Tag Archives: János Kornai

Vulnerable Democracies — An interview with János Kornai

János Kornai, professor emeritus at Harvard and Corvinus, is the foremost economist in Hungary today. Several of his books have been translated into English, including a book that made him a maverick in the tightly centralized planned economy of the 1950s titled Overcentralization in Economic Administration (Oxford University Press, 1959). He is also the author of Anti-Equilibrium (Amsterdam: North Holland, 1971; 2d ed., 1975 in English); Rush versus Harmonic Growth (Amsterdam: North Holland, 1972); Growth, Shortage and Efficiency (Oxford: Basil Blackwell and Los Angeles: University of California Press, 1982); Road to a Free Economy. Shifting from a Socialist System: The Example of Hungary (New York: W. W. Norton, 1990); Vision and Reality, Market and State: New Studies on the Socialist Economy and Society (New York: Routledge, 1990); The Socialist System. The Political Economy of Communism (Princeton: Princeton University Press and Oxford: Oxford University Press, 1992);  and By Force of Thought. Irregular Memoirs of an Intellectual Journey (Cambridge-London, The MIT Press, 2007), his autobiography. Professor Kornai has been awarded honorary doctorates from dozens of prestigious universities.

The online version of the interview that follows appeared in two installments in HVG on December 28 and 29. The first bears the title “Immovable powers, autocracies and their Hungarian variation.” The title of the second is “There is no way Viktor Orbán’s government can be removed peacefully.”

This interview, conducted by Zoltán Farkas, originally appeared in the print edition of Heti Világgazdaság, vol. 2016/41 (October 13), pp. 10-13. In the online version only Zoltán Farkas’s questions and János Kornai’s answers are presented. The Hungarian original also includes a map and a summary of the central ideas. The latter are not presented here as both are available in the longer paper “The System Paradigm Revisited” in Acta Oeconomica vol. 4, (2016). The interview was translated by Dóra Kalotai and Christopher Ryan. Zoltán Farkas and János Kornai are indebted to them for their careful translation.

Hungarian Spectrum has had the privilege of publishing a number of János Kornai’s shorter works in English, either in full or in summary form. For example, his essay on “Centralization and the Capitalist Market Economy,” “Threatening Dangers,” “Hungary’s U-turn,” and “Breaking Promises, The Hungarian Experience.” I’m grateful to Professor Kornai for permission to publish this interview.

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Source: HVG / Photo by István Fazekas

It was six years ago when you first wrote that many important basic institutions of democracy in Hungary had been dismantled, and Hungary had become an autocracy. Now, in a study recently published in Közgazdasági Szemle, you have already summarized the characteristics of autocracies. Has your previous premonition been proved correct?

I feel I have been proved completely correct. Usually, a researcher is filled with pride when he is among the first to recognize a tendency. My pride, however, is overshadowed by bitterness, because the fact that my predictions have come true makes me depressed and bitter.

But Hungary is not unique in this sense. You write that barely one-tenth of the population of the 47 post-socialist countries live in democracies and fifteen percent in autocracies, while the vast majority live in dictatorships. It’s almost as if democracy was the exception. Were we chasing illusions at the time when the regimes changed?

If we start from the knowledge that we possessed at the time of the regime change, based on the experience of democratization carried out in other countries, our hopes for a more successful development – compared to what actually happened – were not just an illusion. It is worth taking a look at the two largest countries, China and Russia. In the latter the elements of democracy were beginning to emerge, free elections were held, and under the leadership of Yegor Gaidar a liberally inclined government was formed. But it did not last long. Anti-democratic elements came to the fore, led by Vladimir Putin, who established his own autocratic system. Repression grew heavier and heavier. China is another story. Perhaps for a while it was not only an illusion that it was, even if slowly, making progress towards democracy. The example of Taiwan is well-known: a tough dictatorial system gradually turning into a democracy. But in China events did not take this turn. How a regime defines itself is always revealing; according to the Chinese regime, theirs is “a socialist market economy with Chinese characteristics.” In my interpretation, on the other hand, China’s system is a capitalist one, even if the ruling party calls itself communist. And politically they have a dictatorship: a one-party system, without elections, with terror. Among countries that changed their regime, democracy has stabilized in very few places as well as it has in the Baltic states. Since 2010,  many fundamental institutions of democracy have been demolished in Hungary, and an autocratic regime has come out on top. Poland has taken the first steps in the same direction, but that particular match has not yet been played out. The abandonment of democracy is a threat in the other post-socialist countries of Central and South-eastern Europe as well.

Which are the characteristic features of autocracy, the marks that set it apart?

