small percentage of people who to some degree are satisfied with the state of democracy. There are large differences between countries and by 1997, the Poles were consistently reasonably optimistic in their evaluation of the transition process while the Czechs and Slovaks were consistently pessimistic. 1 This being the final year the survey was conducted. Table 1 Attitudes to the Transition Process Percentages favouring developments with respect to: 1992 1995 1996 1997 FREEMKT GENDEV FREEMKT GENDEV FREEMKT GENDEV FREEM GENDEV ________________________________________________________________________________________________________ Bulgaria 56.3% [4] 41.3% [6] 40.3% [8] 34.5% [7] 45.8% [5] 11.0% [10] 52.3% [4] 52.1% Czech Republic 55.1% [7] 58.1% [2] 43.7% [6] 56.7% [2] 44.9% [6] 50.9% [4] 29.8% [10] 28.3% Slovakia 50.5% [8] 47.0% [3] 39.8% [10] 31.2% [8] 42.4% [8] 26.2% [8] 34.7% [9] 25.3% Estonia 49.7% [9] 41.6% [5] 56.0% [3] 58.0% [1] 57.0% [3] 59.7% [2] 55.6% [3] 58.5% Hungary 55.6% [6] 20.2% [10] 40.3% [8] 12.4% [10] 38.6% [10] 15.4% [9] 37.8% [8] 30.3% Latvia 39.5% [10] 32.9% [7] 43.4.% [7] 37.6% [6] 44.7% [7] 36.4% [6] 47.5% [6] 46.1% Lithuania 65.8% [2] 25.5% [9] 49.6% [4] 19.7% [9] 40.8% [9] 29.0% [7] 50.3% [5] 42.1% Poland 55.7% [5] 27.8% [8] 64.2% [2] 42.0% [5] 63.4% [2] 41.8% [5] 66.3% [2] 51.8% Romania 65.6% [3] 42.8% [4] 71.5% [1] 43.5% [4] 80.3% [1] 75.6% [1] 69.1% [1] 54.5% Slovenia 66.0% [1] 66.3% [1] 46.4% [5] 50.7% [3] 46.0% [4] 53.0% [3] 46.6% [7] 48.7% All countries 56.2% 40.2% 49.5% 38.8% 50.8% 40.6% 48.8% 43.5% DEMOC- HUMAN DEMOCHUMAN DEMOCRACY RIGHTS RACY RIGHTS RACY _____________________________________________________________________ Bulgaria 35.7% [4] 56.8% [4] 13.2% [10] 43.6% [6] 5.7% [10] Czech Republic 38.2% [3] 54.5% [5] 46.3% [2] 49.2% [3] 40.9% Slovakia 23.4% [8] 63.6% [1] 26.8% [7] 43.3% [7] 22.0% Estonia 27.2% [7] 41.6% [7] 37.9% [3] 50.8% [2] 40.9% Hungary 22.8% [9] 60.8% [2] 19.9% [9] 60.3% [1] 20.6% Latvia 16.4% [10] 39.5% [8] 28.8.% [6] 42.6% [8] 27.7% Lithuania 47.7% [2] 37.2% [9] 25.3% [8] 17.2% [10] 30.0% Poland 32.1% [5] 34.4% [10] 50.4% [1] 44.9% [5] 43.7% Romania 28.8% [6] 54.1% [6] 37.0% [4] 28.2% [9] 54.6% Slovenia 48.1% [1] 58.7% [3] 37.0% [4] 47.7% [4] 42.8% All countries 32.4% 50.0% 32.2% 42.7% 33.3% [3] [9] [10] [1] [8] [6] [7] [4] [2] [5] HUMAN DEMOC- HUMAN RIGHTS RACY RIGHTS 40.5% [5] [4] 46.5% [8] 38.9% [4] 49.9% [9] 52.4% [7] 37.5% [6] 16.4% [2] 39.9% [1] 32.3% [3] 42.6% 39.6% [3] [7] [2] [1] [8] [10] [6] [9] [4] 19.5% [10] 37.6% 24.2% 43.2% 31.0% 27.5% 41.0% 58.3% 47.0% 39.2% 36.6% 50.2% [4] [6] 54.0% [9] 46.4% [3] 53.5% [7] 59.4% [8] 37.5% [4] 23.3% [1] 45.1% [2] 38.3% [5] 50.2% 45.8% Notes: Sources: Eurobarometer surveys in the years specified, [.] denotes a ranking with [1] indicating the highest level of approval. [2] [6] [3] [1] [9] [10] [7] [8] [4] 8 The results of the regressions relating to attitudes to the free market and human rights are shown in Table 2. The number of observations is denoted by N and differs from regression to regression due to responses that were omitted. The dependent variables are defined in an appendix and relate to attitudes to the free market and perceptions of human rights. Independent variables are also defined in the appendix. The first two columns relate to the free market: Column 1 reports the results of using only socio-economic variables together with time and country dummy variables. Approval increases with the respondent’s income and education, but declines with age. It is also greater for students, men and the self-employed and declines for the unemployed, those who live in villages and those who work in agriculture. Civil servants and those working in state industries are also significantly, at the 5% level, less likely to favour the free market. There are significant inter-country differences with those in Poland, Bulgaria, Romania and Hungary being most in favour of the free market and those in the Czech and Slovak Republics least in favour. In the second column we examine the impact of including two potentially key macroeconomic variables, current GNP per capita and GNP per capita in 1991 at the start of the transition process. The expectation is that countries which have done ‘well’ during the transition period are likely to have a higher degree of approval for the free market than those who have done less well. As a consequence, we expect current GNP per capita to