1. Thirty-five years of transition: a discussion in Belgrade
At the World Congress of the International Economic Association in Belgrade in June, I attended an invited academic session with Jan Svejnar of Columbia University, provocatively titled Performance of the Transition Economies 35 Years Later. Svejnar presented a rich comparative picture of what had happened to the former socialist economies since the beginning of transition. But what stayed with me afterwards was the terminology itself. More than thirty-five years after the post-socialist transformations began in Central and Eastern Europe, we were still discussing transition economies. It raised a rather obvious question: how long can an economy remain in transition?
The evidence presented at the session made the question particularly pertinent. There has undoubtedly been convergence. Across much of Central and Eastern Europe, GDP per capita has grown considerably faster than in the older EU member states. Yet convergence has been strikingly uneven, leaving large and persistent differences across the post-socialist economies. These differences extend beyond GDP per capita to wages and productive structures. Perhaps the most telling observation came at the end of the presentation: thirty-five years after the process began, no post-socialist economy has yet reached the EU average in either GDP per capita or median wages.
None of this means that the concept of transition was meaningless. In the early 1990s it described an extraordinary historical transformation with reasonable accuracy. Economies based predominantly on state ownership and administrative allocation were dismantling their existing institutions and creating markets, private property, commercial banking systems and new relationships with the international economy. Something was quite literally being transformed into something else.
But the discussion in Belgrade made me wonder about an assumption embedded in the concept that we rarely make explicit. During the discussion, I asked what seemed to me an increasingly difficult question: what exactly is the normative endpoint of a successful transition? Do we expect Serbia, Albania or North Macedonia eventually to become Switzerland or Luxembourg? And, if so, is that remotely realistic? If not, against what destination are we measuring their “transition”?
The question matters because transition implies not merely change but movement towards some destination. In much of the early transition literature that destination was a functioning market economy, usually with the developed capitalist economies of Western Europe serving, explicitly or implicitly, as the benchmark. But Poland, Czechia, Estonia, Slovenia, Serbia and Albania are no longer economies waiting to become capitalist. They are capitalist economies. If substantial differences among them persist after thirty-five years, describing those differences primarily in terms of how far each country has progressed along a common transition path becomes increasingly problematic.
The more interesting question, then, is no longer whether these countries have successfully “completed” their transition, but what kinds of capitalism emerged from it, why the outcomes have differed so greatly, and why those differences have proved so persistent.
2. Did transition produce convergence?
The expectation that the poorer post-socialist economies would gradually catch up with Western Europe was not unreasonable. It drew on two related but distinct ideas. The first came from the liberal economic critique of central planning, from Mises and Hayek onwards: markets and private ownership were expected to allocate resources more efficiently than administrative planning, while competition and greater openness would strengthen incentives for productivity and innovation. This intellectual tradition strongly influenced the economics of transition in the 1990s. The second came from conventional growth theory. As Robert Solow argued as early as the 1950s, diminishing returns to capital created the possibility for poorer economies, under certain conditions, to grow faster than richer ones. They could also adopt existing technologies rather than develop them from scratch, while lower labour costs could attract investment and facilitate industrialization.
European integration appeared to strengthen these mechanisms enormously. Post-socialist economies gained access to Western European markets, capital and technology and, eventually for many of them, EU structural funds and the free movement of labour. Foreign direct investment connected Central and Eastern European producers to European production networks. If ever there were favourable conditions for economic catch-up, much of post-socialist Europe seemed to have them.
And convergence did occur. To deny this would be to replace one simplification with another. Czechia and Slovenia moved much closer to Western European income levels; Poland and the Baltic economies also experienced remarkable catch-up, while Romania and Bulgaria narrowed the gap substantially. Yet more than three decades of development have produced a persistent hierarchy rather than convergence towards a common position. The Western Balkans in particular remain much further behind.
As Figure 1 shows, all seven post-socialist economies in this comparison moved closer to the EU-14 average over the past quarter-century, but they did so from very different starting points and without eliminating the large gaps between them. There has been convergence towards the Western European benchmark without corresponding convergence among the post-socialist economies themselves. Their relative positions have proved remarkably persistent.
Figure 1. Convergence without a common destination: real GDP per capita relative to the EU-14, 2000–2025
These differences are too persistent to be treated simply as temporary distances along the same transition path. Nor is it particularly helpful to describe them as evidence that some countries “succeeded” in transition while others “failed”. Serbia today does not have half a market economy because its GDP per capita remains far below that of Austria. Albania is not waiting for another round of privatization before capitalism can finally arrive. The institutional transformation that the term transition originally described has, in its essential features, already taken place.
