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Schultz D.
Administrative Law and Performance Reform of Government Agencies in Communist and Post-Communist States
Introduction. The implementation of a new Armenian Administrative Code (“Law of the Republic of Armenia On the Fundamentals of Administration and Administrative Procedure”) at the end of 2007 and the beginning of 2008 follows the path of many other post-communist states which also adopted administrative reforms to change their bureaucracies. In addition to many of these countries privatizing their state-owned industries, Krawchenko (1999, 136) argues: “Shortly after the fall of communism, almost all central and Eastern European States passed legislation establishing a civil service” (142-3). For example, the Ukraine parliament or Verkhovna Rada, adopted a new civil service law in 1993, calling on civil servants to respect democratic norms, rule of law, integrity, and professionalism. The goal in Ukraine was to root out patronage and encourage political neutrality (149).
Administrative law and civil service reform sought to control bureaucratic discretion (Brietzke 1994; Peerenboom 2001). But the introduction of administrative reforms was not singularly prompted by this. Multiple objectives, including addressing corruption, strengthening market reforms, enhancing political accountability, and state-building were all potential benefits that might flow from administrative law reforms. Efforts to use these reforms for these goals are not confined to post-communist states. Even the United States and many former communist states implemented administrative law or civil service reforms to achieve these and similar goals.
Reform of administrative decision-making and the civil service are often cornerstone efforts to improving government performance. The assumption is that the development of strong administrative law decision-making systems should facilitate respect for rule of law, precedent, and the protection of individual rights. Thus, many states have sought out administrative reforms to secure these purposes. Yet little is actually known regarding how successful these reforms are in meeting these objectives. Especially in the case of former communist-states as they transitioned to free market economies, they spent a lot of energy on administrative reform and the question is still open regarding how successful they have been.
This article is a first step towards an examination of the efficacy of administrative law reform in communist and former communist states. It reviews the arguments about why containing administrative discretion is necessary, the types of reforms that are needed, and what these reforms are supposed to achieve. The article looks at the different goals of reform in the United States and communist and then post-communist states. The focus then turns briefly to Armenia, examining its new Administrative Code, offering its reforms as a possible test to see if changes in administrative process and procedure can yield the changes many believe it should.
The Problem of Bureaucracies and Bureaucratic Decision Making. Max Weber and Karl Marx can be thought of as rivals, offering contending descriptions and critiques of Modernity. Marx is well known to many for describing the problems of industrial society as rooted in a capitalist mode of production. Capitalism threatened individual freedom by breaking the essential human relations and attributes that made it possible for individual growth and autonomy. However, Max Weber, especially in his “On Bureaucracy” in Economy and Society, examined the problems of Modernity as grounded in the dualities of bureaucracies and bureaucratic power.
For Weber, bureaucracy represents one of three sources of authority: traditional, charismatic, and rational-legal. A bureaucracy can be an exceedingly efficient mode of
organizing tasks, but it can also be an iron cage, serving as a threat to freedom. Bureaucratic rationality, its technical knowledge and superiority of skills, and its divisions of labor, all can make or transform administrative agencies into highly inefficient, cumbersome, and slow moving institutions hostile to change and unresponsive to its clients.
No matter what society or economic system we are in—communist or capitalist— bureaucratic domination is a problem and seeking to tame it is the source of numerous business books and books on government. The root pathologies of a bureaucracy include inefficiencies in decision-making, in serving customers or constituents, and in getting different parts of the bureaucracy to work together. To summarize, the inefficiencies are the problem of administrative discretion. Regularizing decision-making and confining discretion by placing limits on the power of bureaucrats so they cannot act in an arbitrary fashion is essential if its authority is to be confined.
Administrative Reform in the United States. In the United States efforts to define and constrain administrative discretion have occurred throughout its history. In part, the building of the American national government was accomplished by the creation of administrative structures. Efforts to tame the bureaucracy were essential because of the bureaucracy’s role in implementing laws, adjudicating disputes, and distributing benefits and largess. In the nineteenth century, early staffing of the federal bureaucracy through the spoils or patronage system led to corruption and inefficiencies; this leading to the adoption of the Pendleton Act, America’s first civil service act, in 1883. The growth of the American administrative state during the presidency of Franklin Roosevelt in the 1930s and 1940s led first to further expansion of civil service reforms, then to the passage of the Hatch Act in 1939 which limited the political activity of federal employees, and then to the adoption of the Administrative Procedure Act in 1944. All of these reforms sought to constrain or tame presidential power, promote neutral competence (political neutrality), and accommodate bureaucratic power with the goals of American constitutionalism (Schultz and Maranto 1998).
