Similar to political discourse, economic theory is frequently exposed to major trends challenging liberal norms and values. This project will focus on a presumed sequence of economic doctrines (LNI), using the example of post-communist societies where such trends have proven salient in the global laboratory of collectivist ideas during the past decades. It will discuss liberal theories emerging in the 1980s, which were complemented by neoliberal elements during the post-communist transformation, and recently are under attack by illiberal (authoritarian, populist, anticapitalist) ideas. We will examine how these three stages were affected by collectivist (statist, anti-individualist) legacies of communism.

It is very likely that, in the end, the model of a three-stage LNI sequence will have to be nuanced. What is considered a chronological order may prove to be a blend of liberal, neoliberal, and illiberal ideas from the very outset; a blend in which the proportions among the ingredients have changed toward increasing state-collectivism in the long run. According to a key working hypothesis of our research program, the collectivist legacies (a) were instrumental in limiting the scope of liberalism in 1989, (b) paradoxically, exposed the post-communist “transformers” to neoliberal temptation, and (c) the latter inadvertently paved the way to a new – illiberal – collectivism. Regardless of fine distinctions like these, upon completion of the project, we will be able to offer a better understanding of the plurality and dynamics of liberal economic discourse as well.

Going beyond the state of the art

The LNI project originates in a number of scientific considerations and one serious political concern that already inspired our former research program on "Economic Collectivism". The latter will be presented first.

1. Relapse into state-collectivism. Recently, the post-communist world has been confronted with a steep rise in state-collectivism: interventionism, and even dirigisme. In a number of states from Hungary and Poland to Russia and China, that is, in alleged strongholds of emerging liberalism in the late 1980s, a huge part of property is in the hands of the successors of the communist nomenklatura and/or the new oligarchs. Large banks, utility companies, and pension funds were renationalized and new state-owned firms established. Price controls have been reintroduced, protectionist industrial policies gain strength, and income redistribution by the state is increasing. A bloated public sector is meant to serve not only as a bastion of national autarky but also as an instrument of funneling private gains to the mighty. Where business and politics seemed separate they became intertwined again in informal ways. In some countries society is ruled by a quasi-monoparty (and in China communist-style one-party dictatorship has not ceased to exist). Cronyism, kleptocracy, feudal privileges, and the like are all clear signs of the emerging regimes of organized corruption. As a similar relapse into statism threaten societies with both less and more advanced economies, this project will help recognize its signs also beyond the former Eastern Bloc.
2. Challenging the “(neo)liberal revolution” thesis. Political explanations for the relapse abound and offer numerous models of hybrid (electoral) authoritarian regimes. However, the economic interpretations of the same process, including its theoretical context, develop slowly. The LNI project aims to go beyond the state of the art in understanding that context.
   Following a romantic interpretation of 1989 as the annus mirabilis of liberal revolutions ushering humankind to the “end of history,” the recent rise of illiberalism in post-communist countries seems an inexplicable catastrophe. However, if one portrays the collapse of communism not as a one-time breakthrough of classical liberal ideas but a gradual and inconsistent move in a social-liberal direction, then the past three decades will demonstrate the persistence of state-collectivist attitudes in economic thought.
   Tracing the evolution of such attitudes under communism, one learns how advocating horizontal schemes of economic collectivism based on self-governance, communal/cooperative organization, and the like turned in most countries into hailing rigid vertical (state-directed) regimes of central planning. Nevertheless, both versions of collectivism affected post-Stalinist reform thinking for decades, including scripts of liberalization at the end of the 1980s. Vertical collectivism showed immense resilience by producing a trap that was easy to enter but awfully difficult to leave. It not only kept economic theorists under control through censorship but also paralyzed their fantasy for years even after repression had ebbed. Although a small minority of scholars, such as Leszek Balcerowicz and Václav Klaus, began to indulge in free-market rhetoric (mostly without solid underpinnings in classical liberalism) in the 1980s, a great majority remained under the spell of reform communism and cultivated the concept of “socialist market economy” (market socialism). Its protagonists did not challenge the monopoly of state ownership and one-party rule and part of them advocated workers’ self-management. Those who – after a long hesitation – reconciled themselves with the concept of “social market economy” (Soziale Marktwirtschaft) accepted the hegemony of private property and multi-party democracy without subscribing to Anglo-Saxon varieties of capitalism. To put it bluntly, they were far from being “closet free-marketeers” who could not wait to come out to praise laissez faire.
   This project confronts not only the romantic view of 1989 but also the recent criticism of that view. The former celebrates a liberal revolution whereas the latter laments a neoliberal one. According to both, at the end of the 1980s, one saw a liberal breakthrough in Eastern Europe (and later in China) but the critics also detect among the then prevailing ideas a – low-quality – replica of what had been called a neoliberal body of thought in the West. These critics discover “Chicago Boys” everywhere, busy to introduce the first policy packages of austerity and deregulation. Actually, the economic theorists advising and even heading governments, whom the critics regard as neoliberal fanatics, experimented mostly with social-democratic concepts. In their academic works these theorists drew on neoliberalism only occasionally and preferred to apply its phraseology to its substantial elements. Yet, in the eyes of the critics, neoliberal and neoclassical doctrines, monetarism and supply-side theory, shock therapy and the Washington Consensus, Hayekian and Friedmanite liberalism, the economic programs of Margaret Thatcher and Ronald Reagan, neoliberalism and neo-conservativism, etc., that is, a bunch of partly incompatible concepts, create the optical illusion of a coherent system of thought until today.
   Some analysts on both the left and the right go even further by supplementing the thesis of voluntary emulation with that of cultural colonization by Western think tanks. This narrative bordering on conspiracy theory was crowned by postulating a “neoclassical revolution” in communist political economy.