have a positive impact on electoral participation and historical GNP per capita to have a negative impact. The results are as expected and significant at the 1% level, although current GNP is much less important relative to historical GNP, suggesting that attitudes to the free market at this time were determined more by the success or failure of the centrally planned system which preceded it. Table 2 Attitudes to the Free Market and Human Rights Dependent Variable: Electoral Participation Free market Free market Human Rights Human Rights SEX 0.121* 0.123* 0.0959* 0.0903* EDUCN -0.158* -0.162* -0.0928* -0.708* LAGE 0.300* 0.279* -0.0639* -0.0507* LINCOME -0.168* -0.172* -0.110* -0.0649* SELFE -0.179* -0.192* -0.0365* -0.0369* CITY -0.00824* -0.0234* 0.076* 0.0841* CAPITAL -0.0339 -0.0428 0.125* 0.0834* VILLAGE 0.0831* 0.0438* -0.0238 0.00746 UNEMP 0.111* 0.0964* 0.0784* 0.0820* FARM 0.135* 0.0943* -0.0352 0.0272 STUDENT -0.100* -0.112* -0.300* -0.259* GNPPC -0.132* -0.164* GNPPC91 0.221* 0.171* CIV SERV 0.0480 0.0482 -0.0495 -0.0648* STATE 0.0437 0.0299 0.0608* 0.0823* GYPSY 0.0495 0.0883 0.210* 0.0756 N 36956 36956 34857 34857 Notes: The equations were estimated by ordered probit. See the appendix for definitions of the data. * denotes the variable is significant at the 1% level of significance. Country and time dummy variables were also included. A positive (negative) coefficient means that, as the variable increases, support for the dependent variable falls (decreases). For example, the significant negative coefficient on the log of income indicates that attitudes to both human rights and the free market become more favourable as household income increases. The next two columns relate to attitudes to human rights in the country. A belief that there is a lot of respect tends to increase with income, age, level of education and for students, and decline for women, those who live in cities, particularly capital cities, the unemployed, those who work in state owned industries and gypsies. Again, there are significant differences between countries, with Hungarians being most optimistic and Lithuanians the most pessimistic in this respect. The final column shows that an optimistic view on human rights tends to increase with GNP per capita, relative to its level at the start of the transition process. This leaves open the question of whether people perceive a certain standard of living as a ‘human right’ or whether human rights, more traditionally defined, increase with income. 9 Table 3 Attitudes to Democracy and the General Development of the Country Democracy Democracy Democracy General Development General Development General Development SEX 0.0655* -0.00557 -0.00140 0.0848* 0.0245 0.0276 EDUCN -0.0327* 0.0308* 0.0114 -0.0972* -0.0460* -0.0783* LAGE 0.0947* 0.0975* 0.0681* 0.0346 0.0194 0.00125 LINCOME -0.103* -0.0500* -0.121* -0.185* -0.136* -0.138* SELFE -0.0198 -0.00547 -0.00616 -0.0613 -0.0329 -0.0183 CITY 0.0457 0.00969 0.00343 0.0510* 0.0436 0.0379 CAPITAL 0.109* 0.0691* 0.108* 0.0295 0.00641 -0.0182 VILLAGE -0.0259 -0.0447* -0.0724* -0.0113 -0.00995 -0.0332 UNEMP 0.145* 0.118* 0.131* 0.149* 0.129* 0.142* FARM 0.0938* 0.100* -0.000837 0.0836 0.0753 0.0133 STUDENT -0.195* -0.0737 -0.103* -0.173* -0.0827* -0.125* GNPPC 0.0350* -0.0317* GNPPC91 -00588* 0.0156 CIVIL Servant 0.0223 0.0488 0.0713* 0.0164 0.00291 0.0308 STATE 0.0834* 0.0690* 0.0516* 0.0767* 0.0634* 0.0424 GYPSY 0.288* 0.134 0.407* 0.0788 -0.0185 0.0677 FREEMARKET 0.215* 0.248* 0.279* 0.310* HUMAN Rights 0.632* 0.543* 0.455* 0.410* N 30778 29470 29470 36956 34857 34857 Notes: The equations were estimated by ordered probit. See the appendix for definitions of the data. * denotes the variable is significant at the 1% level of significance. Country and time dummy variables were also included. A positive (negative) coefficient means that, as the variable increases, approval for the dependent variable falls (increases). For example, the significant negative coefficient on the log of income indicates that attitudes to both democracy and the general development of the country market become more favourable as household income increases. We now turn to analyse the determinants of attitudes to the state of democracy and the general direction of development in the country. The first three columns of Table 3 relate to satisfaction with the state of democracy. To a large extent, the results are similar to those already