The United States Supreme Court contributed to this limiting of discretion with several of its decisions (Schultz 1994). For example, the government must have hearings prior to termination of benefits (Goldberg v. Kelly, 397 U.S. 254 (1970)). However, even with this due process or procedural requirement, the Court has given broad agency discretion to use rule-making versus adjudication when making rules (Securities and Exchange Commission v. Chenery Corp, 332 U.S. 194 (1947)). It has also charted out deference to reasonable agency interpretations of law if statutes are silent or Congress has not spoken on the issue (Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984)). But Chevron deference to an agency interpretation applies only if it is clear that Congress intended to give it the authority to make rules carrying the force of law.
The point here is that there is in the United States a well developed body of statutory and case law defining the boundaries of administrative discretion. These limits curb executive power, corruption, and protect individual rights through the development of procedural regularity, judicial review, and defining the proper boundaries between bureaucratic and other government actors. But given that the reforms in administrative law transpired at the same time the American administrative state was expanding to regulate the economy, they also served to build state institutions, improve their performance, and to enhance the economy by way of correcting market failures (Schultz and Maranto 1998).
Bureaucratic Discretion in Communist Societies. Administrative and civil service reform are not phenomena confined to the United States. They have also been undertaken in the European Union (EU) as part of an effort to integrate states and economies and create a common acquis. But administrative law reforms were also implemented in many of the former communist states of Europe and the former Soviet Union. Many of the communist
regimes initiated administrative reforms, including administrative complaint procedures, in order to improve the performance and efficiencies of the bureaucracies and their economies, and to address corruption.
Starting in 1982 Inga Markovits, in a series of five articles over 20 years, cogently documented the use of administrative law reforms in the Eastern European governments (Markovits 1982, 1986, 1989, 1996, 2004). While according to Ludwikowski (1991, 131) the “right of an individual to challenge the legality of administrative decisions was introduced by statutes in Yugoslavia in 1952, Hungary in 1957, Romania in 1967, and Bulgaria in 1970,” it was not until the 1970s that socialist governments began aggressively to use administrative complaint processes to address grievances against bureaucracies (Markovits 1989, 401). The ostensible goal was first to address corruption but also to “civic demoralization” (419).
For example, East Germany did not allow for citizen suits but created numerous informal and formal administrative complaint procedures for both workers and customers. Labor courts that they introduced did not vindicate individual rights but sought instead to strike a balance between rights of employees and employers. As a result if the latter, they led to the emergence of a procedural due process and regularity in how decisions were handled and settled. Similarly, the introduction of housing laws and grievance procedures for evictions developed a concept the notion of due process and right to be heard requirements before evictions. Finally, planned economic contracts involving disputes between suppliers and buyers also became subject to administrative grievances (Markovits, 1986, 724).
In 1980, five years before Gorbachev's rise to power, Poland became the first socialist country to establish a separate administrative court system. In 1981, Hungary enlarged its very limited list of justiciable administrative issues dating from 1957 (Markovits 1989, 402). Overall, Poland, East Germany, and even the Soviet Union in the middle to late 1980s introduced mechanisms to strengthen the ability of citizens to contest state administrative decisions. They ranged from introducing or strengthening administrative law processes, allowing lawyers to accompany clients, or permitting judicial review to oversee bureaucracies.
While addressing corruption and to a lesser extent bureaucratic performance were the reasons for these new procedures and processes, Markovits also saw within these movements the emergence of a “second legality” within the socialist system that resulted in a vindication of rights. This suggested a potential challenge to socialist legal systems.
Rights will more readily be officially recognized in those areas where success really counts. This will obviously be the case in politically vital areas of law, such as economic or administrative law. In their struggle for performance, socialist governments will have to decide whether they want to protect political authority from legal challenges from outside or whether they want to accept modes of regulation which might ensure a more effective utilization of individual autonomy and egotism than the orthodox socialist combination of centralized orders, prohibitions, sanctions and rewards (Markovits 1982, 608).
