From Comprador State to Auctioneer State:
Property Change, Realignment and
Peripheralization in Post-State-Socialist Central and Eastern Europe(1)
by
New Brunswick--Budapest--Berlin Draft version 1.2
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Socialism by Empire
The transformation of the societies of central and eastern Europe into Stalinist state socialism after the second world war was made possible by the Soviet military conquest of the Nazi puppet states of central and eastern Europe in the context of the Allied Powers' military cooperation. The remolding into a Soviet-style state socialism and the imperial subordination of these societies to their Moscow center was hammered together by the joint forces of the great powers--through military alliance during the war and a grudging, but self-disciplined, global "Realpolitik." The structural insertion of the socialist states of central and eastern Europe into the world economy and the interstate system was, thus, marked by the feature that their legitimacy was, initially, completely external. It resided in the status quo of the great-power politics of the cold war:(4) Issues of their internal legitimacy were, at first, quite unimportant. The state developed as a local tool of this arrangement can be summed up as a comprador state:(5) Its relation to its imperial center was analogous to the servitude that links the comprador bourgeoisies of the peripheries of the capitalist world economy to their respective centers of metropolitan capital. The central and east European socialist states were a structure of public authority severly deprived of their sovereignty by the imperial arrangement to which they were subjected.
Thus any attempt at reforming the formal political structures of the state socialist societies toward a more harmonious relationship between state and society was doomed to failure as it ran into, and got stuck upon, the knot tied between socialism and the "geopolitical reality" of the great-power arrangement. Formal structures of representative democracy--an important possible source of internal legitimacy for the state--could not be introduced because of the possibility, indeed likelihood, that such democratic structures would assert sovereignty by abjuring the great power arrangement. Formal political reform would, it was feared, dissolve the comprador state.
Imperial subordination was of course not new to this region. Much of these societies' modern history had been about the suppression of internal legitimacy due to repeated submission to the dynamics of the Czarist Russian, Prussian, Habsburg, and Ottoman imperial structures. Nazi German advances in their territories before and during the second world war were "just" the last pre-state-socialist form of imperialism they experienced. The state socialist imperial attempt was novel, however, in being established with the ambition of creating a world empire that would pose a substantive alternative to the capitalist logic of the world economy. This led, in effect, to the redoubling of global imperial structures: one capitalist, the other state socialist, tied together by the logic of antagonistic cooperation and facing each other directly in what was emerging as the "Third World" as alternative models of modernization(6) linked to alternative imperial centers. This arrangement provided the underlying structural logic of military strategy and international relations. The "two-actor-game of negative cooperation" to which it simplified was seen as a major source of global stability. Economic change under Stalinism was thus largely focussed, after postwar reconstruction, on the needs of the imperial state concerning its bipolar global strategy. This resulted in the early socialist states' preoccupation with heavy industrial growth and the gross neglect of all other branches of their economies, including direct consumption and especially the services, broadly conceived.
The anti-Stalinist revolts in the G.D.R. (1953), Poland and Hungary (in 1956) all aimed at the abolition of comprador statehood and the easing of dependence of the local states on the U.S.S.R. without explicitly demanding an end to socialism. The period that followed saw the state-to-state differentiation of the Soviet bloc. The uprisings were read in the imperial center as signals of tension in the imperial structure and appropriate arrangements were made for readjustment. A general sense of "softening the grip" of the imperial structures followed: The comprador state had to undergo, it was recognized, partial reconstitution--without restoring its sovereignty.
Most important concerning the state-society relationship in central and eastern Europe, the Moscow
center undertook some important, limited concessions to cater for the comprador states' needs for
internal legitimacy. This did not alter the fact that the main locus of the legitimacy of these states was in
the external realm; these new, internal forms of legitimacy added only secondary layers. Nevertheless
they did complicate the initially simple--squarely Moscow-centered--arrangement. These additional
layers of internal legitimacy-seeking measures took extremely varied forms. To illustrate their diversity,
Table 1 presents a brief overview, North-to-South, country-by-country, for the period beginning in the
early sixties.