discussed relating to the free market and human rights in that men, the educated, the wealthier and students tend to take a more positive view than others, whilst those in the cities, again especially capital cities, those who work in the state sector and gypsies tend to take a less favourable view. Dissatisfaction also increases with age and for those working on farms. In the second column, we add attitudes to the free market and human rights to the regression. Only the gender of those variables previously significant loses its significance. Both of the attitudinal variables are significant and the signs suggest that, in terms of evaluating the state of democracy, human rights are substantially more important than attitudes to the free market. Again, when we replace the country dummy variables with GNP per capita and lagging GNP per capita, both are significant. The pattern of significance for location variables suggests that there is a hierarchy of satisfaction which is greatest in villages and steadily declines as we move from towns to cities to capital cities. There are several possible reasons for this but it does suggest greater dissatisfaction with local democracy in larger cities. The country dummy variables suggest that Poland and Romania, together with Slovenia, are most satisfied with the state of their democracies, other things being equal, and Bulgaria, Hungary and the Slovak Republic the least satisfied. We now turn to attitudes to the general development of the country. The results are similar to before and we shall focus on key differences. Firstly, age is no longer significant. Self-interest variables are particularly important. Approval for the general direction of the country increases with relative income, education and is lower for the unemployed and women. Current income per capita has a substantially greater impact than income at the start of the transitions process, with the latter insignificant. Finally, both attitudes to the free market and human rights are again very significant, but this time there is a much more equal impact on attitudes than previously. It is worth noting that the unemployed have significantly less favourable evaluations of the transition process along all four dimensions. This is not unexpected and is consistent with the conclusions of Fidrmuc (2000a,b) but contradicts the work referred to earlier in the USA (Kulegel, 1998). This tentatively suggests that people are less likely to blame the system for their own unemployed status when that system has been in place for a long 10 time. But when the system is relatively new and there is something to which it can be compared, people are more ready to associate their own misfortune with its perceived weaknesses. 4. Attitudes to the EU and NATO Table 4: Supporta (%) for membership of EU and NATO EU 1995 1996 1997 2001 Bulgaria Czech Slovak Estonia Hungary Latvia Lithuania Poland Romania Slovenia 71.9 71.7 74.9 80 56.8 58.5 62.4 54 65.8 59.2 73.4 66 51.9 37.9 43.1 36 64.7 60.0 68.9 70 58.1 49.7 49.2 46 62.7 53.6 52.4 50 78.5 79.5 76.2 54 86.3 89.7 83.3 85 66.1 59.3 70.7 56 [3] [3] [3] [2] [9] [7] [7] [6] [5] [6] [4] [4] [10] [10] [10] [10] [6] [4] [6] [3] [8] [9] [9] [9] [7] [8] [8] [8] [2] [2] [2] [6] [1] [1] [1] [1] NATO 1995 44.1 [6] 42.5 [8] 42.4 [9] 45.4 [5] 43.6 [7] 41.4 [10] 59.0 [3] 80.3 [2] 82.0 [1] 1996 45.2 [5] 39.5 [7] 35.4 [8] 33.7 [10] 43.3 [6] 34.1 [9] 46.9 [4] 78.2 [2] 88.4 [1] 1997 52.1 [5] 45.9 [6] 38.2 [8] 34.6 [10] 59.3 [3] 36.4 [9] 42.4 [7] 75.4 [2] 76.4 [1] a Proportion of those responding who supported membership, including “don't know” responses. [.] denotes an ordering of support. Data obtained from Central and Eastern Eurobarometer surveys for the 1995-97 data and the Candidate Countries Eurobarometer 2002 (2002) for 2001. Our data allows us to analyze attitudes prior to membership of either organization. Table 4 shows the proportion in favour of joining the EU and NATO. Thus, for example, support in Poland for EU membership was 76.2% in 1997, down from 78.5% in 1995. The comparable figures for NATO membership for Poland were 75.4% and 80.3% respectively. Romania, Bulgaria and Poland had consistently high support for membership of both organizations and Latvia and Estonia had the lowest support. Support was typically greater for EU membership than NATO. The data for 2001 are obtained from the Candidate Countries Eurobarometer 2001 and thus, apart from