Before anything else, I have to say that there is no consensus on the interpretation of democracy, autocracy or dictatorship among political scientists, politicians and people working in the media. There is complete conceptual chaos; I can’t even begin to hope things can be put in order here. Thus I shall undertake a more modest task: I would like to supply my readers with a sort of explanatory glossary of what I mean by these expressions. The main distinguishing characteristic of autocracy can be linked to Joseph Schumpeter, one of the most significant thinkers of the 20th century. Many authors, among them Samuel Huntington, follow his lead in viewing democracy as a procedure: a course of actions in which the government can be removed in a civilized way: legally, without bloodshed. This is in contrast with non-democracies, in which the change does not take place in a civilized fashion, nor does it usually happen without blood being shed. For instance, the tyrant is assassinated, or his regime is overthrown by a palace revolution. An example of the latter case was when the First Secretary of the Soviet Communist Party, Nikita Khrushchev was removed from power by his opponents within the Party. In other places the change of regime happens in the wake of a military coup or when a revolution by the masses threatens. If the government cannot be removed or is, to use an everyday phrase, cemented in place, there is autocracy. Schumpeter and others following him, myself included, restrict the name democracy to that politico-governmental form, and only that form, which guarantees that the government can be voted out of office. This is the minimum requirement. The other point is that in an autocracy the ruling group dismantles those checks and balances which would offer a realistic chance of forcing the government to correct its mistaken measures between two elections, and of changing the government at elections.

Fareed Zakaria defined as ‘illiberal democracies’ those systems in which the government came to power via legal elections, and has maintained the outward forms of democracy, but has systematically dismantled the checks and balances. You maintain that there are no illiberal democracies. Why?

When he first wrote about the topic Zakaria did not concentrate on the possibility of voting out the government, but rather on how the majority voted during the election, and on how the winners would uphold certain democratic structures later on, but dismantle others. When the Hungarian prime minister introduced the concept of illiberal democracy into public discourse at Tusnádfürdő, Zakaria, disagreeing with Orbán’s interpretation, refined the explanation of the notion. Personally, I consider this concept a dead end: illiberal democracy is like an atheist pope: the adjectival structure itself is contradictory. In my view all democracies are liberal. I lost my taste for concepts of democracy with an adjective when the communist dictatorship referred to itself as a ‘people’s democracy’, clearly distinguishing itself from the so-called ‘bourgeois’ democracies. But let us return to the significance of checks and balances. Let’s consider the case of President Nixon in the United States, who felt inclined to ‘consolidate’ his position, and had his political rivals bugged, but after being exposed was unable to get his Republican party colleagues, the attorney general or the chairman of the House Judiciary Committee to stop the proceedings against him. The representatives were not bound to a ‘party line’: they wanted to find out the truth – the checks and balances functioned. These are necessary in a democracy. Just like a free press, in which the voice of the opposition is at least as powerful as that of the government. At the same time, it is also true that democracy is vulnerable because the enemies of democracy can also make use of fundamental rights – the freedom of the press, the rights of assembly and association. Those who have built an autocratic order have learned from this. They do not allow themselves the luxury of being voted out at an election where there is the real possibility of a variety of outcomes.

But if this is so, why is it not a dictatorship?

Dictatorships and autocracies do share some common features. One is that in every important issue; indeed, often even in less significant matters, it is the leader who makes decisions. But there are also significant differences. A dictatorship abolishes the multi-party system by law as well. The opposition is not weak; it is non-existent. It is driven underground. In contrast, opposition forces are allowed to function in an autocracy. Autocracies also make use of intimidation, but they do not go as far as extracting confessions by torture or executing large numbers of people. Many people have good reason to be afraid in autocracies as well because they may be thrown out of their jobs or become victims of character assassination; maybe they will be arrested on trumped up charges. But anybody who believes that there is only a difference of degree between autocracy and dictatorship has not yet lived under a dictatorship. Having said this, autocracies do have a tendency to turn into dictatorships. Maybe modern Turkey will illustrate this, almost before our very eyes. We shall see whether they reach the stage of complete, total dictatorship.

You did not list nationalism as one of the characteristics of autocracy. In Hungary, however, one has the impression that they go hand in hand.

I tried to mention only those characteristics of autocracy that appear exclusively in this political-governmental structure; that is, the features which differentiate it from democracy and dictatorship. An obvious counter-example would be corruption, which can be observed in all three types. Innumerable cases of corruption crop up in certain democracies, while there are puritan dictatorships in which money cannot buy everything. Unfortunately, nationalism is another anomalous phenomenon: democracy does not make us immune to it. One of the most tragic examples of this is the period of World War I, when a wave of nationalism swept through both sides; through both of the coalitions that were to go to war against each other. It was a nationalist thirst for revenge that was at work in the politicians of Western European democracies when they imposed humiliating and impossible peace terms on Germany. In this context, to take a great leap through history, the Trump phenomenon is worth mentioning. One of the great parties of the United States nominates the extreme nationalist Trump for the presidency. Even if he does not win the elections, the political camp that supports him will remain strong, and because the United States is a democracy, they will make their voices heard. Recently, a strong wave of nationalism has been felt in Great Britain as well.

What is your impression of Hungarian nationalism?