Table 1. Measures Introduced to Increase the Internal Legitimacy of the Socialist States of Central and Eastern
Europe during the 1960s
| country | measures |
| Poland | - abandonment of collectivization drives, leaving intact a large peasant class
- explicit toleration of the Catholic church, allowing it to openly assume a role of representing a host of national and bourgeois values - serious investments into heavy industrial modernization, catering for a new working class and a managerial elite - toleration of informal economic activities - general relaxation of controls, including freedom of travel |
| G.D.R. | - very serious industrial modernization
- concerted efforts at the creation of a socialist consumer society as a strategy of competition with West Germany |
| Czechoslovakia | - "socialism with a human face"
- concerted industrial development policies to benefit the less developed part (Slovakia) |
| Hungary | - release of political prisoners from 1956-57, reconciliation with the intelligentsia
- abandonment of forced collectivization policies in the countryside, emergence of "around-the-house" farming arrangements - increased toleration of "second economy" activities - creation of a modern welfare infrastructure (large-scale investments into health care, education, housing, transportation, communication and urban collective consumption) - incoming tourism "take-off" producing serious revenues, especially off-the-books - a general sense of the relaxation of controls, including freedom of travel - encouragement of private consumption to prevent the valorization of excess incomes through capital formation |
| Romania | - re-ethnicization of politics (Communist nationalism in a multiethnic society, creation of an ethnic enemy) |
| Yugoslavia | - economic reforms toward marketization, allowing small-scale private enterprise and
creating elaborate schemes of workers' "self-management"
- guestworker arrangements with West Germany and elsewhere in western Europe, complete relaxation of travel restrictions - appearence of serious revenues from tolerating incoming tourism |
| Bulgaria | - industrialization of agricultural production
- major urban industrial investments, creation of a Bulgarian urban working class |
In the early sixties all comprador states became "Yugoslavianized": They developed a set of new nation-specific policies presented to their populations as evidence of relative independence from Moscow. This was despite continued evidence to the contrary regarding the virtual absence of their sovereigny in the military, diplomatic, trade, economic-structural, personnel-policy, ideological and even daily political, realms. These measures were expected to increase the internal legitimacy of the socialist states and to simplify the task of the administration of the empire. The core of the policies pursued as part of this project were modernizationist strategies of "catching up" with the western half of the continent seen as rapidly developing new provisions for publicly subsidized basic consumption commonly known as the welfare state. Following the austere restrictions on consumption under Stalinism, this was seen as a radical break away from the socialist state's previous behavior.
This presents us with an astounding resemblance between the early 1960s' state socialist policies and the policy suggestions of conventional modernization theories for the Third World made, in the "west," at about the same time. These ambitious, large-scale projects aimed at producing "spurt"-like outbursts of economic development. In essence, they were adaptations to the state socialist context--characterized by the extreme concentration of the means of production, and many other societal resources, in the hands of the state--of the institutional "special road" strategies described by Alexander Gerschenkron under the notion of the "latecomer's advantage" (Gerschenkron, 1959). Advances in industrial, transportation, urban housing,(7) public works and communication infrastructure were coupled, for the first time in these states' state socialist history, with serious investments into the health, public health care, social welfare, educational, cultural, art and research infrastructures.(8) These modernizationist successes were of course readily interpreted in official discourse as accomplishments of socialism and so were seen as furnishing evidence for the idea, crucial to the post-Stalinist comprador state, that socialism offered a real, seriously comparable alternative to capitalism.
Political concessions were rarely formalized.(9) The two main techniques used in allowing concessions while avoiding any formally ratified, transparent, and normatively enforceable democratization of socialism can be captured as informalization and metaphorization. Informalization attained where the development of "gelatinous," murky, and personal, informal solutions was encouraged around the edges of rigid, transparent, and impersonal, formal institutions. Metaphorization, on the other hand, marked the process in which essentially Stalinist political practices were reasserted in highly ceremonial ways--but, very importantly, this time with a paternalistic "wink" suggesting that their enforcement can, and should, be expected to be less than strict. Both techniques resulted in the redoubling of social experience, especially with respect to the behavior of the state and to the state-society relation. Kádár--Hungary's state socialist Perón--and his political machine became a brilliant master of both techniques by the late sixties and used them with considerable success throughout the seventies. The important advantage of those practices was that they allowed a bifurcated political representation of reality along the internal/external divide: Formal and post-Stalinist political practices could be presented to the Moscow center as evidence of the eminently socialist character of Hungarian society, state, economy, culture, etc., while references to informal alternatives and the metaphorized nature of the Stalinist practices could serve as basis on which claims for a certain degree of internal legitimacy could be made by the, by now quite sophisticated, comprador state.
Other leaderships either imitated parts the Hungarian example with more or less success, or sought to
gain increased internal legitimacy through different means. The latter involved, instead of informalizing or
bracketing the state socialist institutions of society--which was the essence of the Hungarian pattern--transgressing another tenet of the official "line" of the Moscow-affiliated communist parties of the
region, the principle of discursive internationalism. This transgression involved the promotion of a
nationalist, even racist discourse--manifested most clearly in Romania under Ceauescu, but also in
different ways and in such, otherwise so different contexts as Enver Hodzha's Albania and Ulbricht's
G.D.R. Tito's Yugoslavia represented an interesting additional case as the official nationalism
promoted there--advancing the idea of a Yugoslav nationhood--was of a supra-ethnic kind, akin to the
notion of the supranational "Soviet nation" although the U.S.S.R. was widely understood to be the most
important external entity against which Yugoslav national unity was interpreted.(10)
Socialism by Dual Dependency
Concessions to internal legitimacy carried economic imperatives. Efforts at "catching up" with the welfare states required large-scale investments in public consumption. By the sixties, confiscation of the private means of production, simple extraction of natural resources, and skimming of the agricultural sector--the three main established methods of resource concentration by the socialist state--had been exhausted so much that they could not possibly provide sufficient funds for financing the socialist state's modernizationist project. Profitability and market access problems precluded large-scale reliance on revenues from the enterprises owned by the state itself. Technological backwardness, the need to enter capitalist markets, and increasing demands for consumer goods from the populations--which, for their part, duly heeded their states' message that consumption was not only compatible with, but in some ways highly desirable(11) under, "the advanced stage of socialism"--all pointed in the direction of widening and strengthening ties linking the socialist states into the world-economy.
