Department of Agricultural and Resource Economics

The Bulgarian land reform process is burdened by a fundamental tension between disruption and continuity. This tension arises from the dual roles played by the nomenklatura in the transition to a market economy. Both roles stem from their privileged status in the old order. While the nomenklatura have the potential to provide the agricultural sector with indispensable human capital, they also have the' potential to extract rents from the sector, thus undermining its competitiveness. Both the productivity of nomenklatura capital and their capacity to extract rents are diminished to the extent that the reform disrupts the established agrarian order. Thus in order to succeed, the agrarian reform process must sail between Scylla and Charybdis. Too much disruption degrades economic productivity, possibly to the extent of threatening the viability of the reform movement itself. Too much continuity skews the distribution of political power in favor of the nomenklatura, which may undermine the competitiveness of the nascent free market institutions. This chapter develops a formal political-economic model of this trade-off. The model challenges the conventional political economic wisdom that decoupling politics from economics will improve economic performance. In particular, we identify conditions under which the quality of the transition is enhanced by coupling the nomenklatura's acquisition of political power to the magnitude of the rents that they extract.