the countries already referred to, includes Turkey, Cyprus and Malta2. The data suggest a slight decline in support since 1997 in some countries, particularly Slovenia and Poland. On the other hand, this remains exceptionally high in Bulgaria and Romania. In general, the relative ordering of the countries has remained consistent. Table 5 provides a cross-tabulation of attitudes to these two issues. For example, 8.3% of the sample favoured EU membership, but were against NATO membership3. This indicates that almost a third of the sample lie in diagonal positions, e.g., supporting membership of NATO whilst opposing it for the EU or vice versa. Whilst it is perhaps not surprising that there should be this degree of incompatibility in attitudes, it is possibly less expected that it extends in both directions. This suggests that there are underlying differences in the two attitudes and hence a desire for Europeanization (or factors influenced by perceptions of a common European identity) in its widest sense cannot be the sole factor in their determination. Table 5: The Pattern of Support for EU and NATO membership EU Membership Favour Don’t Know (DK) Against 2 NATO membership Favour DK Against 47.5% 9.4% 8.3% 7.0% 13.8% 2.8% 4.0% 1.2% 6.2% It was not possible to include the raw data from the most recent survey in the regression analysis as it is not available. In addition, data on questions on attitudes to NATO membership were not requested. 3 In total, 65.2% of the sample favoured EU membership, found by adding figures across the first row of the Table, with 47.5% favouring both EU and NATO membership and the remaining EU supporters (8.3% of the sample) unsure on NATO membership. Each person is represented just once in this Table and, hence, the figures should total 100%. The fact that they slightly differ from this is due to rounding errors. [4] [5] [5] [5] 58.5 [4] 54.0 [3] 57.0 [4] 11 Table 6 gives information from the 1997 survey on the reasons people gave for being in favour or against EU/NATO membership. With respect to the EU, the dominant reasons were economic in that 52% state improving the market, higher living standards or aid as a reason to join. Only 10% imply a sense of identification with Europe (i.e., sense of a common European identity influencing attitudes) while other explicitly noneconomic reasons relating to human rights and culture total 16%. However, 'general progress,' the largest category, encompasses all possible reasons. With respect to NATO, the dominant reason is security in the region although only a minority specifically focus on Russia. Factors linked to Europeanization appear to be relatively unimportant. On the negative side, it is interesting to note that people seldom indicate the loss of sovereignty as a reason for not favouring membership. Table 6: Reasons for/against membership NATO For: Will guarantee security and stability in our region Will control & reform army and military industry General progress and cooperation, not just military We need NATO support Security from Russia NATO membership makes us feel as if we are a part of Europe 52% 13% 10% 7% 5% 4% NATO Against: Our country should remain neutral Against military and war Financially impossible 6% 6% 5% EU For: General progress thanks to EU help Economy will improve/open market EU will give us higher living standards We should integrate in Europe Economic/financial aid from EU EU contributes to peace, human rights and democracy Technology, culture EU makes us strong 35% 25% 17% 10% 10% 9% 4% 3% EU Against: Will worsen economic crisis/is too expensive 6% Loss of identity/independence 3% EU acts in its own interest 2% EU brings instability and disintegration 1% Notes: Responses in answer to an open ended question asking "What are the main reasons why you would vote for/against NATO/EU membership.” Source: Central and Eastern Eurbarometer, No. 8 (1998). Caplanova, Orviska and Hudson (2004) report the results of the regression analysis on membership. Support for EU accession significantly increases with the respondent’s income and education. Membership support is also greater for students. However, those who live in villages and those engaged in farming are significantly more hostile to membership. Those who support the free market are also more likely to support membership. The analysis indicates that the Romanians, Poles and Bulgarians are most positive in support of EU