In Hungary, Poland and Bulgaria, and in its own technocratic way, also in the G.D.R., the state's concessions to internal legitimacy included serious measures aimed at reducing the firmness of the state's bureaucratic-proprietorial grasp. The resulting economic reform policies transferred crucial decision making responsibilities from the owner (the socialist state) to the managerial elites. This transfer of control from the ministries and other state organs to management involved two important analytical elements. One of those--macro-organizational decentralization--is often noted: Decision making regarding the socialist economy was now, indeed, dispersed from a single command center to a previously unseen multiplicity of relatively independent posts.
What is less often appreciated conceptually is that this in effect involved the transfer of no less than an important ownership right--the right to exercise control over assets--to actors outside the realm of the state bureaucracy. This created the basic structures of a managerial socialism under continued state ownership. Under such conditions rights to deriving profits from, and alienating legal title to, property continued to rest with the owner (the socialist state, which continued to exercise those rights through a Weberian bureaucracy), but effective control over property was transferred from state bureaucrats to management. This introduced an entire new layer of interests in the running of the socialist state's assets. The resulting industrial organization was remarkably similar to the managerial capitalism emerging two-three generations earlier in the capitalist economies--except that this time round it occurred under the ultimate, ore or less absentee, ownership of the socialist state.
This combination of decentralization and debureaucratization increased pressures for investment and subsidy funds exerted by the managerial elites on the state. The central state administrative and banking organs had little by way of institutional protection to resist such a barrage of requests for extra funding. Because the requested subsidies would flow into property legally owned by the same state from which the subsidies were "pumped," this reveals an important structural contradiction among the socialist state's multiple roles. Its interests as the largest property owner (a state socialist specificity) clash here with its duties as the large-scale regulator of the accumulation process (a generic feature of modern states, capitalist and socialist alike). The confusion of these roles(12) was most easily resolved by extreme permissiveness on part of the gatekeepers of state subsidies for unprofitable enterprises.(13)
Unable to adjust to the early seventies' oil crisis and the requirements of the world economy's move toward flexible accumulation, the resource shortages faced by all socialist states became particularly urgent. Meanwhile, because of the crisis of the imperial arrangement in Czechoslovakia, the comprador states' needs for additional internal legitimacy increased tremendously. This was particularly true for those states--Poland, the G.D.R., Hungary and Bulgaria--that did participate alongside the U.S.S.R. in the military invasion of Czechoslovakia. All those states faced a simple policy choices, and the pressures for change along one or another of those alternatives were mounting, particularly for those that had just abandoned their fellow-reformist Czechoslovak leadership. This put the Hungarian and Polish state (the two most reform-socialist comprador states involved in the Czechoslovak military action) in a particularly precarious political position.
One "solution" was curbing radically the costly aspects of their modernizationist projects. This would involve unraveling their welfare arrangements, halting the ambitious investment projects aimed at increasing productivity through the importation of recent technology, and extinguishing the consumer aspirations of the population. In sum, the essence of the first solution was disentanglement from the modernizationist project of "catching up" with western Europe. An easy-to-predict effect would be a new crisis of internal legitimacy in need to be compensated from another source. Romania(14) and Albania(15) were the two socialist countries of Europe that ended up in this predicament, and their "textbook" versions of state-supported, official nationalism served as the main source from which enough internal legitimacy could be extracted to assure the survival of their comprador state.
The other alternative involved bringing in resources from the outside and using them to subsidize investment in both public and private consumption. As the U.S.S.R. was unable or unwilling to provide such funds, this could be done either (1) by securing a stable flow of annual subsidies and a guaranteed "back door" access to the European Community market--an opportunity open only for the G.D.R. through its "inner-German" links to the Federal Republic of Germany--or, in absence of such a "special relationship," (2) by drawing on for-profit financing from the world market.
This was a policy of spectacular initial success. Investment and trade credits channeling private and state funds from the capitalist world economy to the socialist states(16) provided a simple and straightforward opportunity to continue offering the popular (but costly) elements of the "reform-path" of state socialism. The willingness of the world's leading lenders to provide funds could be interpreted as affirmation of the genuineness of the alternative to capitalism purportedly represented by the socialist states,(17) and, with the new loans, some of the most devastating effects of "structural adjustment" could be averted--as can be seen in retrospect--for another generation.