Dissecting the “liberalism-neoliberalism-illiberalism” sequence

Witnessing the growing backlash against liberalism in Eastern Europe and China, one cannot believe that the collectivist constituents of post-communist economic thought would vanish in the foreseeable future. The reasons are plenty:

• State-collectivist ideas demonstrate extreme resistance in economic thinking and many of them reappear in illiberal discourse.
• Liberalism after communism remains fragmented and fragile and continues to show a strong bias toward social (egalitarian and communitarian rather than classical) liberal theories.
• Neoliberalism works as a political rhetoric rather than a scientific paradigm of economic thought and – depleting values like individualism and pluralism – makes its peace with state-collectivism.
• Neoclassical economics is employed as a tool of legitimizing state-collectivist policies and its pro-market philosophy tends to fade.
• Despite its growing popularity, illiberalism is still a Janus-faced phenomenon: while offering clear political advice to build authoritarian regimes, its economic creed reflects an “anything goes” mentality, combining welfare with workfare and the flat tax, Keynesian demand management with monetarist restriction, market socialism with the theory of the “developmental state,” etc. To date, no eminent economist could be identified as its luminary suggesting a comprehensive theory.
• In sum, liberalism, neoliberalism, and illiberalism have evolved simultaneously, none of them assumed a pure form, and in the long run their shares radically changed in favor of illiberalism.

The flipside of a miracle

The LNI project focuses on the initial economic doctrines of the post-communist transformation and disentangles their collectivist, liberal, and neoliberal components. Covering a few years both before and after 1989, it shows the flipside of the proverbially liberal revolutions (the naïveté of liberal economic theorists writing the first scenarios of the transformation, their knowledge gaps in modern economics, “sticky” collectivist beliefs, and leanings to a “rhetorical neoliberalism”, etc.) while not disputing the emancipatory merits of those revolutions. Portraying a transition between two cultures of economic thought, namely, the historical moment(s), at which the reformist version of communist political economy tipped over to become a social-liberal set of ideas, this project explains why that shift came to an end after a while. It asks why social-liberal theories, occasionally packaged in neoliberal discourse, got stuck or moved backward in many countries, proving unable to develop into classical liberal ones.