I am really worried about it getting stronger, not for myself, but for the future of the country. Because I do not deny that in Hungary autocracy and nationalism go hand in hand. An autocrat is indeed able to turn the wave of nationalism to his own advantage; Trump is doing the same. The main element of his rhetoric is xenophobia, especially against Latin Americans. He adds that the gates are too wide open also to immigrants from overseas, and rejects President Obama’s suggestion that ten thousand Syrian refugees should be allowed to the country. By the way, communist dictatorships that advocated internationalist theories were nationalistic as well. Non-Russian minorities were oppressed in the Soviet Union, and the same can be said of non-Chinese ethnic groups and speakers in China. Nationalism exists in both dictatorships and democracies, not only in autocracies.

In this conceptual framework why do you define Viktor Orbán’s system as an autocracy?

Because it bears in itself all the important characteristics of autocracy, both its primary and its secondary features. This period started with the leader announcing that he intended to establish a system which would last for at least ten or twenty years. He declared that he wanted to cement himself in place. Since the day he came to power, he and his party have been continuously dismantling the system of checks and balances. Not like in a revolution, when they take over every powerful position at the same time, but step by step. Every week, something has happened. One of the first things they did was to reduce the Constitutional Court’s sphere of authority and pack the Court with people connected to Fidesz. Then came the new media law, which created almost endless opportunities for government propaganda. They also took over a significant part of the private media. The bureaucratic dismantling of checks and balances is combined with the use of market methods. The process culminated in the changing of the law on elections.

You write that the interplay of anti-market and anti-democratic elements has formed Orbán Viktor’s system into a coherent one; the mechanism of the state does not work according to the rules of the capitalist market economy. So how does it work?

Even in democracies it is taken for granted that the market cannot be left entirely to its own devices: there is not a single economist with any common sense who would oppose some regulation here and there when there is a real reason for it. In cases of monopoly, state regulation is clearly necessary. Even then, mistakes can be made. For example, the authorities may set prices too high or too low because they don’t understand the situation or are incompetent. Too high, and whoever is running the monopoly will make a handsome profit; too low, and they will make a loss. It is possible for regulation to be done badly as a result of incompetence, but it can also happen if other people’s interests, for example. cronies’, are prioritized. A business can be ruined through regulation so that a friend or client can buy it up cheaply. The tendency towards regulation that is not compatible with the functioning of the market is one of the characteristics of an autocracy. The Hungarian government exercises far more regulatory power than would be reasonable. There are numerous possible underlying motives for their unnecessary, excessive and – not infrequently – distinctly damaging interventions. On the one hand, the central authorities wish to extend their power across as many activities as possible. The knowledge that “I control everything: nothing can happen without me” is a very powerful motivation. An equally strong motive is the need to court political popularity, to make populist promises.

What are the results when autocracy works this way?

It is a mistake to believe that there are so many things wrong with the economy, that because of the numerous incompetent and biased interventions it functions so erratically, that it is bound to collapse in the end. This may happen, but it is by no means bound to happen. A state that gets along badly with the market does not push the economy over the edge into catastrophe; it just makes it harder for it to fulfill its potential. It will not be innovative enough, not competitive enough; it will lose the best experts. This will become obvious only in the long run. The trams still run, only more rarely, the teachers complain, but teaching doesn’t stop, health care is beset by dire problems, but they still try to look after patients in hospitals. It is not that the economy is unable to function, only that it fails to achieve as much as it could. As a result, it falls behind its rivals, behind those countries where the state and the market work together in greater harmony, where people involved in the economy discuss what they have to do, where they listen to people before passing laws that affect them. In the past, I had many arguments with people who claimed that the Soviet economy did not work. The truth is that it did not collapse until the very end: it functioned, however badly and inefficiently, in spite of all the well-known, serious inadequacies and problems. It fell further and further behind its historic rival, the capitalist West. The question arises: does the state play a lesser role in a democracy than in an autocracy? At any rate, it would never occur to anybody in the U.S. or the Scandinavian welfare states that education should be brought under the control of a single center, as has happened in the Hungarian autocracy.

Every day we hear Fidesz trotting out some of the well-known catchwords of socialism. They promise full employment, they consider state ownership superior; they utter anti- profit slogans. Are they leading the country back to socialism? Is that what they want to restore? Even in a different form?

I do not see any danger of this. At the time of the regime change, people used to say “You can make an omelet out of an egg, but an omelet will never turn back into an egg.” Whatever happened is irreversible. Autocrats coexist happily with capitalism. Indeed, it is the only system they can really coexist with because they make use of the opportunities offered by capitalism to maintain their own authority. Looking at it from the other side, some capitalists are attracted to stable and authoritarian governments. Many western or multinational companies that have set up shop in China would not like the situation there to change. It is just the same in Hungary. Anybody who enjoys special advantages in public procurements and certain tenders, in the opening times of shops or the purchase of raw materials, who can count in bailouts if they get into financial difficulties, they are having a good time. In autocracies, given the private economy, a wide circle of clients can be built up from the supporters of the system who receive financial support. They can pay for these favors if and when the time comes. Far from wishing to bring socialism back, this regime gets on very well indeed with capitalism.