The linkages of technological, trade and financial dependency that emerged from these subsidy-,
backdoor-trade- and borrowing-based solutions produced the phenomenon described elsewhere
(Böröcz 1992a and 1992b) as dual dependency. This was marked by the geopolitical splitting of the
comprador state's external linkage hierarchies: Political-military controls kept the comprador states
squarely in the Soviet orbit while new, ever more gripping structures of economic (technological,
financial, and trade) dependency tied them to the most powerful core actors of the capitalist world
economy. Those core actors included private transnational corporations and major governments as
controllers of flows of technology, credits, as well as investment and consumer goods. The emergence
of dual dependency was paralleled by the rapid dissimilation of the comprador states as for the degree
of their internal legitimacy, the harshness of their political oppression and the particular ideological and
cultural taboos they enforced, the living standards they provided, and the proliferation of informal
economic, political and cultural institutions they allowed. Other than their geographical proximity and
their comprador nature under dual dependency, there was little by way of descriptive characteristics
that warranted the treatment of the societies of central and eastern Europe as a "bloc" by the time of the
collapse of state socialism. Table 2 summarizes some main points of their diversity.
Table 2. Differentiation of Socialist States by 1989
| political | economic | |
| Poland | Martial Law state, complete absence of legitimacy for socialist state/party, organized, strong civil society led by an intellectual elite resolutely opposing the state | severe debt crisis, dropping living standards, widespread informalization, technological lag and environmental devastation |
| G.D.R. | state locked into a mirror-image trap of competition with West Germany, serious internal pressures at specific policy points that cannot be released because of the state's adherence to them due to "Inner-German" relations (freedom of travel, leading role of the CP) | exhaustion of socialist development policies, dependence on "inner-German" subsidies and "back-door" access to the European Community market, environmental crisis, inability to adjust to post-Fordist requirements of the world economy |
| Czechoslovakia | internal legitimacy never rebuilt after 1968, strong elite-intellectual resistance with wide popular support | relative stability under manageable foreign debt, eroding world-market position due to Post-Fordism problems |
| Hungary | internal quiescence achieved through political apathy, organized intellectual resistance with moderate popular support, unresolved problems of ethnic Magyars as minorities in the neighboring countries | barely manageable external and internal debt crisis, strong potential economic niches (=high-quality, labor-intensive agro-products, knowledge-intensive services) threatened by EU protectionism, extreme levels of informality severely imbalancing the state budget |
| Romania | devastation of the political scene by the dictatorship, official ethno-nationalism, a textbook example of the police state | poverty, large pockets of society reduced to Latin American-style informal strategies of survival, virtually no foreseen niche for economic growth |
| Yugoslavia | brisk destruction of the Titoist project of supraethnic Yugoslav nationhood due to (1) economic expectations of the relatively better-off to gain from detachment through new states and (2) staying power of unreconstructed communists in the largest republics | severe internal regional economic inequalities, extreme imbalances due to patterns inherited from uneven development and unequal internal exchange, volatile currency, near-complete trade and financing dependence on the EU withou the benefits of formal membership |
| Bulgaria | ossified leadership, ethnicization of politics | post-Fordism problems, underfinancing crisis |
Capitalism by State A(u)ction
The collapse of the Soviet side of the "two-actor game" of the Cold War caused the breakdown of the great-power balance of forces. The Soviet Union withdrew both its troops and most of its other, rather elaborate imperial structures from the region, causing the termination of the comprador states with astonishing speed and self-discipline. As for the center, the abolition of the state socialist empire was managed with remarkable professionalism. The ensuing transformation of the comprador states, however, was much more disorderly, complex, contradictory, and crisis-ridden.
The specific events in the rapid large-scale process of institutional transformation--the demolition of the comprador state--produced an extremely wide range of patterns. These included:
This variety of modalities of political breakthroughs relates to the diversity of the late-state-socialist states as to their institutional patterns(19) and the policy measures developed as part of their struggles for internal legitimacy and strategies of state-socialist modernization. Meanwhile, the deeper, and slower-scale, transformations of the central and east European societies can be captured in simpler, more encompassing formulas by focussing on their similarities.
This is possible for two reasons. First, because the comprador states' collapse took place in the context of the capitalist world economy which leaves much less room for "surprises" (Bodnár 1996) in the social-structural realm than the late-state-socialist comprador state and its institutional complexities. This was so because, second, as the comprador state represented the structural point where the single "economic development" hierarchy of the core-periphery system clashed with the bipolar logic of the Cold War, the first and most important thing to be destroyed once the imperial arrangement was weakened substantially, was the anomaly of the comprador state. The triple crisis of state formation, nation formation and class formation to which the comprador state's destruction has led has been addressed elsewhere (Böröcz and Smith, 1995, Böröcz 1994).
As both nation formation and class formation are intimately connected with the abrupt transformation of
the economic, political and cultural structures known previously as the comprador state, here I will
focus on the crisis of state formation and the emerging, yet new patterns of state insertion between the
world economy and the national populations. The current crisis of central European state formation can
be appehended in three realms:
An anti-state ideological backlash has constituted an intrinsic element of the post-state-socialist status quo. In a perfect negative mirror-image of the 1960s' drives for "catching up" with the welfare states of western Europe, today's intense ideological fervor is directed against the very idea that the state should partake in alleviating the suffering of members of society. In the current, slow but resolute destruction of the post-state-socialist societies' health care, public health, educational, retirement, cultural and public consumption infrastructure the requirements for the IMF-dictated "structural adjustment" policies find natural allies in the post-state-socialist ideological hegemony of a whole variety of anti-state rhetorics. These rhetorics range from a strikingly naive form of anti-state anarchism through the utopian-ideological practice of reform-transform-Pangloss(20) economics to socio-conservative ideas advocating the family as the only functional vessel of social aid (in essence designating the female body as a "natural" replacement for the state in taking care of the needy). This anti-state ideological hegemony is, no doubt, fuelled by the collective experience of practical disillusionments regarding the state's ability to deliver on its promises--a conclusion derived from a careless observation of the slacks in the late socialist state's performance in delivering many of those services during much of the recent period without taking into account the fiscal crisis of the socialist state (Campbell 1996) as an explanation.
