From Socialism to Capitalism

TitleFrom Socialism to Capitalism
Publication TypePublication review
AuthorsŠćepanović, Vera
Author(s) of reviewed materialKornai, János


PublisherBudapest: CEU Press
ISBN Number978-963-9776-16-6
Review year


Full Text

From Socialism to Capitalism, originally published in Hungarian in 2007 as Szocializmus, kapitalizmus, demokrácia és rendszerváltás, is a collection of eight studies written between 1990 and 2007, conceived as a reflection on the debates that arose with regard to the “end of post-communist transition” in East Central Europe. János Kornai acquired international acclaim as an early critic of state socialism, whose works, most notably Economics of Shortage(1980) and The Socialist System (1988), provided a novel theoretical framework for the analysis of the socialist economy and spurned new concepts that contributed to the understanding of economic planning in general. As an active participant and a meticulous analyst of the subsequent reform programmes both under and after the collapse of state socialism in Hungary, twenty years into the post communist transition in Eastern Europe, Kornai remains singularly well positioned to respond to another set of questions – those of the meaning and consequences of transition, and the lessons to be derived from this unique process in the political and intellectual arena.
Two major themes constitute the intellectual agenda of this ambitious volume. The first self-stated objective is to provide a “dispassionate, professional analysis”of the achievements of post-communist transformation, a discussion that was most recently triggered by the political upheavals in Hungary during 2006 and 2007, when the country took a rather sharp economic downturn after being extolled as the star performer of East European transition during most of the previous decade (p.IX). The second theme, which is only explicitly addressed in the last two articles but appears as a red thread throughout the volume, is an attempt to address the questions raised by many students of the region now that “transition” has moved out of the limelight of international academia: what, if anything, are the lessons from the study of post-communist transformation that remain relevant for the broader theoretical toolbox of the social sciences?
Kornai is fully aware of the weight of political tensions surrounding the “end of transition” – disappointment with the achievements of democracy and capitalism, lingering nostalgia for those elements of socialism that stood for relative economic and social security, as well as disaffection with political elites and their – real of perceived – mismanagement of the economy and society. This is precisely why he is at pains to “set the conceptual apparatus in order”, or in other words, to distinguish the analytical categories pertaining to the “positive assessment” of transition from the “normative” evaluation (p. 124). For this purpose, Kornai intentionally chooses a very narrow definition of both socialism and capitalism, where socialism is an economic system characterised by public ownership, bureaucratic coordination of the economy and a political monopoly of a Marxist-Leninist Communist party, i.e. “party whose ideology is inimical to capitalism” (p. 126). By contrast, capitalism stands for predominantly private ownership, market coordination of the economy, and a dominance of political power which is not adverse to capitalism. Democracy is not necessary for this arrangement, however, by a “stroke of historical luck” (p.132) economic and political transformations have occurred parallel in Eastern Europe and the criteria used for the “positive” assessment of the latter is that of Schumpeter’s procedural definition of democracy – a distinctly narrow one as well.
Although restricted through these definitions, the task is nevertheless daunting. Kornai uses the first four articles in the volume to rehearse his arguments about the “irreformability” of the socialist system as long as all three basic tenets are in place (due to the strong linkages between the three which render “combinations” of socialist and capitalist features impossible in his assessment), failures and instability of reform socialism, non-viability of “third forms” (i.e. “market socialism”), and the enormous policy challenges that presented themselves in the course of transition. Thus, drawing solely on the “necessary” conditions for transformation, he is able to conclude that the process has been exceptionally successful, given that it also happened relatively swiftly and with very little violence as compared to other “great transformations” in history.
This is not to say that Kornai is oblivious to the fact that by the “change of system” those disillusioned people on the ground usually mean more than the replacement of the basic tenets of the economy.[1] By relegating them into the “normative” wish list or “auxiliary” set of conditions for a successful transition to capitalism, however, he hopes to focus the discussion and thus identify the source of discontents more clearly – effects of the transformational recession, unrealistic expectations, idealised comparisons, even flawed policies, but not always, or not necessarily, the systemic characteristics of capitalism. To that effect, in the chapter on The Great Transformation of Central Eastern Europe, which is probably the most controversial and also the most interesting one in this volume, he also offers his own “normative” standpoint – by converting to capitalism and democracy, the countries of East Central Europe have returned to the “main directions of development of Western civilisation” (p.92) and thus “in the long run, the economic advantages of capitalism will also become manifest in Central Eastern European region.”
