A credit to the bank

Most of my Romanian colleagues dislike the World Bank. Some detest it. They consider it arrogant, high-handed and insensitive. Its resident mission in Bucharest, in a secluded mansion on Boulevard Dacia, appears uninterested in dialogue, either with Romanian specialists or with the growing contingent of foreign specialists from other organisations now working in Romania. The bank issues edicts; it does not discuss their aptness or relevance. "Do it our way, or do it without us." Romanians concede that they need its financial support, as they struggle through a painful transition; but they deeply resent its diktats. During more than two years working in Romania I heard not one approving word about its activities.

The Romanian view is in line with a growing wave of criticism of the bank worldwide. Some critics are marking the World Bank's 50th anniversary with the campaign slogan "Fifty years is enough". The bank's track record of support for mega-projects often profoundly detrimental to people and the environment is being challenged as never before. So to encounter a "World Bank Book", as its cover proclaims, devoted to the human dimension of the turmoil in central and eastern Europe comes as a surprise. Yet more of a surprise is to discover that Labor Markets and Social Policy in Central and Eastern Europe -- despite its dogged title -- is a very good book indeed.

It was written at the bank's behest by 15 contributors, all with World Bank experience, under the editorship of Nicholas Barr of the London School of Economics. As the product of a committee, the book has a remarkable unity of style, combined with crystalline clarity of presentation and argument. It is a positive pleasure to read, even when dealing with matters both complex and subtle. The essence of the book is an attempt to offer a thoughtful and detailed analysis of a question now being asked in central and eastern Europe and in nation-states everywhere: "What is government for?" Under communist regimes, government was for everything. Resource use was centrally planned and allocated; decisions were made at the top and passed down through the party machinery. The cumulative failures of such systems eventually became intolerable, triggering the upheavals of 1989 and after. Under the banner of reform, the former Soviet satellite states and then the former constituent states of the Soviet Union itself began the struggle to reconstitute themselves as democratic societies with market economies. The euphoria faded rapidly; the transition proved to be much more arduous and protracted than anticipated, and its outcome in many new nations remains in doubt. Barr and Co. have prepared a meticulous route map for those working their way along this tortuous road.

They focus on relationships between the government and the governed, under the former regimes and under the new. What role should governments play and how? What social activities can be left to the market, under what ground rules? What measures must be the responsibility of governments, and how should they be implemented?

The book is structured carefully: an introductory overview is followed by a lucid primer on "The role of government in a market economy". The communist inheritance is reviewed with impressive dispassion, acknowledging that the old regimes, for all their shortcomings, provided for many people a secure if limited framework for their basic requirements, including guaranteed employment. For central and eastern Europe, the rise of unemployment since 1989 poses an acute challenge to fragile new democracies. Related problems of education and training, medical care, insurance, pensions and poverty relief emerge as key problems.

The second part of the book is devoted to teasing out the many tangled threads that affect policy design and implementation for each of these essential provisions. Each chapter describes the inheritance, the forces driving change and the impediments to change, and proposes policy measures that may be adopted, with suggestions for priorities and sequencing. A final chapter summarises the essentials for effective activity by government, to better the lives of its citizens without intervening unnecessarily.

The book is at once a compelling read from cover to cover and a reference work that will be heavily thumbed. What stands out, apart from the vivid immediacy of the writing, is the way the book puts forward sharp and incisive argument without a hint of the doctrinaire. The authors present proposals, but they do not lay down laws. That, they rightly concede, is the province of the appropriate ministers in governments answerable to their electorates. Nevertheless, the book will be an invaluable help to any such minister.

Labor Markets and Social Policy in Central and Eastern Europe deserves a wide readership, not only in the new democratic ministries of central and eastern Europe, but also among those who are now involved in assisting the process of transition. I trust a copy has been dispatched to the resident mission in Bucharest.

Walt Patterson is senior research fellow in the Energy and Environmental Programme, Royal Institute of International Affairs.