Product-Life-CycleParaphrasing Katzenstein, Greskovits argues that post-communist transformations were warped by perceptions of vulnerability, which stem from competing politics of memory vis-à-vis legacies of previous specialization (Greskovits in Beissinger & Kotkin 2014). Yet, while scholars contend that communist seizures of power knocked CEE states out of their developmental trajectories into new paths (Haggard&Kaufman 2008), they disagree on the degree of rupture vs. continuation (Inglot 2008 emphasizes continuity, Haggard&Kaufman 2008 document rupture). Disputed historical legacies and diverse strategies of communist exit created a puzzling picture – all manufacturing specializations emerged with origins in the past, but not all continued international integration (Greskovits in Bessinger & Kotkin 201); wrenching market transformations showed more convergence in terms of welfare state change than in Latin American transitions that are often used as comparisons (Haggard & Kaufman 2008).

The aim of this brief article is to argue that a better understanding of post-socialist production and investment patterns can be gleaned by adding nationalism and nation-building process to the overall picture of transition politics. The fundamental point is that perceptions of incomplete or fundamentally changed nationhood prompt dynamic state interventions (Brubaker 1996), not just in cultural areas, but in the economy as well. I follow Greskovits’ bricolage argument (Greskovits in Beissinger & Kotkin 2014, 85), but add that in the co-constitutive relationship between agency, structure and process (Lawler 1997) that pushed forward the transition, competing discourses on national paths identified “desirable” sectors to be strengthened.

The product cycle argument 

In its original formulation the product cycle refers to the stages of innovation and production, market saturation, export and production in foreign markets, saturation of the latter and export back towards the original market (Vernon 1971). Correctly identifying that market reform progress is unable to account for the meager complex manufacturing investment that occurred in the Baltics, Romania and Bulgaria, Greskovits notes that a better argument can be found by adapting the product cycle theory – complex manufacturing investment was likely to flow first to those socialist countries whose initial profile already included complex manufacturing (Greskovits in Beissinger & Kotkin 2014). The argument is extremely robust and accurately identifies that previous legacies were a necessary condition, and also leaves room for seeing that policy barriers and politics have effects that are neither fully catalytic nor fully hampering. Concretely, the argument neatly shows why Visegrad countries and Slovenia, with legacies of chemical and machine building industries, could rightly expect large inflows of industry-specific FDIs (Greskovits in Beissinger & Kotkin 2014). With certain additions, like the role of human capital and politics of market reforms, the model is also useful for the Baltics and the South-Eastern post-socialist transitions, yet the lingering feeling is that of a structural model that underestimates the role of politics.

How does nationalism play a role?

On a very basic level, Norkus argues that specific national cultural values generate in affinities for FDIs (he documents it for Estonia and Finland – Norkus 2012). The relationship is however not unilinear as the Baltic states display a mixture of highly restrictive citizenship rights, which initially only brought international isolation. Differences in culture have important consequences not just because they lie with elites, but also because populations oftentimes judge transitions comparatively with other similar states, and hence sanction incumbents during elections (Norkus 2012). This does not occur as a type of “good-vs-bad” types of nationalism, but rather appears in the shape of selectively strengthening particular industries and upholding particular tariffs (for instance in Visegrad transitions – Greskovits in Bessinger & Kotkin 2014). The idea of openness is particularly tricky given the immense pull factor of EU integration, which since the late 90s came not just as an economic incentive, but also with a cultural agenda. In this sense it is important to note how the late 90s EU push for integrating regional historical narratives generated a political scandal in Romania, starting from a history textbook that was deemed anti-national through its “conciliatory” view on Hungarian history – when the Ministry refused to withdraw its support for the textbook the scandal escalated in late 1998-early 1999 almost to the point of votes of no confidence in the Government. What is however interesting is that given Romania’s candidacy bid, the “original culprit” – the EU, was never blamed, the proxy scape-goat for “eroding Romanian national history and culture” was “American globalization!” (Paraianu in Trencsenyi et al 2001, elsewhere I also pick up this topic of nationalism and post-communist Romanian politics at length – see Delcea 2014)

In addition, Kuzio argues that nationhood provides a collective power necessary for mobilization, which represents the backbone of transition (2001, 170). While this falls short to the literature on cushioning marketization by demobilization and pacification (Greskovits 1998, Vanhuysse 2006), it highlights that nationalist social contracts (Bohle & Greskovits 2012) are key to understanding which sectors were strengthened, opened or closed.  Nationalism qua political ideology selectively identified “desirable” sectors –in this sense the Visegrad states “returned to Europe” by building on functional, albeit not fully modernized, sectors of the pre-existing socialist economy (Greskovits in Beissinger & Kotkin 2014). By contrast, Baltic states legitimized the benefits of socially costly open market economies (Greskovits in Beissinger & Kotkin 2014) through a radical break with a perceived illegitimate soviet past, thus implementing citizenship-based segregation. In this line of thinking, the merger of nationalism and state paternalism can account for Romania’s protracted start and uneven structural reform overall.Incentives for accelerated breaks with the past do at least in part explain the decay or boom of certain industries – for instance the Romanian profile with foreign control traditional and light and resource-based industries, in a country with an essentially homegrown experience (Greskovits in Beissinger & Kotkin 2014).

All in all, production profiles are clearly not dictated exclusively by initial structures, but also by conscious political choices and the ideologies that legitimizes them, among which nationalism occupies a pivotal position. The precise interplay between pre-existing structural legacies, agency and post-socialist market contingencies is extremely hard to disentangle, but what does seem clear is that neither pillar alone is a sufficient and necessary condition.