membership, other things being equal, with the Baltic States being least favourable. Further analysis indicates that people are more in favour of accession if the economy is doing better relative to its position at the start of the transition process. Attitudes to NATO accession are, to an extent, determined by similar factors to those for the EU. In particular, both income and students retain their earlier signs and significance. Education, too, is again significant and retains its earlier significance though with less of an influence. There are several other notable differences between this regression and those for the EU. Firstly, there is no difference between those who live in villages and work on farms and the attitudes of others. However, the self employed and men are now significantly in favour of membership and those who live in capital cities are significantly more likely to be opposed. Similar to the earlier results for the EU, people opposed to the free market are significantly less likely to support NATO 12 membership and favourable movements in GNP per capita also impact positively on attitudes to membership. Education is now insignificant. It is unlikely that this varying pattern of significance reflects differing degrees of self-interest and may therefore reflect different attitudes to non-economic self-interest factors, relating, for example, to neutrality and pacifism. However, it is interesting that there is no comparable decline in the impact of being a student. With respect to both organisations, students are significantly more in favour of membership than others. The pattern of country dummy variables suggests that Romania and Poland are again most enthusiastic in support of membership, with Slovakia being least favourable. The Baltic States no longer form such a noticeable set of outliers. 5. Conclusions and Policy Implications Our analysis has provided empirical estimates for the impact of economic conditions, both at the individual and macro level, on attitudes to the transition process. The size of these impacts are such that they provide support for both those who argue that bad medicine should be administered quickly to get people committed to the future of the reform process and those who argue that reforms should be done on a sequential basis with demonstrable gains increasing such support. Both of these arguments depend upon people's attitudes being determined by the impact of such reforms on the economy and their own economic position. However, the significance of GNP per capita at the beginning of the reform process in determining attitudes to the free market, human rights and the state of democracy suggest that attitudes to the reform process are determined by past performance as well as future expectations, or at the very least that future expectations are based on past performance. Only for attitudes to the general development of the country is lagging GNP per capita insignificant. Thus, on balance, this tends to support those who argue for a gradualist approach in as much as the bad medicine is not quickly forgotten. This emphasises the somewhat obvious point, similar to that made by Roland (2000) discussed earlier, that support for the free market process depends to a large extent on how successful it is in delivering solid improvements both to individuals and to the country. Failure to deliver such improvements puts the reform process in jeopardy. This lack of support is then likely to manifest itself in ways which damage the transition process, for example, in increasing tax evasion (Orviska and Hudson, 2003). The transition process has not been as successful as had been hoped (Svejnar, 2002) and these results may provide part of an explanation for this. To ensure support in the long run, the transition process must deliver solid benefits to a majority of individuals within the society. That is, they should be better off, or at least no worse off, under the free market/democratic system than under its predecessor. To the extent that the free market widens income inequality, this must mean that there are sufficient gains in per capita GNP to compensate those lower down on the income scale who would otherwise suffer from widening inequality. It is also apparent that compensating the losers may also be an effective, if limited, means of garnering support for the reform process. For the elderly, the unemployed and the poor, a social