Add to the anti-state backlash and the IMF-pressures the power of potential investors from the centers of the world economy, promising technological modernization, world-market access and jobs to the debt-burdened post-state-socialist states struggling with ever-intense problems of technological obsolescence, and you are likely to have one of the largest-scale and rapidest institutional transformations of property ownership in the history of humankind, comparable in its scope only to the confiscation drives by the socialist states at the time of the establishment of state socialism. Because of the condition that the socialist states were the largest property owners in their respective economies--state-owned property exceeded two-thirds of all assets in each case at the time of the collapse of comprador statehood--the resulting reorganization of the institutional system of property relations involves the mobilization of an extremely concentrated form of assets.
This process could be described, from an arms-length perspective, as a new transiton to capitalism
through a "second" original accumulation of capital. However, a number of important differences do set
the current transformation apart from the "classical" pattern, eroding the accuracy of that conceptual
analogy.
With the end of the overdetermined status quo of the Soviet military occupation, the strategic stability of all of the states of the region was shaken. Many underwent profound transformations in the most fundamental parameters, violating their territorial integrity: old borders have been moved, new borders have been erected, previously constituent parts have ceded from the body of their previous state, and state legitimacy has been widely questioned on ethno-national grounds. The former G.D.R. was incorporated into the federal structure of the west German state. All three of the explicitly multiethnic(26) states of the region--Czechoslovakia, Yugoslavia and the U.S.S.R.--entered a path of multiplication by division. The rush to small-nation sovreignty after the collapse of the state socialist imperial reality can only be understood--from the perspective of the geographically more western and economically more well-off entities which insisted on the breakup of their multiethnic states--in the context of the gradual and apparently unstoppable emergence and enlargement of the European Union literally on their borders. If small-state sovereignty can be achieved early enough, it may be possible to win earlier inclusion--and to negotiate more advantageous terms for the inclusion-- than in the framework of the economically much more "backward" multiethnic states. The independent states of the Czech Republic, Slovenia, Croatia, Estonia, Lithuania and Latvia were all imagined as offering a vastly better chance of achieving earlier, smoother and more accommodating admittance than the larger and clumsier states of Czechoslovakia, Yugoslavia or the Commonwealth of Independent States. This calculation was meaningful under the assumption that a speedy "small-state" enlargement of the European Union in the eastern direction is a realistic prospect. So far (i.e., during the seven years since the collapse of the Soviet empire), however, nothing of the sort has come about: The European Union is giving Byzantine signals to the small, ready and eager states of the region regarding their chances for admittance.
Meanwhile, the fragmentation of the state structures of central and eastern Europe is a biting everyday reality. Withe the addition of new borders and the fragmentation of the structure of multiethic states, the shear number of the states of the region has increased from nine to twenty only in the European territory of the former COMECON, despite the fact that one of the former Soviet bloc states--the G.D.R.--has been "unwound" without an independent successor. All other things equal, any rise in the number of actors is bound to increase the possibility of conflict and makes reconciling contending interests exponentially more difficiult. Coalition formation, isolation, and the threat or actual exercise of various cross-border pressures and coercion emerge as possible tools of change in the international realm.
The fragmentation of some states also increases the perceived relative power of those states that do remain territorially intact. Small-scale "great-power" aspirations are now emerging, revealed most obviously in rump Yugoslavia (which used much of the Yugoslav military machine it had retained to wage a war largely against the civilian populations of its former federal partner states), Russia (which has done the same against some of its own internal minorities aspiring for small-state sovereignty), as well as, in much more subtle and modest forms in the regional policies of Romania, Hungary, Albania, and Poland with respect to their neighbors. This is fanned by the new, small state machineries' insistence on the development of new nation-state rhetorics, threatening the collective interests of their internal ethnic minorities--some of which do have receptive cross-border nationalist ears in the neighboring states.
The main response to the increased international volatility of the region has been a rush to NATO, seen as the only serious external potential provider of security in local conflicts. As a result, the main point of contention in the realm of international relations between the states of central Europe and Russia has been the issue of their NATO membership. Increased military spending, partial relinquishment of new-found sovereignty in the military realm, and the possibility of being drawn into internatinal conflicts that would otherwise not concern the area are seen by the new political elites as small prices to pay for the possibility of an umbrella of protection against your neighbors, promised by NATO.
