The political economy of economic upgrading in Central Eastern Europe

The paper explores the political conditions favourable to economic upgrading in democratic non-corporatist emerging economies with a focus on CEE countries as characteristic examples. While the existing literature has assumed this polity type to be the least favourable for designing and implementing effective industrial policies because of a lack of bureaucratic ‘embedded autonomy’, the paper argues that this is not to suggest that such industrial policies and economic upgrading are rare in these economies, but rather that they involve different mechanisms of political mobilisation and support. To identify these mechanisms, the paper adopts a social bloc-based framework and applies it to an in-depth study of Estonia, a strong upgrader in the region in terms of its increased economic specialisation in ICT-based services. The paper finds that a lack of ‘embedded autonomy’ can effectively be supplanted by the embeddedness of private actors in the state administration and political decision-making through a network-based configuration of the social bloc and a shared upgrading ideology leading to a conflation of private interests with national development goals.