The persistence of these differences suggests that convergence itself tells us only part of the story. The question is not simply how far countries have travelled towards the Western European benchmark, but what economic structures have emerged along the way.
3. What did transition produce? From transition paths to accumulation regimes
Once we stop treating the differences among post-socialist economies simply as different stages of transition, another way of looking at them becomes possible. All these economies are capitalist, but they are not the same kind of capitalist economies. What emerged after state socialism was not a single economic model at different levels of completion, but systems with different ownership structures, sources of investment, productive specializations and relationships with international capital.
This point is hardly new. In Transition Economies: Political Economy in Russia, Eastern Europe, and Central Asia, Martin Myant and Jan Drahokoupil identify several distinct types of post-socialist capitalism. Their approach is particularly useful because these differences are not reduced simply to institutional quality or the speed of reform. Attention shifts instead to how the resulting economies actually function: where investment comes from, what they produce and export, how they are connected to international markets, and which economic and political actors sustain these arrangements.
The divergence extends well beyond the European cases considered here. Recent work by Calumn Hamilton and Gaaitzen de Vries, for example, finds strikingly different patterns of structural transformation in Central and Eastern Europe and the former Soviet Union: structural change contributed positively to productivity growth in the former but negatively in the latter, despite stronger within-sector productivity growth in the FSU.
For my purposes, this suggests moving the analysis from transition paths towards accumulation regimes. The concept, developed within regulation theory and elaborated by Robert Boyer in Économie politique des capitalismes, directs attention to who owns and controls productive assets, how investment is financed, where technological capabilities and higher-value functions are located, how economies are incorporated into international production networks, and how the resulting income is distributed and reinvested. It also asks what role the state plays in creating and reproducing these arrangements.
Seen from this perspective, some features conventionally interpreted as signs of incomplete transition look rather different. Consider Serbia. Its development model over the past two decades has relied heavily on foreign direct investment, relatively inexpensive labour, state incentives to investors and integration into European and global production networks dominated by foreign firms. This has expanded manufacturing exports and employment. But it has also produced a particular structure of accumulation. Foreign-controlled enterprises accounted for more than a quarter of total investment in Serbia already in 2020, while generating around one fifth of total value added. Important technological and strategic functions remain outside the country, while the growing stock of foreign investment generates substantial income outflows. In 2025, foreign investors received €2.7 billion in dividends and similar distributions and €374 million in interest, while another €1.8 billion in profits was reinvested in Serbia.
These figures illustrate the dual character of the model: foreign capital finances domestic accumulation while also creating substantial income flows accruing to non-resident owners. In earlier work with Boris Kagarlitsky, using data for Albania, North Macedonia and Serbia, we found that FDI inflows were associated with growing capital outflows and the crowding out of domestic investment, suggesting that foreign investment can support accumulation while reinforcing dependency. Nor is the state absent from this process. It actively sustains the model through investment subsidies, infrastructure and other forms of support intended to maintain the country’s attractiveness to internationally mobile capital.
These characteristics need not disappear because Serbia completes another reform agenda, improves another set of institutions or advances further towards EU membership. They may instead be mechanisms through which the existing economic model reproduces itself. What appears through the lens of transition as an intermediate stage on the road towards a more advanced market economy may, through the lens of political economy, be a relatively stable accumulation regime.
This does not make institutions, policies or political choices unimportant. Recent work by Milojko Arsić, Saša Ranđelović and Aleksandra Nojković, for example, shows that government policies and institutional conditions remain important determinants of growth across the emerging economies of Europe and Central Asia. The point is rather that institutions themselves form part of particular accumulation regimes and cannot be treated simply as measures of how far a country has travelled along a predetermined transition path. They reflect and help reproduce particular relationships among states, domestic capital, labour and international investors.
The persistence of the hierarchy shown in Figure 1 therefore becomes less puzzling. If post-socialist transformation produced different and partly self-reproducing accumulation regimes, another decade of “transition” need not make them converge upon the same model. The more difficult question is why particular regimes emerged where they did, and why some countries have remained much closer to the European economic core than others.
That takes us beyond transition itself, to the relationship between centre, semi-periphery and periphery.
4. Why have the differences persisted? Centre, semi-periphery and periphery
If different accumulation regimes emerged from post-socialist transformation, the next question is why they have proved so persistent. Domestic institutions and policy choices clearly matter, but they cannot provide the whole explanation. As Samir Amin argued in his analysis of accumulation on a world scale, development and underdevelopment are relational processes, shaped by the different positions economies occupy within a common capitalist system. Post-socialist economies developed through incorporation into a much larger European and global capitalist economy in which countries occupied very different positions.