The economic and social costs of these transformations have been tremendous. They involved the radical rearrangement of the external linkage structures. The wars have caused the suffering of millions of citizens of the states involved and made serious repercussions region-wide by forcing the war-torn nations' neighbors and conventional partners to come up with makeshift adjustments in order to compensate for their losses in export and import markets as well as the blockage of their conventional transport and communication routes. Foreign buyouts have produced such textbook outcomes as market penetration from the outside, forced concessions in tax relief to foreign investors, and closure of companies by foreigners in order to eliminate strategic competitors. The large-scale transformation of the organization of ownership and control has resulted in massive displacements of labor and the production process, introducing the phenomenon of massive unemployment--an experience utterly unknown for the working classes of the state socialist period. Unmitigated exposure to world market competition has reduced labor remuneration rates, created hyper-inflation, and led to unemployment on a massive scale. National economic performance indices suggest serious drops.
For lack of space for an elaborate documentation of these processes here, it will have to suffice to illustrate these trends by surveying changes in two fundamental areas--life expectancy and the United Nations' index of "human development." Because of the slow pace of the social processes revealed in them, both of these indices can be considered conservative as markers of the process of peripheralization which they represent.
Slight, gradual increases in life expectancy are usually considered to be a global secular trend since the time of the systematic collection of demographic statistics. Considering that, it is especially striking that all seven of the societies included in the United Nations Human Development Reports (UNDP 1991 and 1996) (27) experienced serious declines in life expectancy at birth. The drop is most pronounced in Russia and Hungary where, in the space of the three years elapsed beetween the two observations reflected in the graph, life expectancy decreased by cca three and two years, respectively. A generally well-respected quantitative measure of the quality of life in any society, these extremely serious declines can only be interpreted as signals of serious peripheralization.
The U.N. Human Development Index (HDI) was developed for the purpose of providing a simple
comparative measure of the degree to which societies convert their economic wealth into quality of life
for their population. It is a synthetic measure made up of standardized variables pertaining to
educational and health care measures.(28)
The bleak picture emerging from comparing the trends in HDI during
the first three years after the collapse of state socalism in central and
eastern Europe is that of peripheralization. All of the seven central
European post-state-socialist societies for which data was provided in
the UNDP tables (UNDP 1991 and 1996)
register serious drops in their Human
Development Index. It appears that the socialist states--which had
represented "overachieving" positive outliers in the sense of producing
greater-than-expected scores in the Human Development Index are now, after the collapse
of their socialist state structures, are in the process of "correcting"
their position. They are moving where they "belong": in the direction
predicted on the basis of their national income statistics direction
(downward).
To summarize, the end of state socialism in central and eastern Europe
involved the collapse of one of the largest imperial structures of the
twentieth century. It removed the military and political bases of the comprador
states which has set off a number of unexpected transformations. This process
affected the very base of the existence of these states--their territorial integrity and their multiple roles as
owners of productive assets and regulators of the accumulation process. As
a result of these transformations of institutional structures, the process
of peripheralization--which had begun in most cases before the collapse of the
comprador states--has accelerated, revealed clearly in the significant
reductions in quality of life measures for most populations. Property
change, realignment of international relations and peripheralization are
all corollaries of the collapse of the comprador state, redefining itself
in the transformation process as an auctioneer, liquidating its collective
assets in the interest of hyper-adjustment to the perceived requirements
of the world economy.
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1. Paper prepared for presentation at the conference on states and sovereignty at the University of California at Irvine, in February, 1997. This project was partly supported by a grant, entitled "Property Change and Privatization Ideologies" funded by OTKA (the National Science Research Fund of Hungary) under number T6739, various hidden and explicit subsidies by the Institute for Political Studies of the Hungarian Academy of Science, and partial research and travel expenses covered by Rutgers University. Part of this paper was written while on a research visit at the Zentrum für Zeithistorische Forschung (ZZF) in Potsdam, Germany. Generous support from ZZF also provided for assistance in Berlin and Potsdam by dr. Brigitta Gantner. I owe special thanks to Magdolna Csizmadia of the U.N. Economic Comparisons Project for her assistance in locating some of the data I used in this analysis.
2. József Böröcz is Associate Professor, Department of Sociology, Rutgers University, New Brunswick, NJ 08903-5072 (e-mail: jborocz@rci.rutgers.edu) and a Senior Research Associate at the Institute for Political Studies of the Hungarian Academy of Science, Budapest, Benczúr u. 33. H-1068 Hungary.
3. I am using the terms 'socialism' and 'socialist' as markers to denote the societies of the Soviet bloc. The vexing question of whether or not they represented a "genuinely" socialist form of society (i.e., whether or not their experience conforms to an idealized image of a post-capitalist society derived from a radical critique of capitalism) is not the subject of my inquiry.
