Historical Materialism �3.4 (�0�5) �69–�78 brill.com/hima Socialism Betrayed? Economists, Neoliberalism, and History in the Undoing of Market Socialism Besnik Pula Department of Political Science, Virginia Polytechnic Institute and State University bpula@vt.edu Abstract Through an historical analysis of the transnational practices of economists during the Cold War, Johanna Bockman rejects the narrative that the revolutions of 1989 represented the victory of ‘Western economics’, and especially neoliberalism, over ‘East-European socialism’. Rather, Bockman shows that the space of exchange, as well as policy experimentation in socialist states such as Yugoslavia and Hungary, led to the articulation of alternative, decentralised, ‘market socialisms’ from the 1950s up until the 1980s. Instead of operating within separate and incommensurable paradigms of ‘capitalist’ and ‘socialist’ economics, Bockman shows how neoclassical theory and its long tradition of comparing distinct economic systems became the central episteme allowing for the transnational exchange of ideas between economists of both the East and the West. This review-essay evaluates the book’s central claims but argues that the book stands on weaker ground when arguing that a reformed socialism was a viable option in Eastern Europe after 1989. Keywords neoliberalism – Eastern European transition – economics Johanna Bockman, Markets in the Name of Socialism: The Left-Wing Origins of Neoliberalism, Stanford: Stanford University Press, 2011 Johanna Bockman has produced an intriguing and provocative book. It begins by redefining the field of neoclassical economics and extricating it from the © koninklijke brill nv, leiden, ���5 | doi �0.��63/�569�06X-��34�4�6 170 pula appropriations and, in her view, perversions of, neoliberalism. Against the seemingly standard practice of equating neoliberalism with neoclassicism, Bockman argues forcefully that the neoclassical tradition constitutes a theoretical universe much larger, much more heterogeneous, and much more open to non-capitalist forms, than the narrow, and mainly normative, assumptions of neoliberalism (this perspective has its own problems, but more on that later). Through her discussion of the neoclassical tradition, Bockman aims to break apart the capitalist/socialist, laissez faire/central planning and market/state dichotomies that informed much of neoliberal critique of state socialism prior to and after the revolutions of 1989. Her work excavates debates on ‘market socialism’ in Eastern Europe, and reform-socialist experiments in Yugoslavia and Hungary, arguing that, among many economists of the time, the revolutions of 1989 were about moving towards a new kind of marketsocialist alternative, rather than abandoning socialism entirely in favour of neoliberal capitalism. The book is divided into seven chapters. The first two chapters trace the origins of neoclassical economics and the recovery of neoclassicism as a shared vocabulary and epistemic framework for economists of the East and West during the post-Stalinist 1950s and after. Chapters 3 and 4 discuss market-socialist reforms in Yugoslavia and Hungary, respectively, during the 1950s, 1960s and 1970s. Chapter 5 discusses the work of the Centre for the Study of Economic and Social Problems (CESES) in Milan, Italy, often claimed as a Cold War-era, right-wing think tank promoting anti-Communism, but which Bockman suggests was an ideologically much-more porous, transnational space for economic and theoretical debate among economists of both the East and the West. The final chapters discuss the debate among economists in the period immediately before and after the events of 1989, arguing that the shift towards neoliberal capitalism was an unexpected turn for most. Instead, Bockman argues that a number of influential economists had envisioned a variety of alternative paths of reform that did not necessarily involve the mass transitions to capitalism that ultimately transpired in the region. The remainder of this essay will discuss the chapters while raising a number of concerns. While engaging with the collapse of state-socialist economic systems in Eastern Europe and the Soviet Union after 1989, Bockman’s concerns are broader and involve debates over the rise of neoliberalism, both as a political-ideological movement and as a theoretical-normative commitment among economists. The events of 1989 are often claimed as an epic victory for neoliberalism, as the demise of central-planning systems provided ultimate empirical ‘proof’ that planning and state ownership of the means of production results in outcomes Historical Materialism 23.4 (2015) 169–178 Socialism Betrayed ? 