Has this system reached a point where the government can no longer be voted out of power?

Only the historians of the future will be able to answer that question. If it turns out that the government can be removed peacefully, in a civilized way, in the voting booth, then I have been wrong. I’m not making any predictions. What I can say is this: in Hungary, the regime has done and will continue to do everything possible to make itself irremovable. I hope you will not misunderstand me: the last thing I want to do with my analyses is to discourage those who are prepared to fight to change the situation. People for whom the values of democracy are important: individual autonomy, freedom of speech, freedom of the media and press, constitutionalism, legality, rule of law–they should not make their behavior dependent on the likelihood of change. They should not lie low during these years, but they should act, in their own ways, using the methods of their choice.

December 29, 2016

János Kornai: Threatening dangers

The Peterson Institute for International Relations (USA) and the School of Public Policy at the Central European University (Hungary) held a conference on “Transition in Perspective: 25 Years after the Fall of Communism” in Budapest on May 6 and 7, 2014. Among the attendees were Leszek Balcerowicz, Václav Klaus, Anatoly Chubais, and many other well-known economic policymakers and academic economists of the post-socialist transition period. This is the text of János Kornai’s keynote address.

INTRODUCTION

I would really like to give a cheerful and optimistic talk. I was optimistic when I was working on my book The Road to a Free Economy in 1989.  I undertook comprehensive evaluations of the post-socialist transformation later, on various occasions, and although all the essays pointed out the problems, they always ended on a note of optimism. Even today, there are several developments that may give grounds for satisfaction: in many countries in Central-Eastern Europe and in the Baltic regions dictatorship has been replaced by democracy, the command economy by the market economy, socialism by capitalism. My sentiments, however, are overcast by two depressing developments.

David Levine: Business & financial figures, economists /New York Review of Books

David Levine: Business & financial figures, economists /New York Review of Books

I am Hungarian – my mind can barely stop processing the uninterrupted flow of gloomy news for a second.  Hungary was moving forward on the path of democratic development for 20 years. People were tormented by various troubles, however, it was to be hoped that sooner or later we would manage to overcome these too. But the situation changed for the worse in 2010, when the political forces leading the country performed a U-turn. Instead of the strengthening of democracy we saw the abolition or drastic restriction of numerous fundamental institutions of democracy. Instead of private property being reinforced, the security of private property came under attack. Instead of continuing decentralization, the tendency to centralize was revived.

What has taken place here in four years and what will, in all likelihood, continue for the next four is a unique phenomenon: Hungary is the first – and so far the only – one  among the countries that chose the democratic path in 1989 – 90 which made a U-turn. This one example, however, is enough to prove that such a change can happen. The path on which we started in 1989 is not necessarily a one-way road; the changes, of historical significance, are not irreversible. Quite the contrary – and this is one of the terrible aspects of the Hungarian state of affairs -, the situation after the U-turn may become irreversible for a very long time. Democracy, especially in countries where it has not yet taken deep root, might be unable to defend itself. It may be overpowered if it is attacked unscrupulously and with Machiavellian determination.

The other shadow over our celebration is cast by the Ukrainian situation. Nobody can tell for sure what the months to come will bring. But one thing has already happened, and this is the de facto annexation of the Crimean peninsula. One of the fundamental principles of the Accords signed in Helsinki in 1975 was the sanctity of the status quo: the state borders valid at that time were not to be changed for any reason whatsoever. The Crimean peninsula became part of Ukraine twenty years before the Helsinki Accords. One of the basic principles of the Accords was overthrown in March 2014, and the world took note of this and responded only by wagging a disapproving finger and introducing mild reprisals. Like the Hungarian changes, this constitutes a powerful precedent, according to which it is possible to change a lawful border using military force on some pretext or another, and for this purpose the most obvious excuse is ethnic.

All the things I wish to say tonight I will discuss in the light of these two precedent-forming events.

ALTERNATIVE POLITICAL REGIMES

Let us imagine the map of the world and let us look at the Eastern half. We shall use three colors. Let’s cover the new democracies with green, the color of hope. I call them the post-communist democracies. Although many of their features are identical with those of traditional Western democracies, their political cultures still bear the marks of the communist past.

East of this stretches a very wide zone, which I would cover with pale red: this is the zone of post-communist autocracies. Their prototype is Russia. After 1989 the transition towards a market economy was launched there as well. At the very beginning a democratic constitutional structure appeared : parliamentary elections among competing parties, debates between a government relying on its parliamentary majority and the opposition. The rule of democracy, however, proved to be a very brief episode. Following a few stormy years Putin seized power and a new political structure emerged. This has restored certain aspects of the communist system, especially the great power of the state, but it also differs from that in some significant ways. The number one leader (whatever his official legal status might be) is invested with an enormous amount of power and rules over a strictly centralized hierarchical state and political apparatus, but he does not possess the absolute monopoly over power of a real dictator. There are opposition parties, parliamentary elections do take place, although it is true that the opposition is very weak and doomed to lose the elections from the start. There are newspapers, radio and television stations and internet portals that are independent of the ruling group – their voice, however, is weak. This type of autocracy is halfway between the full-fledged Western-type democracy and a totalitarian dictatorship. What mainly distinguishes it from the latter is the fact that, although the regime is very repressive, it does not use the most brutal means: the arrest and confinement in cruel concentration camps or physical liquidation en masse of the representatives of alternative political movements. The other great difference from the communist system is that the autocratic political regime is connected to an economy in which private ownership is dominant. The ruling political powers hold important positions in the economy, both in the still significant state-owned and the very broad private sectors.  The larger part of the economy works according to the behavioral regularities of capitalism