The LNI project capitalizes on the results of our research program "Economic Collectivism" that ended with the analysis of economic thinking right before the first scripts of the economic transition were put on paper. Adhering to the methodology of that program (see below), we discuss the fate of liberal ideas during and after the collapse of the old regime. With the wisdom of hindsight, the historian may well understand today what twists and turns were encoded in that fate and what kind of additional factors contributed to the evaporation of the miracle that in 1989 so many economists in the ex-communist countries had presumed to enjoy for good. Differently put, a retrospective analysis can reconstruct the road leading from the state-collectivist monolith of the theory of the planned economy, through its partial disintegration first by means of reform communism and later by social-liberalism, to a situation in which neoliberal ideas (mostly slogans) celebrating market fundamentalism started spreading. The analysis ends by identifying the principal reasons for the emergence of illiberal thought and asking how they were related to the surviving collectivist elements of both social-liberal and neoliberal doctrines. This way one can understand why the trap of collectivism in economic thinking under communism was not fully deactivated after 1989, why many economists have been unable/unwilling to exit it until today (while some others crept back into it with pleasure)?

Too much liberalism?

Since the first signs of a backlash against liberal ideas during the post-communist transformation, the analysts have been struggling with the problem of whether – to put it bluntly – there was too much or too little liberalism in the cultural baggage of the late communist reformers, early transformers. In principle, with time, both could trigger off a relapse into some sort of state-collectivism. Knowing that in many countries the liberal programs have proven rather weak in consolidating capitalism during the past more than thirty years, one should have sufficient evidence for solving this problem – if that evidence is collected and processed properly.

Challenging a widely held view of a massive and lasting liberal breakthrough in the economic mind of Soviet-type societies, we presume that the alleged liberal consensus in 1989 and shortly thereafter was egalitarian or communitarian rather than classical liberal by nature. Those few economic theorists who began to praise the beauty and justice of the market process in high-sounding terms, remained in the field of political rhetoric, while in the real world they often borrowed economic institutions and policies from social-democratic welfare states in the West. Although accepting selected neoliberal measures (e.g., introducing flat tax, curbing welfare expenditure, supporting transnational companies, restricting collective bargaining, or privatizing pension schemes) from time to time, the majority of economists reached back to Ordo-liberal doctrines from the interwar period rather than to current neoliberal ideas. They insisted on regulated rather than free markets, agreeing to the “European Social Model” even before their countries were invited to join the EU and continued to prefer social engineering from above to a spontaneous evolution of the markets from below.

They claimed that the emergence of capitalism would slow down or be reversed by communist/nationalist/populist forces, unless private ownership and the market were carefully protected and promoted by the state. Any rush would backfire. Gradualism, went the argument, is contingent on a central authority that portions out transformative measures and controls their speed. The removal of the ruins of the old institutions and the design and construction of new ones need concentrated efforts: in a sense, deregulation has to be regulated and even the dismantling of central planning requires some planning by the government, particularly if these tasks are to be performed amidst economic stabilization to overcome both the pre-1989 crisis and the post-1989 “transformational recession” (cf. the then popular metaphor of rebuilding a ship on a stormy sea). While arguments like these were fairly biased, reflecting engrained statist prejudices, it is also true that even the (in)famous concept of shock therapy cried for a relatively strong state pursuing restrictive policies of crisis management.

“Interventionist anti-interventionism”

Why have so many observers depicted the social-liberal majority, to be portrayed in this project, as a community of increasingly neoliberal-minded, thus, dangerous thinkers and challenged them with passion up till now? By and large, demonization derived from two sources: the (visibly and disturbingly) high social costs of the post-communist transformation and the top-down character of far-reaching institutional change.

The market-fundamentalist rhetoric of some members of that community but, actually, its manifestation in certain transformative policies in areas such as marketization, privatization, and stabilization suddenly resulted in sizable social costs ranging from mass unemployment to new poverty. This rhetoric was further weakened by the related thesis of TINA (“there is no alternative”) repeated by a few radicals among the social-liberals. During the rise of social inequality, it was rather easy to paint the neoliberal devil on the wall, blame global capitalism, stir up nationalist/populist sentiments, and ignore the medium- and long-term “social benefits” of new capitalism, which originated in a greater freedom of choice in consumption, employment, and entrepreneurship, quicker progress of technology, etc.,  and were difficult to quantify ex ante. Meanwhile, transformative policies advocated by social-liberal economists did not amalgamate into a unified neoliberal economic strategy in any post-communist country and preserved collectivist features in important fields (e.g., employee ownership, voucher privatization, collective bargaining, price control of some basic goods and services, progressive taxation, public education and health care, social assistance, and so on). As a consequence, the level of redistribution of incomes by the government and its per capita welfare expenditure remained higher in most countries than in many welfare states in the West. Normally, the post-communist governments did not become “lean” at all.