171 inferior to private ownership and free markets. Beyond the exuberance of the time, such as that of Jeffrey Sachs1 and the Harvard neoliberal economists who came to dominate policy debate on reforms in post-1989 Eastern Europe, rightwing economists such as Anders Åslund2 continue to claim 1989 and the path of pro-market reform in Eastern Europe as a crucial victory for neoliberalism and ultimate ‘proof’ of its ‘success’ as an economic and political model.3 In this respect, the meteoric rise of neoliberalism from the ashes of state socialism offers an important puzzle. Bockman’s book traverses recent work on the history of neoliberalism as a political-ideological movement (such as in the work of Harvey),4 comparative sociologies of the economics profession,5 and the varied work on the rise of worldwide technocracies which embrace neoliberalism as a distinct mode of governance.6 Bockman differentiates her work from these perspectives by casting it as part intellectual history, part sociology of the Cold War-era economics field (and particularly the transnational flows and interactions usually ignored by analyses of national economics professions), and part an historical sociology of the potential futures which were blocked off by the ideological triumph of neoliberalism in 1989. The latter goal, i.e. salvaging the events of 1989 from the appropriations of neoliberalism, is what ultimately justifies the project, as an intellectual history of economists in the Cold War would probably be an uninteresting one. For her purposes, Bockman defines neoliberalism more narrowly as a politicalideological movement which supports (1) competitive markets; (2) smaller, authoritarian states; (3) hierarchical firms, management and owners; and (4) capitalism (p. 4). As will become clear, what ‘capitalism’ stands for here is far from obvious, but this definition helps Bockman develop her categorisation of non-capitalist forms of economic organisation, as represented by Soviet, Hungarian and Yugoslav socialism (p. 11). Her alternative models are, in essence, theoretical ideal-types, because they stand to organise her analysis of the discourse and formal theoretical models of economists, rather than really-existing economic systems (though the distinction sometimes becomes 1 Sachs 1993; Sachs and Woo 1994. 2 Åslund 2007. 3 As Bockman and others critics note, for classic neoliberals such as Friedrich Hayek and Milton Friedman free markets and political freedom co-constitute each other and are theoretically and practically inseparable. In the neoliberal variant of the argument, the collapse of oneparty regimes in Eastern Europe in 1989 by necessity required free-market capitalism to ensure the irreversibility of change and the enshrinement of democratic political freedoms. 4 Harvey 2005. 5 Fourcade 2006. 6 Centeno and Silva (eds.) 1998; Mitchell 2002; Ong 2006; Rose and Miller 1992. Historical Materialism 23.4 (2015) 169–178 172 pula blurred in the book). Bockman claims that, in any case, all of these models stem from, or are compatible with, foundational perspectives in neoclassical economics. The book’s central historical support lies in the porous lines of division and the disagreements between economists over the ultimate superiority (in terms of economic efficiency and/or social-welfare maximisation) of markets versus planned systems, especially in the prewar period. As Bockman shows, the concept of planning as a substitute for the market as a coordinating mechanism in production, consumption, and distribution in industrial economies had a long history in economics. She cites Léon Walras, one of the founders of modern economics, as having declared his commitment to socialism as early as the 1860s, because, as he explained in a statement written in 1896, ‘slavery, servitude and the proletariat [involve] three empirical phases of the same question, namely that of property and taxation, or the distribution of social wealth among men in society’ (quoted on p. 21). Following Walras, Vilfredo Pareto declared markets and state-planning models to be theoretically equivalent and interchangeable. Pareto’s concept of ‘social planner’, as Bockman notes, continues to serve as an important conceptual tool in economic theory. Pareto used the concept to develop formal proof that an imaginary social planner could, theoretically speaking, effectively and successfully run a ‘Ministry of Production’ without free-market prices in full Pareto optimality (pp. 24–5). The more important and consequential voice in Bockman’s narrative is Pareto’s colleague Enrico Barone, who developed two alternative models of planned economies, ‘a centralized one where the state organizes production without the input of consumers and a decentralized one where citizens choose their consumption and occupation’ (p. 25). In the 1930s, while John Maynard Keynes was pushing for a state-managed capitalism, a number of other economists came to advocate direct planning and social ownership, including the likes of Mihal Kalecki and Oskar Lange. Bockman thus invokes the origins and evolution of neoclassical economics to argue that socialism and planning are, rather than antithetical to capitalism and markets, inherent in the neoclassical tradition. Bockman uses this claim to argue that neoclassical theory is, given its history, not simply a ‘science of capitalism’ as some Marxists have tended to portray it. Rather, in Bockman’s view, neoclassical theory is a ‘galaxy’ allowing for many alternative economic arrangements, including possible non-market-based systems. Bockman is keen on emphasising this point throughout the book. Bockman argues that two events caused the breakup and subsequent recovery of the neoclassical tradition among economists in Eastern Europe. The first was the Bolshevik Revolution, and particularly the rise of Stalinism, Historical Materialism 23.4 (2015) 169–178 Socialism Betrayed ? 