One is free to disagree with Kornai on this point, however, there is something to be said for redirecting the discussion from the ills of “incomplete” or “flawed” transition to the systemic effects of capitalism, or rather the kinds of capitalism that arose in East Central Europe. To what extent, then, does this particular understanding of socialism, capitalism, and transition provide theoretical tools for the wider study of political economy?
Kornai’s response to this second item on the book’s agenda is somewhat more ambivalent. The final chapter of the book is dedicated to outlining “the system paradigm,” an approach to understanding economic processes which stands at odds with the strict disciplinary divisions in the social sciences and, particularly, with the partial formal models that tend to be employed by contemporary economics. This systemic approach is concerned with the socio-economic organism as a whole, including the way it relates to its particular sub-systems, and is thus of necessity inter-disciplinary but also heavily focused on structures and institutions and not the more ephemeral events and processes. As a “broad brush” it cannot always account for minor fluctuations of the systems, but is all the more relevant for understanding larger transformations, for which it relies on broad historical comparisons. For Kornai, it was precisely the transition from communism to capitalism which proved the necessity for such an approach to complement standard economics, given the enormous and simultaneous transformation of the entire system.
While the proposal of “system paradigm” can be welcomed, especially in the realm of neoclassical economics, like his discussion of the “success” of transition it raises more questions than it manages to answer. The most nagging of all is Kornai’s own reluctance to apply his paradigm in understanding the post-transformation processes. Part of the problem is Kornai’s insistence on maintaining narrowly defined socialism and capitalism as ideal opposites, where “system” is reduced to a handful of basic characteristics, i.e. the "generic program" (p.19) consisting of political structure, property relations and type of coordination (p. 19). Focus on the “genetic program” provides us with a certain definition of a “system” but precludes transferability of conclusions – Kornai goes only as far in his chapter on the “lessons of transition” as to recommend them to the handful of still “classical communist” countries of the world. The greater problem is that once we leave the classical socialist system, the definition of the “system” – his basic unit of analysis – is up for grabs. Although presumably under socialism the genetic code accounts for an entire set of systemic characteristics that are similar across the socialist world, according to Kornai, in capitalism, “while all countries meet the three primary conditions, they may substantially differ in their secondary features” (p.128). Where, then, does the analysis of the “capitalist system” begin once its theoretical anti-thesis ceases to really exist?
Although Kornai does not mention them in this volume, the recent literature on the “varieties of capitalism” (see Withley:1999, Hall and Soskice:2001) and its somewhat more tentative application to East Central Europe and earlier “recombinant” approaches to transition (e.g. Stark and Bruszt:1998) might offer examples of the system paradigm as applied to the study of capitalism. These, however, almost necessarily go beyond the “genetic code” definition of the system to encompass those features that Kornai spurns as “secondary” to evaluating the achievements of the post-socialist transformation. Whether we speak of the vagaries of post-socialist reality or of capitalism in general, Kornai’s From Socialism to Capitalism does not always provide satisfactory answers. What it does, however, is to provoke pointed questions that might yet lead us to a better understanding of capitalism in East Central Europe.
Hall, P. Soskice, D., Varieties of Capitalism. The Institutional Foundations of Comparative Advantage (Oxford: Oxford University Press, 2001).
Stark, D., Bruszt, L., Postsocialist Pathways. Transforming Politics and Property in East Central Europe (Cambridge: Cambridge University Press, 1998).
Whitley, R. Divergent Capitalisms, The Social Structuring and Change of Business Systems(Oxford: Oxford University Press, 1999).

[1] The following quote is particularly illustrative: “I keep two accounts, not one, and I do not merge them. On one account, I gladly acknowledge great success on a level of world history: the system created is superior to the old and has arisen without bloodshed, at incredible speed. On the other account, I have the list of good and bad experiences in everyday life: much joy and much pain...[however]...I do not believe it to be possible, or for that matter permissible, to compile some kind of balance sheet on which to base a summary, comprehensive value judgement.” (p.119)