When the formerly Communist countries of Eastern Europe began their transformation into market-oriented economies, reforms in social programs and services were minor parts of the adjustment agenda. Government and public attention focused mainly on other issues: macroeconomic stabilization, the opening of the economy, privatization of enterprises.

Half a dozen years into their economic transformations, however, those countries which had reasonably effectively addressed many of the initial economic challenges of adjustment began to focus attention much more squarely on pension and health-sector reforms. Hungary adopted radical changes in its pension system in mid-1997. Poland designed a similar set of reforms in two packages, one passed before the elections and change of government in autumn 1997, and the second approved in autumn 1998. Latvia had adopted partial pension reforms somewhat earlier and is now expanding its reforms, while similar measures are moving ahead in Croatia, Estonia, Macedonia, Romania, and Slovenia.

A great deal of analysis has focused on the substance of these reforms and the merits and drawbacks of specific design components. However, the context, the goals, and the character of these reforms combine to pose formidable political challenges. This chapter focuses not on design but on the politics of social-sector reforms.

Social-sector reforms are usually ‘second (or third) generation” reforms in the broad structural adjustment agenda. They are likely to unfold in a quite different political climate than initial macroeconomic measures.