03/18/2013 09:35 am ET Updated May 18, 2013

A Tale of Two Reforms

Slovenia and Bulgaria are, respectively, the best-case scenario and the cautionary example of "transition" states. Both have struggled to transform communist-era economic and political structures. Both are now members of the European Union and NATO. But their economic and political realities place them practically on different planets.

Slovenia has a per capita GDP of $29,000 that puts it above all other East-Central European transition states and several West European states as well. Bulgaria's per capita GDP is less than half, at $13,800, below Belarus, Botswana, and Libya.

In the last UN Human Development Index, Slovenia ranked 21, which put it above the UK, Luxembourg, and the EU average. Bulgaria clocked in at 55, below all other European countries except Serbia and Albania.

In the Catch-Up Index, which grades European countries according to economy, governance, democracy, and quality of life, Slovenia came in at the EU average and Bulgaria was near the bottom of the list, just below Romania. In Transparency International's Corruption Perceptions Index for 2012, Slovenia ranked 37 while Bulgaria occupied a rather dismal 75th place.

For better or worse, Slovenia has successfully vaulted into Western Europe while Bulgaria has remained behind the informal Iron Curtain that continues to divide the developed from the developing parts of the region.

Philip Bokov is uniquely suited to compare the most successful and the least successful of the reform processes in East-Central Europe. He was involved in the Bulgarian transition first in the Bulgarian foreign ministry, then in parliament as a member of the Bulgarian Socialist Party (BSP), and after that part of a breakaway faction of the BSP. Now, he serves as Bulgaria's ambassador to Slovenia, where he arrived in 2008.

To understand the different trajectories that Bulgaria and Slovenia took after 1989, Bokov identifies historical and cultural factors, such as inclusion in the Austro-Hungarian versus the Ottoman empires. The economic starting points of the two countries were also very different, with Bulgaria heavily dependent on the Soviet market and Slovenia already facing West in the 1980s.

Then there was the geopolitical factor. "The central European countries, and in particular Germany, were very much concerned about the disintegration of Yugoslavia, and they didn't allow Slovenia to fall under," he told me in an interview in the Bulgarian embassy in Ljubljana last October. "Politically, they adopted it like a child and they nurtured it."

This geopolitical preference extended to the question of economic reform. "When I came here four years ago I was surprised by how few reforms they had done," the ambassador observes of the Slovenian reform process. "The majority of the economy here is still in the hands of the government. And they were recognized as a market economy, perhaps as a state market economy with state-ownership. They were adopted by the central European countries, like Germany and Austria, and nobody criticized them for lack of reforms. Bulgaria, meanwhile, was under very heavy pressure."

In 1990, I interviewed Philip Bokov about the economic and political realities in Bulgaria. In 2012, we revisited these questions with the benefits of hindsight and cross-country comparisons. Our conversation ranged across the pitfalls of privatization, the role of Russia and Turkey, and the future of socialist and social democratic parties in Europe. I've appended the 1990 interview below the current conversation.

The Interview

Why could Slovenia embark on what has been called a "slow transition," as opposed to a "shock-therapy" transition, and Bulgaria either wasn't allowed to or couldn't?

There are two reasons. One is the almost total dependence of Bulgaria on the Soviet market, at that time within Comecon. If I remember the figures correctly, about 60 percent of Bulgaria's trade went to the Soviet Union, and 80 percent to Comecon. Only 20 percent was with the rest of the world.

Slovenia was a different case. Being part of Yugoslavia at that time, it had a semi-market economy with worker self-management, and it had much closer links with neighboring countries such as Italy, Austria, Germany. This was a question that intrigued me very much when I came here, and I talked to a lot of people about it. One professor in economics told me that because Slovenia was very insistent on leaving Yugoslavia -- and this was a general feeling regardless of the political orientation of Slovenians -- they were afraid that when they lost the Yugoslav market they would have to compensate this with something. He told me that directors of companies here, which were then "worker-managed," went in their cars to Austria, to Italy, to neighboring countries to secure orders, to make sure that their companies would continue working. And they were very successful.

The second reason was political. The central European countries, and in particular Germany, were very much concerned about the disintegration of Yugoslavia, and they didn't allow Slovenia to fall under. Politically, they adopted it like a child and they nurtured it. And Slovenia did very well, actually. If you compare the living standards of Slovenia and Bulgaria, they're worlds apart. The Slovenians have had it very good, the best compared to all the other central and eastern Europeans countries. The Slovak ambassador was complaining to me that the average wage in Slovenia is about 1100 Euro while in Slovakia it's 600. This is almost twice as much. Of course, now the Slovenians are in for a hard time, because they will have to do some of the reforms--perhaps not all of them--that they missed while the other Eastern Europeans were doing them.

On the question of privatization in Bulgaria, when I talk to people there, it's one of the greatest complaints. They're upset about the sales to foreign owners, like the Bulgarian airline, which was basically dismantled. They're also upset about properties sold to Bulgarians. People feel that it was politically motivated rather than economically motivated. In other countries, privatization was often politicized specifically to ensure the stability of the economic system at a time of great political instability.

This is what the Czechs did. They were more successful in this respect. But see, privatization was not and perhaps still is not such a popular idea, and for very obvious reasons. If you have something which is nobody's, or so-called government-owned, or socially owned, how do you give it to some member of society?

In Bulgaria, for example, after 20 years of privatization and economic development, people perhaps have come to love capitalism. But they don't love capitalists. It's a paradox, and it's natural. Before, you and your neighbor were living on the same floor of the same block of flats. Your neighbor had almost the same social status as your own, and now he's driving a Mercedes, his children are studying in London or Berlin, and he goes for holidays in the Maldives. And you're still in the same situation, or perhaps even worse than 20 years ago. The majority of people feel like this.

I don't know whether anybody has devised a method to have fair privatization. I don't think it's fair. Why should I sell this property to you and not to the person next door? It's a very devious process that hadn't been done before. I mean, it had been done in the West, where England for example privatized, nationalized, and privatized the railways several times. But there was not this feeling of injustice.

The situation is similar here in Slovenia. Last year, ambassadors from the European Union had lunch with the then-leader of the opposition, now Prime Minister Janez Jansa. And my British colleague asked him exactly the same question about privatization: "Why isn't privatization, 20 years after the start of the changes, still not on the platform program of the right-wing political party in Slovenia?" Janza said that in Slovenia, when asked in the opinion polls, 80 percent of the people are against privatization, and of the other 20 percent who are in favor, 80 percent percent of them want the companies to be sold to Slovenians -- not foreigners.

So I think in order for the results of privatization to be accepted, several generations would have to pass. It is similar to the initial accumulation of capital, for example, in the United States with the Rockefellers or the Mellons. The emergence of capital has to be forgotten through the generations in order for this to be accepted.

You actually made the same point 22 years ago.

Did I? So, this hasn't changed, and practice has confirmed this.

You talked about the paradox of people loving capitalism and not loving capitalists. Let's talk for a moment about that other paradox: people loving democracy and not loving politicians. I could not find very much support for any particular politicians in Bulgaria. And there's been such a rotation of parties in Bulgaria over the last 20 years. There's been so little trust in the political system. Why do you think that's the case?

To read the rest of the interview, click here.