Ironically, those who suspected a global neoliberal conspiracy were much more appalled by what they called “new social Darwinism” than by the fact that capitalism was introduced, that is, its key institutions were called into life by fiat from the top. True, some critics missed the approval of the new institutions by civil society and talked about “market Bolshevism” or state capitalism, alluding also to a swift transfiguration of the former communist reformers (cf. the bon mots “Marxists into Monetarists,” or “from the Moscow Consensus to the Washington Consensus”). Statist-activist leanings emphasized by a large variety of authors when defining neoliberalism in the West became an item in the “criminal record” of Eastern European transformers as well. The criticisms concerned the lack of direct-democratic consent to economic liberalization and the “aggressivity” of the latter rather than the fact that the markets were designed by social engineers instead of being discovered by free economic actors.

Typically, the critics did not reach back to Hayekian-style classical liberalism to reject state-led transformation as an attempt at “constructivist rationalism”. Rather, they were ready to accept, together with the social-liberals, the need for “interventionist anti-interventionism” almost instinctively, and thereby showed, if at all, affinity to Milton Friedman’s thoughts on strict monetary regulation rather than to those of Friedrich Hayek’s creed of spontaneity. Loyal to the traditions of vertical collectivism, both the social-liberal left and the national-conservative right agreed on strengthening the state for it to become a veritable architect, guard, and quality controller of the economic transformation and failed to ask how its extra powers could be reduced once the transition to capitalism was over.

Methodological concerns

Working on the project, we pursue research in the same three thematic fields (concepts of ownership, planning, and the market) that were covered by the edited volumes published in the framework of the "Economic Collectivism" program. They were examined in eight countries of Eastern Europe (Bulgaria, Czechoslovakia, GDR, Hungary, Poland, Romania, Soviet Union, Yugoslavia) and China.

Research on the evolution of economic ideas under communism had been started with the dual purpose of telling unknown stories and warning about the dangers of their repetition. In studying economic thought after communism, our aims did not change as far as the exploration of the uncharted and the discovery of the untold were concerned. Nevertheless, warnings are complemented by a real-time explanation of how and why old collectivist concepts tend to survive or reemerge and combine with liberal ones. Here, as so often in the past, collectivist economic thought is not only generated in the countries concerned but also assisted by the current vacillation of liberalism and the rise of the “new New-Left” in the West.

During the past ten years, our research group has worked out laborious but viable techniques of studying the evolution of economic ideas under communism. The three comparative volumes testify to the feasibility of the research program and promise success in exploring the intellectual history of post-communist economies as well. The lessons learned in focusing on three major concepts (social property, central planning, and market socialism) should help understand the post-1989 period when we examine transformative ideas related to their counterparts in nascent capitalism, i.e., privatization, the switch from planning to government regulation, and market liberalization, respectively.

Nevertheless, the fact that we retained major research fields does not mean that our bet was placed on path dependency exclusively. The individual fields show considerable differences due to the spread of hybrid solutions. To take the example of ownership, this project does not assume to discover the return of the familiar concept of social property enriching the nomenklatura by means of the party-state. Rather, we expect to find a number of mixed models of ownership (e.g., state-financed private property, neo-feudal property networks, etc.) that do include powerful collectivist components but – despite surprising similarities – cannot be identified with their communist precursors. In this field, research is extended to alternative theories of privatization, in which for many years state-collectivist blueprints were dwarfed by liberal ones in most countries under scrutiny. Here, the rise of statism needs a special explanation instead of being satisfied with a simple reference to the strength of path-dependency (e.g., to the old ruling elite converting to capitalism). Similarly, disregarding the fact that liberal solutions for dismantling state ownership were exposed to what the illiberals like to call “neoliberal dictatorship,” such as the shock-like transition of state assets in private hands through non-transparent procedures and with adverse social consequences, would also falsely shortcut the connection between ownership concepts under communism and current illiberalism.

