Milford businesses

When socialist Hungary became neoliberal

Of course, 1989 was a decisive turning point in history. Having said that, I don’t think a term like “private sector” is of much use to us if we are to understand the transition to neoliberal capitalism in Hungary (and elsewhere in the Soviet bloc).

The private sector basically refers to the part of the economy in which private companies operate, mainly motivated by the logic of profit. (These can range from small businesses owned by one or more people, like your cafe or local plumber, to large transnational corporations, like Audi or Facebook.)

In the case of the Soviet bloc regimes in Eastern Europe, the private sector was formally banned following the introduction of socialism (or, as I say, “state capitalism”) at the end. 1940s. Hungary, of course, established itself as the most liberal regime in the Soviet bloc. Thus, although the sovietization of the economy was declared with great fanfare in August 1949 (when the Hungarian People’s Republic was created), small pockets of the private sector have survived. In fact, as the regime progressed, the private sector gradually multiplied (notably following the introduction of the New Economic Mechanism, NEM, in 1968).

As a result, in the mid-1980s, research by Hungarian sociologists showed that up to 70 percent of all households in the country drew some of their income from the private sector. However, the existence of a private sector (even if it is relatively small by Western standards) does not tell us much about How? ‘Or’ What Where Why neoliberalism has developed in Hungary.

Indeed, “neoliberalism is a much broader concept than that of the“ private sector ”. I think it needs to be understood in three interrelated ways.

First, it denotes a relatively loose set of economic ideas, including a strong ideological commitment to the efficiency of private enterprise, yes, but also “self-regulation” of markets and tariff reductions, and a monetarist analysis of inflation. As Pierre Dardot and Christian Laval demonstrate in The new way of the world, the origins of these ideas go back to the interwar years and can be found on both sides of the Atlantic.

Second, neoliberalism represents a class project, aiming less at “restoring” the power of economic elites (as argued by David Harvey in A brief history of neoliberalism), but rather to restore the conditions for capital accumulation following the global crisis of capital accumulation (1968-75).

Third, and finally, as neoliberalism gradually gained ground among the ruling classes around the world, it came to represent the current phase of global capitalism. In this regard, neoliberalism is characterized, among other things, by a structural reorientation of the state towards export-oriented financialized capital, unlimited commitments to market-like systems of governance, privatization and expansion of enterprises. , a deep aversion to social collectives and the gradual redistribution of wealth by the dominant classes, etc.

Following this triple definition of neoliberalism, the regime change of 1989 takes on a whole new light. It has less to do with replacing one system with another (i.e. ‘socialism’ with ‘capitalism’ or ‘planned economy’ with ‘market economy’), as traditional readings of the transition. Instead, it has a lot more to do with the preservation of class power, in this case the technocratic elite of Hungarian state capitalism, who sought to salvage their own dominant role after it became clear that the planned system is no longer viable in the context of a increasingly globalized capitalist world economy.

This point is generally omitted even by critical readings of neoliberalism in Eastern Europe and the former Soviet Union, such as those of the late Peter Gowan Where David Harvey, who see the ascendancy of neoliberalism in the region as the result of external pressures, such as hegemonic Western powers, global and regional bureaucratic organizations, such as the IMF or the EU, neoliberal think tanks based in the West, etc. argue that we can trace the origins of “proto-neoliberal” ideas to Hungary in the mid-1970s, when the MSZMP leadership attempted to move the Hungarian economy away from the Soviet bloc and further integrate it into the world economy capitalist, in response to the negative impacts of the global crisis of capital accumulation. In this regard, I agree with Johanna Bockman, Gil Eyal and Agnes Gagyi, who perceive Eastern Europe as an important laboratory of neoliberal ideas during the Cold War and stress the interaction between reform economists and policy makers in the region and the West.

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