4. Consider the case of that European state--Yugoslavia--which became socialist despite the fact that only a small part of its territory had fallen under Soviet military occupation during the war. Yugoslavia's "assigment" in the Soviet orbit was preordained nevertheless. This was evidenced in the famous agreement on "proportional" spheres of influence worked out quite informally between Churchill and Stalin in Yalta (Churchill, 1996 [1953]). This agreement spelled out a "50-50%" split of influence between "the West" and the U.S.S.R. for largely-self-liberated Yugoslavia as well as for Hungary which had virtually no liberation movement to speak of. Subsequent history saw of course repeated symbolic insistence on Tito's part to assert Yugoslavia's independence but that independence was always relative. This is reflected, e.g., in the fact that Yugoslavia was a member of the Council for Mutual Economic Assistance (CMEA) but not of the Warsaw Pact. On the other side of the Iron Curtain, Austria--a considerable part of which was in fact occupied by the Soviet Army during and after the war--was granted independence from Soviet influence by the Soviet agreement to the Austrian Staatsvertrag of 1955 which resulted in the withdrawal of the Soviet troops from Austria and in effect released Austria from the, by then clearly emerging, socialist bloc through the formula of "everlasting" neutrality. The status quo emerging by the end of the 1950s was, thus, strikingly reminiscent of the Yalta division of "influences" agreed upon over a decade earlier. (Everlasting neutrality lasted until recently when Austria was fully admitted to the European Union and its NATO membership is seriously considered.)
5. This is summarized after Böröcz 1992a and 1992b.
6. I am quite aware of the loaded nature of the "modernization" terminology. (See Böröcz 1995.) I use the term in this paper to denote an ideological construct positing "catching up with the advanced societies" as the main purpose of political, social and cultural efforts.
7. See Bodnár 1996. Rural housing remained, in striking contrast, almost entirely unsubsidized by the state, leading to the emergence of very creative, reciprocity-based rural labor pooling practices (Sik 1986) making up for the structural disadvantages associated with rural residence. All this contributed handsomely to a deepening of rural-urban contrasts in the late-state-socialist period (Bodnár and Böröcz, ms).
8. They also provided, through the subsidization and ideological promotion of household appliances by the state, the basic technological means for the full-time inclusion of working-age women in the labor force on a massive scale without reordering the gender-based division of labor in the family. So, with the state socialist societies of central and eastern Europe in the nineteen-sixties, we the first historical instance of societies with virtually full female employment. This, in conjunction with increasing consumer expectations, raising female educational attainment, and continued housing shortages, resulted in such specific problems as serious drops in the birth rates that were to be addressed soon by way of generous maternity support policies.
9. The extinction of the East German and Hungarian uprisings and the Czechoslovak construction of a "socialism with a human face" served as a reminder that formalization of political reforms was beyond the limits of the international status quo.
10. This notion of Yugoslav nationhood was developed parallel withYugoslav state's promotion of all of the over a dozen national languages spoken by the peoples of Yugoslavia.
11. Socialist consumerism was promoted with a particular vengeance in the G.D.R. whose leadership was so preoccupied in overtaking the "west" (in their case, West Germany) in every possible respect. Artefacts of this bizarre cultural modernizationist project, ranging from promotion of G.D.R.-made jeans through fiction films teaching east German audiences how to be good (demanding and conscientious) consumers of G.D.R.-made household appliances, were displayed at a striking exhibition entitled Wunderwirtschaft, on display at the time of the writing of this essay at the Kulturbrauerei, an important post-state-socialist cultural institution in (former East-)Berlin's Prenzlauer Berg district (Wunderwirtschaft, 1996). In Hungary, parallel developments took place in a more informalistic-metaphorized, "winking" fashion, causing serious ideological confusion among the party rank-and-file. This was duly reflected in public debates on the social advantages and ills of socialist consumerism. (E.g., the "frigidair-socialism" debate, the "cashew nuts" controversy, or repeated alarmist voices raised in fear of the country's shrinking population, called the "kicsi vagy kocsi?" [kid or car?] dispute.)
12. This role conflict will have an important role to play in post-state-socialist processes of property change.
13. This, amply expressed in the low correlation scores between enterprise profitability and managerial incomes in late-state-socialist Hungary, is what economist János Kornai described as the "soft budget constraint"of the socialist state. As a result, monthly revisions to five-year plans were not an uncommon feature of these societies, giving a new, ironical meaning to the NGO terminology referring to them as "Centrally Planned Economies." David Stark and Victor Nee (1989), especially pp. 9-12, offer the clearest and briefest summary of the economic sociological import of Kornai's argument regarding budget constraints.
14. Romania was the only European Warsaw Pact state that refused participation in the invasion of Czechoslovakia. It was also the only European socialist state that had repaid all of its previously-accumulated foreign debt and stayed free of financial dependence on the capitalist world economy for much of its post-1968 history. Its technological and trade dependence remained of course enormous, in fact likely exacerbated by the elimination of financial dependence.
15. Albania's initial efforts at modernization had been quite feeble and were constrained largely to the military sphere so it was easier implement this strategy of severe internal restriction.
16. This was an area of lending in which Austrian banks had a clear comparative advantage and great successes as organizers. This contributed handsomely to Austria's spectacular success in carving out a very lucrative niche between the two political-military blocs for much of the region's post-world-war-II. history. (See my "Austria's and Hungary's External Linkages after World War II", chapter 4, pp. 83-100. in Böröcz 1996.) It could be argued that the choice of this niche for Austria had much to do with another special relationship--less binding and less emotionally loaded than the inner-German bind but clearly recognizable both in popular rhetorics and the behavior of large institutions--between Austria and those of its neighbors that were fellow-successor-states of the Austro-Hungarian Monarchy two generations earlier. This was particularly clear for the relations between Austria and Hungary.