While the rise of state-collectivist ideas features as a strong working hypothesis of the LNI project, we try our best to avoid foregone conclusions and find fields, countries, or time periods, in which this hypothesis proves wrong. In this way, comparative efforts may result in a meaningful classification scheme distinguishing a series of mixed types of liberal and collectivist economic ideas, and capturing their paths of evolution.

Continuing to insist on a multi-perspective approach, the principle of transnational comparison, and the importance of mass culture (“small texts”) in economics, certain facets of the post-communist world nonetheless requires changes in research strategy. Thanks to greater transparency, an upswing in international academic exchange, and a more professional work of libraries and archives, one has to struggle much less to obtain necessary information. Facing the near past and the present, one need not fear the passing of interview partners or the vanishing of crucial documents in dusty storage rooms of long-closed research institutes. The relative importance of the countries under scrutiny changed as well – not only because of the decomposition of multiethnic communist states but also because the influence of Russia upon scholarly evolution in the ex-communist countries today is incomparably smaller than in Soviet times while that of China is growing. Of course, Russia cannot be assumed away but, for instance, Estonia, a country proud of the liberal spirit of its economic experiments, was to be examined as well. The same applies to Slovakia and Slovenia in the context of former Czechoslovakia and Yugoslavia.

Also, profound adjustments are necessary in a fourth field of research, namely, in studying the sociological and political drivers of economic thought. Like in the previous three edited volumes, these drivers did appear in the historical analysis but would have required a great deal of additional work to be covered in depth. Nevertheless, this project does not ignore some crucial trends in this field during the past more than three decades. The acceleration of the West-East flow of ideas after 1989 are instrumental in grasping the essence of the neoclassical turn that has taken place in research and education during the last thirty years. The emerging academic markets with an increasing number of private actors (ranging from competing universities, research institutes, and publishers, through peer reviewed journals, to the international exchange of students) and the fall or weakening of communist control also require special attention and research tools. However, while not predicting a complete return of Soviet-style limits to scholarly life, one cannot help detecting familiar threats to academic freedom in Eastern Europe and China. Impoverishing or closing independent research institutions, subjecting universities to government control, reintroducing (self-)censorship, intimidating critical-minded scholars and privileging sycophants, are all telling signs of a new authoritarian grip over research and education in many countries. In economics (just like in other social sciences) the new restrictions on freedom of thought and pluralism in general result in a significant loss of scientific performance, growing opportunism, emigration, and the like – well-known phenomena from the “bad old times.”

Finally, we face greater difficulties than earlier in answering two intertwined Big Questions of intellectual history, which pertain to the correctness and originality of the ideas examined. Previously, working on communist intellectual history, our research group dealt with concepts that were, in terms of scientific quality, often poor or expressly flawed but sometimes authentic. Now, exploring emerging capitalism, research will be done on concepts that are rooted in high-quality achievements of universal economic science but are often imitative unless one considers their hybrid mutants original enough.

Research agenda

The project will develop in two stages. In the first stage, the project director will prepare a monograph on the Hungarian version of the first phase of the alleged LNI sequence by providing an analysis of the evolution of economic thought right before and after 1989. Its working title is (Neo)Liberalism and the 1989 Revolutions. Economic Ideas Stuck Between Communism and Capitalism. The book manuscript will be discussed at a workshop in which members of the national research teams of the “Economic Collectivism” program will take part presenting working hypotheses on the relationship between liberal, neoliberal, and illiberal economic theories unfolding in their countries in the same period. In the second stage of research, they will expand these texts into chapters of a comparative volume to be published together with the Hungarian monograph. The volume may transcend the chronological limits of the monograph and continue studying the evolution of economic ideas prevailing in post-communist societies until today.

Funding

The LNI project is supported by the “Program on Pluralism” of the Mercatus Center at George Mason University.