Of the 15 successor states of the former Soviet Union, three Baltic countries have become relatively stable post-communist democracies. I would place Belarus and the Central-Asian republics together with Russia in the post-communist autocracy category. Now, 25 years after 1989, it can be stated that the situation in the post-communist autocratic countries is basically unchanged; there is absolutely no sign of the iron hand relaxing its grip.

Ukraine’s position is uncertain, and has actually now become especially problematic; over the past 25 years it has sometimes displayed the signs of post-communist democracy; at other times those of post-communist autocracy.

Let us go back to our map. To the east and south of the region of autocracies we can see China and Vietnam. These embody a third type, which I shall call post-communist dictatorship. Let us cover this region with a deep red color. The economy resembles, in many respects the Putin-type regime. Although the state sector has remained very significant, the larger part of economic resources are now in private ownership. Here too the political and economic worlds are closely intertwined. The significant difference lies in the fact that in China and Vietnam the ruling political parties have never for a moment given up their own power monopolies. The Chinese and Vietnamese communist leaders did a thorough analysis of the Gorbachev era. The series of events which started with glasnost and ended with the disintegration of the country, the loss of super-power status and the liquidation of political monopoly have been haunting them like horror dreams. Anything but that! The Chinese and Vietnamese leaders have made an unshakeable decision never to open the floodgates of free political movements.

The Chinese and Vietnamese governing parties are only ‘communist’ parties in name: nowadays they have absolutely nothing to do with the Marxist-Leninist program which intended to abolish capitalism. Lenin would classify these political formations as bourgeois. The Chinese and Vietnamese ruling parties accept capitalism in practice, they cooperate with it and profit from it.The case of China and Vietnam clearly demonstrate that capitalism is compatible with dictatorship. It is true that there is no democracy without capitalism, but this statement cannot be reversed. Capitalism can exist and function for a very long time without democracy. In spite of the hopes of many Western analysts, there are no signs of any tendency for the heavy-handed regimes to loosen their grasp.

I will not go on to discuss the situation of certain small countries: North Korea, Cuba and Venezuela. Instead, I will refer back briefly to the introduction of my lecture. In 2010 Hungary changed color: it turned from green into pale red. It is not a post-communist democracy anymore, but a post-communist autocracy. As I have said, this is a first and so-far unique event. But here I ask the participants of this conference: is there no danger that other countries which are still in the green zone will make a similar U-turn?

NATIONALISM

Historical developments show, that the problem of state borders and the relationships between ethnic groups within the borders is one of the most important issues of the post-socialist transformation; it is no less important than the form of political government and the radical transformation of property relations.

The Soviet Union disintegrated into 15 successor states. Czechoslovakia was divided into two. These two changes took place peacefully. The disintegration of Yugoslavia, on the other hand, was followed by bloody wars. Not long after the declaration of independence a war broke out between two successor states of the Soviet Union, Azerbaijan and Armenia. Fighting is now virtually continuous in the southern regions of today’s Russia. And now here we are in the middle of Ukrainian internal strife and the Ukrainian-Russian conflict.

We have divided the post-communist region into three zones on the basis of the defining features of their political structure. What the countries in all three zones share, however, is the existence of ethnic conflict. The intensity of conflicts varies. Relatively speaking, the ‘mildest’ form is nationalist rhetoric: blustering about the superiority of the majority ethnic group, vilifying ethnic minorities, or rabble-rousing against neighboring peoples. A graver situation is when nationalist, racist arrogance is manifested in deeds as well. It can happen in discrimination affecting schooling and the distribution of work places, or in the limitation of the free use and official acknowledgement of a minority language. Unfortunately, the most criminal forms of nationalism also take place. Although infrequently, violent behavior driven by racist motives occurs, such as the desecration of Jewish cemeteries and synagogues, and even Roma murders.

There is not a single country in the post-communist region which is immune to the epidemic of nationalism. There are degrees, of course: at one end of the scale we find the quietly thrown anti-Semitic or anti-Roma terms of abuse in ‘gentlemanly’ style. Next degree: hateful, cruel words. Next, more frightening degree: beating of members of the minority, threatening parades of uniformed commandos. And at the other end of the scale: murder. Who knows where the incitement to nationalism will lead?

DANGERS OF RADICALIZATION AND EXPANSION

In all three zones and every country of the post-communist region significant economic problems make themselves felt. Naturally, the constellation of difficulties, the relative gravity of the different issues varies from country to country. However, there are certain problems which are fairly general.