The challenge that these new administrative procedures posed was systematic. By that, the emergence of the second legality that Markovits talked of produced a larger movement in the socialist or communist states to take individual rights and rule of law more seriously. Yes, judicial review and administrative due process would serve as ways to check bureaucratic discretion that resulted in corruption and other inefficiencies, but they would also ensure that government institutions would be more responsible to the policy-making bodies of their respective countries. It would help foster a limit on bureaucratic power, and therefore establish the type of regularity that Weber saw as necessary to checking this type of authority.
As a result, as in the United States, this checking of bureaucratic power theoretically realigned state institutions.
Even in the Peoples’ Republic of China, efforts to improve the performance of state agencies and businesses have emphasized the need to address bureaucratic discretion (Peerenboom 2001). In an effort to overhaul state institutions China has sought to strengthen rule of law, develop laws against corruption, improve its civil service, and develop other mechanisms to change its bureaucracies (Buhmann 2001).
Administrative Law Reform in Post-Communist States. While administrative reforms were introduced in many socialist states, these efforts continued, introduced, or accelerated in post-communist states for many of the reasons noted above. Procedural regularity is necessary to address corruption, which appeared pandemic in these societies due to clientelism and other factors, and for the promotion of accountability (Polokhalo 1997, 164-5). But administrative reforms also facilitated democratization of regimes and the introduction of market economies in post-communist societies.
According to Brietzke (1994, 53): “Presumably, the key public-law question in Eastern Europe today becomes how can better performance be elicited from the public sector and the emerging private sector, in the service of local democratic preferences? Answers to this question lie more in the realm of administrative law than in a (hopefully) rigid constitutional law.” How did these post-communist states respond to this question? Many used privatization as one option. But it was also through numerous legal and institutional changes, including those within the administrative realm. According to Russell-Einhorn, Lubbers, and Vedet (2002, 459-460):
In the decade following the fall of Communism, many transition countries have struggled to develop systems of governance that are equal to the task of supporting and regulating their new market economies. This involves a major reconstruction of their systems of public administration and the creation of various kinds of accountability mechanisms that can bring bureaucracies that once operated with relative impunity under some degree of meaningful public control. Limiting bureaucratic discretion is viewed as having the potential to increase simultaneously the predictability and fairness of regulatory processes.
In their examination of post-communist reforms in Latvia, Russell-Einhorn, Lubbers, and Vedet argue that many of the changes were necessary not simply for the sake of improving government performance but also for helping to facilitate and introduce the role of the free market in this country. Improvements in rule of law, transparency, and the regulatory capacity of the bureaucracy are necessary to encourage business investment and address market failures.
A second force driving administrative changes is globalism. According to Aman (2002), globalism challenges all countries, not just post-communist ones, in that it puts emerging economic processes against traditional governing structures. By that, distant economic forces challenge the capacity of parliaments and bureaucracies to make policy and regulate, necessitating them to respond to distant forces beyond their control. For Aman, all of this led to a “democracy deficit” driving reforms in public administration.
Third, Goetz (2001), Papadimitriou and Phinnemore (2003), and Craig (2006) argue that the integration of post-communist states into the EU, or even trade or closer alignment (if not integration) into it have been an impetus to make administrative changes. Adoption of the acquis of the EU, which is part of the goal of EU integration, produces an Europeanization of the law that builds a set of common institutions across its member states and those who have
frequent contact with it Papadimitriou and Phinnemore (2003, 4-5, 10). Building state and common administrative institutions committed to transparency, accountability, openness, and increased market performance requires states to submit to state institutional changes in their bureaucracies and governance. This Europeanization also brings with it judicial review by the European Court of Justice and, in many cases, also to the European Court of Human Rights.
Finally, in the case of the unification of the two Germanies, Goetz (1999, 85-6) contends that administrative law reform was instrumental to helping dismantle democratic centralism and replace one governed by rule of law. Without establishing rules for the merger and operation of these bureaucracies into one common governing administration, unification of Germany would have been impossible.