17. As cues for the political nature of these loans on the receiving end, they were referred to in the official language of the time typically as "measures of assistance" (Hung. segítségnyújtás). This ingenious construct successfully hid the profit-logic of the transactions and the collective responsibility on part of those who engaged in attracting and accepting those loans from the local publics. Meanwhile, they also worked as ambiguous euphemisms making those deals acceptable for such elements in the state-party that could mount political resistance to them. Just why western banks would volunteer to engage in the highly unorthodox practice of "assisting" a foreign, let alone socialist, state was never quite explained. On the other hand, those loans indeed served as powerful "assistance" to the socialist states in one specific area: maintaining a grudging, apathy-based quasi-legitimacy that provided a basis for the survival of the comprador state for one generation.
18. Historian Hans-Hermann Hertle (1996) offers a breathtaking summary of the contingent, "nonlinear" nature of the East German collapse. It is captured astutely by a G.D.R. border officer reporting by phone to his superiors after the opening of the Bornholmerstraße checkpoint in Berlin: "We are now flooding!" ('Wir fluten jetzt!', Hertle, 1996:166).
19. The presence of the Soviet Army during the "unwinding" (in official German terminology, Abwicklung, see Borneman, 1992, and Böröcz 1995) of the comprador states worked as a crucial stabilizing force during the collapse. Generalized political violence erupted in connection with the collapse of the central and east European comprador states only in those two societies (Romania and Yugoslavia) that were not under Soviet military occupation during the collapse.
20. This term is introduced, elsewhere (Böröcz ms) to denote economists who moved, in close harmony with the perimeters of allowable political speech over the span of the last ten years or so, from arguments advocating the "market-socialist" reform of state socialist economies through calls for the transformation to "the market," some arriving at the extreme position of advocating a highly utopian form of "pristine" capitalism without any interference in the market.
21. See, e.g., Stark 1996, Böröcz 1993.
22. This is the unambiguous conclusion of a number of empirical studies on managerial elite selection in the transformation (Böröcz and Róna-Tas 1995 and 1996, Róna-Tas and Böröcz 1996).
23. As a result, the property transformation process has been extremely tenuous economically. High transaction costs and poor representation of the seller's interest in the transactions has caused the net state revenues from privatization to be zero in Hungary and in the G.D.R. (Bródy 1996, p.3). Scandals of enormous magnitude have signalled the likely presence of corruption in the process.
24. This happened in very distinct ways and for different reasons in the two societies. The G.D.R. state was "unwound" by way of a systematic privatization (and political cleansing) process providing extreme advantages for west German capital so that today, after the conclusion of the privatization process of the former-G.D.R.-state assets and the dissolution of the Treuhandanstalt, the state property agency set up to run the privatization process, expert estimates suggest that over 85% of the assets are held by former west German corporations and individuals. Eastern Germans, in contrast, own a mere 5% of the assets of their former state. It is thus clear that the privatization strategy of the Treuhandanstalt was combining privatization with drawing on west German capital and assuring that the property of the former G.D.R. state will remain in (west) German hands. (I am grateful to economist Rainer Land, cultural anthropologist Ina Merkel and social historian Thomas Lindenberger for illuminating conversations on the former-G.D.R. situation.) As for Hungary--by far the most "marketized" society of all of the former eastern bloc by the time of the collapse of the imperial structure of state socialism--the legal, financial and other institutional conditions for foreign direct investment were found unanimously attractive for foreign capital early on. This was boosted by such economic-geographical and historical exigencies as the country's key position as a transportation and communication crossroads in central Europe, its relative peace and social quietude (in contrast to the war-torn states of former Yugoslavia) and the pre-existing, historical linkages tying Hungary to its neighbors. All those suggested that Hungary could be a suitable launching pad for further forays into the former "east bloc," in some ways playing a role vaguely reminiscent of Austria's niche during the preceding decades.
25. Over two-thirds of foreign direct investment in Hungary has been showered on the capital city and its immediate agglomeration.
26. Of course all of the region's states (as well as the vast majority of the world's states in general) are multi-ethnic so the practical questions is to what extent their legal structures recognize that condition. This notion is introduced here to designate those states that had made explicit provisions in their constitutional order to recognize the presence of multiple ethnic groupings in their territories.
27. The G.D.R. was unreported in the 1991 UNDP Report and has ceased to exist since then. The successor societies of Yugoslavia were excluded to avoid the confusing factor of the war and the enormous degrees of territorial inequality reproduced in their division. 1993 data for the Czech Republic and Slovaka are compared to the figures for Czechoslovakia in 1990; scores for Russia are compared to the U.S.S.R.'s figures in 1990.
28. UNDP 1991 and 1996 provide detailed descriptions of how the index is constructed. Although the
computation method was slightly modified between the two timepoints, it is generally considered
comparable between 1990 and 1993.