Post-communist transition has its winners and losers. Large numbers of people lost their jobs, unemployment became chronic. In many countries the inequality of income and wealth distribution escalated. Millions live in abject poverty, while others who have suddenly lined their own pockets enjoy their wealth in front of them. This explains why so many people think of capitalism with annoyance or hate. Few of them expect help from the extreme Left: the chances of a communist restoration are negligible. The number of those, on the other hand, who turn to the extreme Right, is significant. The ears of the disappointed, the losers and the needy quickly pick up the message of the populist demagoguery against profit, banks, and multinational companies.

The atmosphere of dissatisfaction is susceptible to the slogans of nationalism. “Life would be better if we lived again in an empire as large as it was during the tsar’s time” – they say in Russia. “If only we could get back those resource-rich parts of the country that we were stolen from us at Trianon in 1920!” – they say in Hungary.

So, what we have is a mass below, receptive to nationalism and slogans of “law and order”. And we have political parties and movements above which sense the opportunities provided by the angry mood of the masses. A vicious, self-inciting cycle evolves from disappointment in democracy, the attempts at anti-democratic governance, nationalism, and economic dissatisfaction. There are government intentions and mass sentiments at work which mutually reinforce each other.

The holders of power in Russia are anxiously observing how the growth of production is slowing down, how it has almost reached stagnation. This is when attention must be diverted from the problems of the economy towards ‘great national issues’ such as the plight of fellow-Russians living on the other side of the Western borders. Nationalism gives birth to an expansion drive. And this is no longer a domestic issue, but a tendency whose effect crosses national borders and threatens peace.

I have mentioned Russia because the looming monster of Russian expansion has appeared in our immediate vicinity. But we must also speak of China. The idea of nationalism is growing stronger there too. The rate of growth has fallen spectacularly. The inequality of income is extreme. There is a great deal of audible dissatisfaction about the fact that the rise in the living standards is far behind the growth of production.  Here too, nationalism proves to be the best way of diverting attention. Local protests are crushed not by eliminating economic problems, but by police measures. The people in charge are iron-fisted fighters for ‘order’.

Although in my imaginary map post-communist autocracies and post-communist dictatorships were given two different colors, in terms of nationalism, the tendency towards expansion and the heavy-handed restriction of democratic rights they share many features. These create a strong kinship between them, bonds which are strong enough even after the shared beliefs in Marxist-Leninist ideology disappeared. Most likely this political kinship also plays a part in the fact that so often the international political actions of the countries in the pale red and deep red zones correspond.  At important sessions of the United Nations they vote the same way, they support or turn down the same interventions. They have no joint center, but it is as if they were marching to the same drum on crucial issues. The axis of repressive powers opposing Western democracies is in the making – if I may borrow the expression “Axis” from the vocabulary of the period preceding the Second World War, when it was the name of the Alliance between Germany, Italy and Japan.

CLOSING THOUGHTS

I am no Cassandra: I am not blessed or cursed with the ability to foresee the future. All I can say is that present-day events recall historical memories in me.

Hungarian current events remind me of the end of the Weimar Republic. There is great economic dissatisfaction. Millions of patriotic Germans feel humiliated by the terms of peace. More and more join the Nazi side. In the meantime, the anti-Hitler forces are at each others’ throats. In the 1933 multi-party election, which are conducted lawfully, Hitler’s party emerges victorious, but without a parliamentary majority. And then the moderate right-wing Centrum party is ready to enter a governing coalition with the Nazis … I shall stop this story here.

Thinking about the Ukrainian events Hitler’s first conquests come to my mind: the occupation of the Saarland, then the annexation of Austria. The aggression is based on ethnic reasoning: the territories in question are inhabited by Germans. Then comes the Munich agreement; Chamberlain’s joyful announcement: we have saved the peace at the price of Czechoslovak territories inhabited by Sudeten Germans being annexed to the German empire. Soon comes the dismemberment of Czechoslovakia. Then the plan to conquer Danzig, referring to ethnic reasoning… Here I shall leave this story too.

Who knows how the history-writers of the distant future will view the conference on Ukraine recently held in Geneva. Was it merely an insignificant diplomatic event? Or did it give birth to a new, albeit minor, Munich agreement, encouraging further aggression?

It was George Kennan who in 1946 pronounced the principle of containment. It is time to declare this principle again. Now it is not the spreading of communist principles, the Stalinist expansion, but the spread of nationalist principles, the expansion of post-communist autocracies and dictatorships, that need to be contained.

It is not for me to work out the methods by which the new principle of containment could be applied in practice. I can say this in the plural: we academic researchers are not fit for this task. I regret, but I cannot present the present company with a plan of action.

Let me finish here. I am just not able to end my lecture with words of reassurance. My intention was to alarm you, to unsettle you, to arouse in you the sense of threatening dangers.