Overall, as Goetz (2001) contended, administrative law and civil service reform was necessary both to promote modernization and Europeanization of the former communist states. But he worries that the reforms were not complete, but more isolated, resulting in what he calls the Latinization of bureaucracies where only partial reform occurred. Goetz’s piece is important. It raises perhaps the most critical question: How successful were the administrative reforms and what did they actually accomplish?
Administrative Law Reform in Armenia. Goetz’s question is challenging and it brings this article back to Armenia. Armenia is one of the former Soviet republics still seeking to transition from a communist to a post-communist state. Like other transitional postcommunist states, it experiences high levels of corruption (Stefes 2005, 9). According to Transparency International, in 2003 it has a score of 3.0 and was ranked, 78th on its Corruptions Perceptions Index. In 2004 it had a score of 3.1 and was ranked 82nd, in 2006 it had a score of 2.9 and was ranked 93rd, and in 2007, it had a score of 3.0 and was ranked 99th. Armenia is this perceived to be corrupt and it has stagnated in efforts to address this problem.
Like other former communist states, it has employed both privatization and administrative reforms to address this corruption. Armenia is the latest state to usher in administrative law reforms, prompted in part by the examples of other states which have done the same. Two events underscore Armenia’s recognition that administrative reform is important to its country’s development. First, Armenia, along with several other states, adopted the Anti-Corruption Action Plan for Armenia, Azerbaijan, Georgia, The Russian Federation, Tajikistan, and Ukraine (OECD 2005). Pillar I of the plan calls for administrative law reforms that include open, efficient, transparent, and politically neutral civil service systems free of corruption; ethical codes of conduct, appropriate oversight of discretionary decision-making, disclosure, conflicts of interest laws, and performance measures. Pillar II addresses corruption, calling on the passage of new criminal and other laws to address it. Second, on February 18, 2004, Armenia adopted a new administrative code embodying many of the ideas found in Pillar I, and which are also found in many other European and EU rules. While detailed analysis of the Code is not possible here, a few comments are in order.
First, Chapter I, Articles 5, 6, and 7 all are directed at abating abuses of discretion. Article 7, “Prohibition of Arbitrariness,” for example, states: “Administrative bodies shall be prohibited from manifesting unequal treatment towards the similar factual circumstances, unless there is any ground for their differentiation.” Article 38 guarantees a right to be heard. Article 23, “Representation in an Administrative Proceeding,” provides that “Proceeding participants may take part in an administrative proceeding independently, through their representatives or together with them”. The two clauses grant standing and representation. Articles 24 and 25 define conflicts of interest and situations when administrative judges must recuse themselves from making decisions. Chapter 6 in general outlines the procedures for conducting hearings, including burdens of proof, evidence, and how testimony is handled and heard.
Among other sections of the Code, Article 8 requires administrative rules, orders, and decisions to comply with the Armenian Constitution and other applicable laws. Article 11 mandates that administrative agencies act to maximize efficiency. Articles 28 and 29 require a written public record of hearings, and Articles 36 and 43 impose a mandate to render decisions in a timely fashion. Finally, Article 110 defines remedies for violations.
But far more important is how the new Armenian Administrative Code seeks to limit bureaucratic discretion by introducing the concept of precedent and judicial review of administrative actions. Article 7 states: “If administrative body has exercised its discretionary power in a particular manner, then, in similar cases in the future, it is obliged to exercise the discretionary power in the same manner.” If the concept of precedent, which is now foreign to Armenian law, is accepted and followed up by judicial review the two together potentially can improve the performance of bureaucracy and root out corruption. Additionally, as in other post-communist states, it could also confine administrative discretion and executive power and therefore strengthen courts, protecting rights, and enable ruling of law to become more fully developed in this country.
Conclusion. States employ a variety of techniques to address administrative discretion. These reforms may include privatization of bureaucracies, but as seen from the examples of many of the communist and post-communist states, administrative law and civil service reform have also been implemented to address corruption, inefficiencies, and to engage in state building. While much effort has been placed on these reforms, little empirical research has been produced demonstrating their efficacy. As Armenia becomes yet another country following the path of administrative reform, its implementation of its new Code should be an invitation for scholars to develop a research agenda seeking to determine if, how, and under what conditions these types of reforms produce yield the results promised.
Notes:
1. The author of this article taught as a Senior Specialist Fulbright Scholar at the American University in Yerevan, Armenia in the spring, 2007.
References:
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