This suggests another way of looking at the hierarchy shown in Figure 1: through the distinction between centre, semi-periphery and periphery. These categories are not simply another ranking of rich, middle-income and poor countries. They describe relationships. A peripheral economy is peripheral not merely because it is poorer or less productive, but because of how it is connected to more advanced economic centres: through ownership of capital, control over technology, positions within production networks, trade and financial flows, and the movement of labour.
Serbia illustrates the depth of these relationships. In 2025, EU member states accounted for 58.3% of its merchandise trade and 72.2% of FDI inflows. Despite growing links with China and other partners, Serbia’s production structure remains deeply intertwined with the European economy. This integration has expanded exports and employment, but integration into international production networks often takes place through activities in which higher-value functions remain elsewhere. In manufacturing, this has included labour-intensive assembly and component production; even in ostensibly high-technology sectors such as IT, Serbian firms frequently provide services to foreign companies, while ownership of the final product, intellectual property, market access and strategic control remain abroad. Foreign capital finances domestic accumulation while generating income for non-resident owners; migration brings remittances while transferring labour and skills towards higher-productivity economies. Integration can therefore promote convergence while reproducing unequal positions.
I have discussed this paradox elsewhere in relation to Serbia as a “super-periphery” and, more broadly, in The Capitalism of the Good. The point is not that integration is inherently harmful, but that development is relational: the opportunities available to an economy depend partly on its position within a wider system in which capital, technology and higher-value functions are unevenly distributed.
This also complicates explanations based primarily on the quality of domestic institutions. Czechia’s integration into European manufacturing, Poland’s combination of foreign investment with a large domestic market and stronger domestic firms, and Serbia’s more dependent, FDI-led model cannot be explained simply by differences in institutional quality scores. Geography, inherited productive capacities, market size, technological capabilities and the strategies of multinational firms have also shaped what kinds of activities developed where. Institutions and policies matter, but they operate within these structural opportunities and constraints.
There is a deeper historical puzzle. The hierarchy that emerged after 1989 bears a striking resemblance to economic divisions that predate state socialism. Central European economies historically closer to the industrial core of Western Europe generally occupy stronger positions today than much of southeastern Europe and parts of the former Soviet space. Socialism profoundly transformed these societies, industrialized predominantly agrarian economies and attempted to reduce inherited inequalities. Yet its disappearance did not place every country on an empty playing field.
This is not to suggest that contemporary positions were fixed a century ago. Countries can and do change them. But the persistence, and in some cases re-emergence, of older spatial hierarchies raises an important possibility: post-socialist transformation may have changed the mechanisms through which European uneven development operates without eliminating the underlying structure of centre and periphery.
Seen this way, thirty-five years of uneven convergence becomes less mysterious. Countries are not simply travelling at different speeds towards the same destination. They occupy different positions in international production and accumulate capital through different relationships with one another. Their persistent differences may therefore reflect not how far they have progressed along a common path, but the different positions they occupy within the wider European and global economy.
5. Transition to what?
So where does this leave the idea of the transition economy? Thirty-five years of experience suggest three conclusions. Transition produced convergence, but it was partial and uneven, leaving a persistent hierarchy among post-socialist economies. It produced not a single market economy at different stages of completion, but different forms of capitalism sustained by different accumulation regimes. And these outcomes reflect not only domestic institutions and policies but different positions within European and global structures of centre, semi-periphery and periphery.
Alec Gevorkyan’s recent announcement of the Spanish edition of his Transition Economies, originally published in 2018, provides a fitting occasion to reconsider the category itself. His book ranges across Central and Eastern Europe and the former Soviet Union, bringing under the same analytical heading economies whose post-socialist trajectories have become extraordinarily diverse. That makes the question all the more pertinent: how much longer should countries whose capitalist economies have been functioning for more than three decades continue to be defined primarily by the system they left behind?
This does not mean that the study of transition has become irrelevant. Quite the contrary. How state socialism was dismantled, markets and private ownership were established, assets redistributed and new institutions created remains essential to understanding why today’s economic systems look the way they do. But this is increasingly a historical and causal question. Transition belongs to the explanation of how the present emerged rather than to the description of what these economies are today.
The analytical task now is to understand the forms of capitalism that emerged from that transformation, the accumulation regimes that sustain them, and the relationships that reproduce their very different positions within the European and global economy.
Perhaps, after thirty-five years, it is time to declare the transition completed and start studying its outcomes.