János Kornai and Marxism

A few days ago I promised to write something about a short essay by János Kornai, the famous Hungarian economist, on his encounter with Marxism. The essay, entitled “Marx egy kelet-európai értelmiségi szemével” (Marx through the eyes of an Eastern European intellectual), appeared in a volume of Kornai’s collected essays, Gondolatok a kapitalizmusról: Négy tanulmány (Thoughts on capitalism: Four essays) (Budapest, Akadémia, 2012).

Kornai in this essay describes his road to Marxism and his discovery of some of the fundamental flaws of the Marxist system. He had just turned eighteen in 1945 and was open to the ideas of the Hungarian Communist Party (MKP) after going through  a war, losing his father in Auschwitz and his older brother somewhere in the Soviet Union where he served in a labor battalion. He was attracted to the party that was most resolutely opposed to the Horthy regime and all that it entailed.  So he began his study of the works of Karl Marx in the original German because at that time no Hungarian translation was available.

János Kornai / www.kornai-janos.hu

János Kornai / www.kornai-janos.hu

He began with Das Kapital and was struck by the sharp logic and the precise formulations of his ideas. These attributes appealed to Kornai because he himself is “a maniac for order and precise thinking.” Moreover, eventually he began to surmise that Marxism had universal application. It was just as applicable to the evaluation of a theatrical production as it was to economic problems. Here Kornai steps back a little and observes that “young people desire some kind of universal explanation for all worldly phenomena.” In addition, Marxism appealed to him emotionally because of the German philosopher’s passionate commitment to the oppressed and the dispossessed.

But then came the disillusionment. This process occurred not on an intellectual plane but on moral grounds. It happened when he met an old communist who has been arrested and tortured. His faith in the system was shaken. He had encountered critical voices against Marxism earlier but refused to take them seriously. Once his faith in the moral superiority of the system started to waver, however, he began noticing things that he didn’t want to see before. Problems with the practical application of  socialism. In vain did he look for answers in Marx’s works. It was not that Marx gave wrong answers to these questions, like wastefulness, low quality products, the constant scarcity of goods. The real problem was that it never occurred to him to pose any of these questions in the first place.

Once Kornai’s faith was shaken he began studying Marx more critically and found that there are some really fundamental precepts of Marxism that have proven to be dead wrong in the years since Marx wrote the Communist Manifesto. One of these was Marx’s insistence that as a result of the capitalist mode of production the lives of workers will become more and more wretched. It was enough to look around in well-developed capitalist countries to see that this Marxist prediction was wrong. Exactly the opposite was true: the living standards of the proletariat were steadily improving. Without going step by step through his mental processes, the final result was that even before the 1956 Revolution Kornai had become a critic of the socialist system.

So, eventually he had to pose the question to what extent Marx was responsible for what was going on in the Soviet Union of Lenin, Stalin, Khrushchev, and Brezhnev, in the China of Mao Zedong, and in other socialist countries. What is the relation between the theoretical ideas of Marx and the historical reality of the socialist system? Here I will quote Kornai verbatim: “I will try to answer concisely: the socialist system realized Marx’s plan.”

Kornai is aware that some people might counter that this judgment goes too far. But in Marx’s opinion a market economy doesn’t work. The market is anarchy and chaos. In its place a planned economy must be introduced. Moreover, private property must be abolished and it must be replaced by commonly held ownership. Both of these very basic Marxist doctrines became a reality in the socialist countries. When Lenin, Stalin, Khrushchev, and others invoked Marx’s name and work to defend their policies, they were correct. They had every reason to appeal to him. They were the ones who realized Marx’s dreams.

Kornai also finds Marx “guilty” of rejecting “empty, formal bourgeois constitutionalism, the parliamentary system, and democracy.” He didn’t seem to realize that once a market economy and individual initiatives are gone the system must be directed from above and that very fact results in the repressive apparatus of the state or the ruling party. So, Marx is responsible for what happened in the Soviet Union and in other socialist countries, but it is “intellectual responsibility.”

Finally, Kornai briefly analyzes what we still can learn from Marx. After the collapse of the socialist system the belief spread in intellectual circles that Marxism was dead. But in the last few years, especially since the 2008 financial crisis, the opposite has been true. Marx is in vogue again. “Prophets” have arrived who predict that capitalism is dead, a view Kornai doesn’t share. Yes, capitalism right now is going through a deep crisis but it is alive and will most likely live for a very long time.

Nonetheless, Kornai believes there are some valuable Marxist teachings that are still applicable. One of these is the overextended expansion of credit and production that far surpasses demand. Marx talked about these problems in the first and third volumes of Das Kapital and called attention to the grave consequences of these phenomena. Today we see the results of the irresponsible granting of credit all too clearly. As for the balance between supply and demand, Marx was especially interested in imbalances in the labor market. Today the imbalance in the labor market poses serious problems in the developed world. Marx was one of the pioneers in discovering this danger.

In addition, Kornai also looks upon Marx as the first person who tried the develop something Kornai calls a “system paradigm” (rendszerparadigma). He was an economist, a sociologist, a political scientist, and a historian who tried to combine all these disciplines. Today we call this an interdisciplinary way of looking at the world which attempts a comprehensive understanding of society as a whole.