welfare net, along Western European lines, may prove a more effective way of cementing the gains from the transition process than the more free market approach of North America. Predictably, support rises with income and also the level of education. It also declines with age, reflecting perhaps that the young have most to gain from increases in prosperity in the future whilst the old have most to fear from an erosion of the role of the state. Similarly, the losers in the process, most visibly the unemployed, but also perhaps those in agriculture as well, tend to be significantly less favourable in their attitudes to the free market. But the results also support the hypothesis that perceptions of the public interest also impact on attitudes to the transition process. This was clearly the case for attitudes to democracy and the general direction of the country with the significance of free market attitudes and perceptions of human rights in addition to socioeconomic variables proxying self-interest. But by backward induction, this very significance is also evidence that free market attitudes and perceptions of human rights are not simply based on self interest or the individual's own position. Satisfaction with the democratic process depends upon much the same factors as free market approval. But the differences are illuminating. Firstly, the economic self interest variables, although in the main significant, are much less so than for free market approval. This suggests that the ability of a government, or rather a political system, to deliver economic benefits is only part of the equation in determining satisfaction with that system or, alternatively, that people do not fully put the blame for economic failure on the democratic process. It further suggests a greater role for non-economic factors and possibly a greater weight on public interest versus self interest. In addition, the pattern of significance of location variables, with scepticism for the state of democracy tending to increase with the size of the locality the individual lives in, is consistent with the hypothesis that the potential for corruption, or at least misgovernment, is greater in larger communities. This emphasizes something often missed, namely that local government can play a significant role in people’s daily lives and to ignore this in focusing on national government is a mistake. 13 With respect to membership in the EU and NATO, the results suggest that, in general, more people were in favour of EU membership than NATO4. This is not unexpected since the benefits of joining the EU are financial as well as bringing benefits in other areas including security, whilst the benefits of joining NATO, apart from enhancing a feeling of belonging to Europe, are largely limited to security. On the other hand, the loss of sovereignty is considerably greater with respect to EU membership. The data also suggests that there is not a simple dichotomy between those who supported membership of both organizations and those who did not. This was the dominant division, but almost one third have divergent attitudes. Our analysis suggests why this might be the case and reflects the different impact membership has on different sections of the community. Thus, for example, capital cities stand to lose most in terms of loss of sovereignty by membership in both organizations, but also tend to gain the most economically from membership in the EU. It is also true that under the rotating presidency of the EU, for six months each country becomes much more the focus of interest than it ever would as a simple nation state and also each country will at some time have an EU commissioner. There are fewer such compensations with NATO membership. This pattern of interest is clearly evident in the significance of CAPITAL in the two regressions5. The similar pattern of significance of the self-employed also reflects their unambiguous self-interest in seeking the market reforms of recent years protected by NATO membership, but the more ambiguous impact of freer trade, resulting from EU membership, on their businesses. Farmers and those who live in rural areas are significantly less in favour of EU membership, but are not significantly different in their attitudes to NATO. This too is consistent with self-interest. More generally those who tend to have done best out of the transition process, those with the highest income, the more educated, and possibly students, tend to be more in favour of membership in the two organizations which either protect or enhance that process. Thus, for political and economic unions, and this may apply equally to existing as well as prospective ones, popular support appears to, at least partly, depend upon a calculation of self-interest. Perceptions of the public interest are important, but these too are likely to be based on the perceived self-interest of others. Politicians may speak of ‘the tide of history’ and the ‘noble task of reuniting Europe’6 and appeals to some sort of shared ideal based on a sense of civic duty may help cement support, but unless people actually perceive benefit from the union such appeals are unlikely to be successful. 6. Postscript: Have the Economic and Political reforms Brought Increased Well Being? The last of the surveys on which this work was based was done in 1997. Since that time, there was a break until 2001 when the Candidate Countries Eurobarometer appeared. The format is much closer to that of the Eurobarometer surveys conducted in Western Europe. This will allow valuable future analysis of the evolution of attitudes between 'new' and 'old’ Europe. However, the questions on which this survey was based are unlikely to appear again. Thus, in this respect, these surveys and the analysis we have conducted are uniquely valuable. But there is a second reason why this is so; they relate to a unique time in history when several countries emerged from Communist regimes and, to a certain extent foreign domination, and began the evolution of their political and economic systems towards democracy and the free market. Table 5 Life Satisfaction in 2003 ________________________________________________________________________________ GNI per capita % satisfied + 5 Year Very satisfied change Bulgaria ∈6,300 30 [33] -46 Czech Republic ∈13,200 72 [74] -2 Slovakia ∈10,800 62 [54] -26 Estonia ∈8,600 53 [50] +2 Hungary ∈11,500 56 [57] -5 Latvia ∈8,600 51 [55] -3 Lithuania ∈7,500 53 [40] -11 Poland ∈8,900 64 [61] -26 Romania ∈5,200 38 [40] -29 Slovenia ∈15,600 82 [85] +2 4 For example in Bulgaria in 1997, 74.9% supported EU membership, but just 52.1% supported membership in NATO. 5 If this interpretation is correct, it would imply a very high level of cognitive sophistication and before such a hypothesis could be accepted, more empirical confirmation within other contexts would be necessary, 6 The President of the Commission, Romano Prodi when addressing the Spaak Foundation in October 2000. 14 Sources: CCEurobarometer 2003:2, except for figures in [.] which relate to CCEurobarometer 2001. The relevant questions were: “On the whole, how satisfied are you with your life in general”and “If you compared your present situation with five years ago, would you say it has improved, stayed the same or got worse?” The figure reported equals those who thought it had improved minus those who thought it had got worse. At the moment this data allows us to answer the question of whether people perceive the reform process to be benefiting them. The more recent survey shows that in 2003, the majority of people in the majority of countries felt themselves at least satisfied with their lives. The exceptions were Bulgaria and Romania, the two poorest countries. If we compare this with 2001, we see that for most countries there has been relatively little change except for Lithuania and Slovakia which have seen sharp increases in satisfaction. However, that notwithstanding, there are many people who perceive that they are worse off than the previous five years. This is particularly true in Slovakia, Lithuania, Bulgaria, Poland and Romania. The fact that this is so for Lithuania and Slovakia, despite the increases in the number who say they are happier than two years ago, may be explained by the difference in the time frame or the fact that perceptions of the past are biased. It is also possible, however, that the economic reforms which have perhaps partially been behind increases in aggregate reported well being have divided societies into winners and losers and the losers in particular feel that they have fared badly in the reform process. Certainly we observe a large number of people who report that things are better even when an even larger report that things have got worse. In this sense, the reform process seems to be delivering an improvement in the quality of life to some people, but a large proportion of people are being adversely affected. 