Kornai ends his brief essay by saying that he is not a Marxist but neither is he a Keynesian. He doesn’t belong to any school or -isms. He considers himself to be an eclectic economist who was influenced by Joseph A. Schumpeter, John Maynard Keynes, Friedrich Hayek, and Marx “who in this list is always mentioned in the first place.”

The sources of Viktor Orbán’s ideas on the world economy

Practically everything that has aroused my interest in the last couple of days is connected in one way or the other to Tusnádfürdő/Baile Tusnad or, as the organizers call it, the “free university” Tusványos. It is a made-up word. Originally, these gatherings were held in Bálványos/Cetăţile Păgânilor, but the festivities over the years have grown so much that they had to move to Tusnádfürdő. Hence the name.

I wrote a couple of times about a commentator who calls himself Elek Tokfalvi, a mirror translation of Alexis de Toqueville. He is an erudite fellow and a sharp-eyed observer of political developments. This time Tokfalvi found a sentence in Viktor Orbán’s speech at Tusványos that prompted him to do a little research. The sentence followed Orbán’s running commentary about the great powers and their exploitation of the smaller ones on the periphery. The sentence reads: “Jenő Szűcs, an author who was very much in vogue about twenty or twenty-five years ago, wrote about this very clearly when he put together a popular treatise on the centers of the world economy and their peripheries.”

I myself didn’t catch this particular sentence when I listened to Orbán’s speech but I sure got a shock when I saw it in print. First, Jenő Szűcs was a historian of Hungarian medieval history who didn’t “put together” popular works. In fact, I clearly remember when I bought one of his works in Hungary and showed it to my father. His first reaction was that Szűcs’s style was so “scientific” that it took mental effort even for a well read and intelligent man like my father to comprehend what the slim volume was all about. I think the title itself is telling: A nemzet historikuma és a történetszemlélet nemzeti látószöge (hozzászólás egy vitához) (History of the nation and the national vision of the view of history, remarks to a debate). His works were appreciated by his colleagues but “in vogue” he was not.

Then there is the problem of dates. Jenő Szűcs died in November 1988, so he couldn’t have written anything twenty or twenty-five years ago. Orbán might conceivably have referenced an article Szűcs wrote in 1980 in the samizdat volume published in honor of István Bibó. The title of the article was “Vázlat Európa három történeti régiójáról.” A year later it also appeared in Történelmi Szemle. But the “Sketch of the three historical regions of Europe” had nothing to do with great centers of the world economy or their peripheries. It was an attempt to portray the region lying between Eastern and Western Europe as a distinct entity that has been different for at least the last thousand years. I for one don’t think that this was a revolutionary discovery, but Hungarian historical circles were impressed.

So, if Jenő Szűcs wasn’t Orbán’s source, who was? Tokfalvi suggests Immanuel Wallerstein, an American Marxist “sociologist, historical social scientist and world-systems analyst.” Apparently in the 1970s Wallerstein was not only translated into Hungarian but very much appreciated by the party leadership. He called the satellite countries “half peripheral” because he saw their centralized planned economic policies as vehicles of true convergence. Thus Wallerstein gave his stamp of approval to the totally mistaken economic policies of the socialist countries. Tokfalvi thinks that Wallerstein is the most likely candidate for Viktor Orbán’s Jenő Szűcs “in vogue.”

Over his career Wallerstein adopted some basic Marxist doctrines: the dichotomy between capital and labor and the view that world economic development is a dialectical process that goes through such stages as feudalism and capitalism. He believes in something called “dependency theory,” which leads straight to the notion that resources flow from a periphery of poor and underdeveloped countries to a “core” of wealthy states, enriching them at the expense of the poor countries. He is one of the leading figures of the anti-globalist movement.

Source: wikipedia.org

Source: wikipedia.org

It is becoming increasingly obvious that Viktor Orbán and his college friends are truly the children of the late Kádár period, together with all its ideological baggage. Orbán, when he espoused Wallerstein’s theories at Tusványos, must have noticed that he was flirting with Marxist clichés and felt compelled to preface this particular passage about “the core and the periphery” with the claim that he is not a “vulgar Marxist.” Even his stress on the value of labor that produces only tangible products is suspect. It might be a less than a perfect understanding of Marx’s labor theory. I wouldn’t be at all surprised if that were the case because I know from personal experience as well as from the stories of others that Hungarian college students didn’t take their compulsory course on “political economy” very seriously.

This discussion will be a good introduction to a book review I have been planning to write on a new book by János Kornai called “Gondolatok a kapitalizmusról” (Thoughts on Capitalism). Included in this volume is an essay entitled “Marx egy kelet-európai értelmiségi szemével” (Marx through the eyes of an Eastern European intellectual.” The very last sub-chapter’s title is “Ami tovább él Marx tanaiból” (What still lives from the teachings of Marx).  Certainly not what Viktor Orbán is talking about.