15 References Caplanova, A., M. Orviska and J. Hudson, (2004), Eastern European Attitudes to Integration with Western Europe, Journal of Common Market Studies, Vol. 42, pp. 271-88. Fidrmuc, J., (2000a), Political Support for Reforms: Economics of Voting in Transition Countries, European Economic Review, Vol. 144, pp. 1491-1513. Fidrmuc, J., (2000b), Economics of Voting in Post-Communist Countries, Electoral Studies, Vol. 19, pp. 199217. Frey, B. S. (1997) A Constitution for Knaves Crowds out Civic Virtues, Economic Journal, Vol. 107, pp. 1043-1053. Hellman, J. and M. Schankerman, (2000), Intervention, Corruption and Capture - the Nexus between Enterprises and the State, Economics of Transition, Vol. 8, pp. 545-576. Hudson, J. and P. Jones, (1994), The Importance of the Ethical Voter: An Estimate of Altruism, European Journal of Political Economy, Vol. 10, pp.499-509. Kligman, G., (1994), The Legacy of Communism: Women, Children and the Feminization of Poverty. In Millar, J.R. and S.L. Wolchick (eds.), The Social legacy of Communism, Woodrow Wilson Center Press, Washington DC, 272-90. Kluegel, J.R., (1988), Economic Problems and Socio Economic Beliefs and Attitudes, Research in Social Stratification and Mobility, Vol. 7, pp. 273-304. Locke, J., (1960) Two Treatises of Government, ed. Peter Laslett, Cambridge, Cambridge University Press. Orviska, M. and J. Hudson, (2003) Tax Evasion, Civic Duty and the Law Abiding Citizen, European Journal of Political Economy, Vol. 19, pp 83-102. Roland, G., (2002), The Political Economy of Transition, Journal of Economic Perspectives, Vol. 16, pp. 29-50. Svejnar, J., (2002), Transition Economies: Performance and Challenges, Journal of Economic Perspectives, Vol. 16, pp. 3-28. Waldron-Moore, P., (1999), Eastern Europe at the Crossroads of Democratic Transition - Evaluating Support for Democratic Institutions, Satisfaction with Democratic Government and the Consolidation of Democratic Regimes, Comparative Political Studies, Vol. 32, pp. 32-62. Data Appendix: Variable Definitions Dependent Variables FREEMKT Responses to a question which asked “Do you personally feel that the creation of a free market economy, that is one largely free from state control, is right or wrong for (OUR COUNTRY’S) future?” Those who answered “right” were coded “0.” The alternative includes “don't knows,” but not those who declined to answer. HUMAN Responses to a question which asked “How much respect is there for individual human rights in (OUR COUNTRY)?” The responses were a lot of respect, some respect, not much respect, no respect at all. GENDEV Responses to a question which asked “In general, do you feel things in (OUR COUNTRY) are going in the right or the wrong direction?” The answers were right direction, don't know, wrong direction. SATDEM Responses to a question which asked “On the whole, are you satisfied, fairly satisfied, not very satisfied, or not at all satisfied with the way democracy is developing in (OUR COUNTRY)?” The responses were: very satisfied, fairly satisfied, not very satisfied, not at all satisfied. Independent Variables SEX 1 if the respondent is female, otherwise 0. EDUCN The highest level of education achieved, ranges from 1 (up to elementary) to 4 (higher education). LAGE Log of Age in years LINCOME Log of household income prior to tax and deductions using an increasing scale of 1 to 16 16 UNEMP 1 if the respondent is unemployed, otherwise 0. SELFE 1 if the respondent is self-employed, otherwise 0. CITY 1 if the respondent lives in a non-capital city, otherwise 0. CAPITAL 1 if the respondent lives in a capital city, otherwise 0. TOWN 1 if the respondent lives in a town, otherwise 0. VILLAGE 1 if the respondent lives in a village, otherwise 0. FARM 1 if the respondent is a farmer, otherwise 0. STUDENT 1 if the respondent is a student, otherwise 0. CIVIL SERVANT STATE 1 if the respondent is a civil servant, otherwise 0. GYPSY 1 if the respondent is ethnically defined as a Gypsy, otherwise 0. GNPPC GNP per capita (constant 1995 ‘000 US$) in the year current to the time of the survey. GNPPC91 GNP per capita (constant 1995 ‘000 US$) in 1991 at the beginning of the transition process7. 7 1 if the respondent works in a state owned industry other than in agriculture, otherwise 0. Except for Slovenia were data was not available for 1991 and 1992 was used instead.