173 which effectively cut ties and limited communication between Soviet economists and those in the West until well after Stalin’s death. The second was the ‘market socialist’ experiments in Eastern Europe. After the YugoslavSoviet split in 1948, the Yugoslav Communist leadership used its newlyfound political autonomy to experiment with alternatives to Stalinist central planning. This produced – in theoretical if not necessarily in practical terms – a decentralised economic system based on worker control of firms, competitive markets, and decentralised planning, commonly known as the Yugoslav self-management system. In the 1960s, after attempts at reform and the fateful Soviet intervention of 1956, Hungary engaged in a similar path of reform which led to the development of a ‘market socialist’ system where centralised ownership of industry combined with quasi-market competition. As economists of both East and West re-established lines of communication in the 1960s and 1970s in venues such as Milan’s CESES, neoclassical economics again came to provide the conceptual vocabulary allowing formal comparison between economic systems and debate over the value, efficiency and ultimate utility of capitalist and socialist economic systems. In the West, for example, there formed during this period the subfield of comparative economic systems, based largely on neoclassical economics and growing out of the infamous ‘Socialist Calculation Debate’. In Eastern Europe, Bockman finds, the neoclassical tradition was invoked to develop and support models of market socialism and decentralisation, some apparently inspired by Barone and Lange’s work. While neoclassical economics came to function as the episteme of transnational economic debates in the Cold War, it was this context that led neoliberalism to emerge as a distinct political position advocating small states, free markets, and hierarchical forms of ownership and firm organisation. Among the reform debates in Eastern Europe for most of the 1960s and up until the late 1980s, discussion pitted against each other those who argued in favour of more or fewer markets, and more or less firm decentralisation (i.e., worker control) but, according to Bockman (who documents this in Chapter 6), with few exceptions, none of the major economists advocated hierarchical firms and free markets of the neoliberal kind. Bockman illustrates this with an anecdote involving the Yugoslav-born (and future World Bank) economist Branimir Milanović and Jeffrey Sachs. Having accidentally encountered Sachs at a Belgrade bookstore in 1990, Sachs asked Milanović to sign his new book. In his dedication, Milanović wrote, ‘To Jeff Sachs, who is trying to save socialism.’ Upon seeing the dedication, rather shocked, Sachs responded, ‘I do not want to save socialism; I want to bury it.’ (p. 158.) Such was the gap, evidently, between economists in Eastern Europe around 1989–90 and the neoliberals who came Historical Materialism 23.4 (2015) 169–178 174 pula to dominate policy at the time, that Milanović and his Eastern European colleagues still clung to the belief that 1989 was about ‘saving socialism’. As an intellectual history of an understudied area, the work tackles interesting developments and shifts in the discipline of economics, and it is well-documented with cross-national sources from the West, as well as Hungarian, Yugoslav and Italian archives. As such, it is a superb reconstruction of a transnational domain of practice during a period typically described as entirely antithetical to such engagements. The book is also well written and does not require technical knowledge of economic theory. One stylistic problem that this reviewer would remark on is the constant repetitive statements which reiterate the basic arguments of the book. While such statements are useful in reminding the reader of points raised and arguments developed in different chapters of the book, they are so frequent that they sometimes appear overused, almost striking the reader that the author’s intention is to persuade them by sheer repetition of the book’s central claims. A number of more substantial criticisms could be raised against Bockman’s approach to the treatment of her historical problem. I will raise three. First, one might object to Bockman’s unconventional and highly expansive definition of neoclassical economics. Bockman, in staking a position that informs the entire analysis of her book, asserts that ‘socialism . . . plays a foundational role in neoclassical economics’ (p. 7) and that ‘both the pure competitive market and centrally planned socialism sit together at the center of neoclassical economics, no matter the politics of an economist.’ (pp. 7–8.) In essence, ‘neoclassical economics’ in Bockman’s designation includes everything that has happened in economics since Walras. Even Marxist and Austrian economics could be read as versions of neoclassicism, because Marxism constitutes, in the neoclassical reading, a ‘critical economics of capitalism’ while the Austrian school is credited with ‘[presenting] an economics of socialism’ (p. 12). The approach still levels important and substantive differences between monetarists, Keynesians, and Austrian-school and Chicago-school microeconomists, some of whom may define the neoclassical tradition more narrowly. While many economists might share the Walrasian vocabulary and framework – and that appears to have made some interlocution between economists across the Iron Curtain possible – it obviously does not follow that they also share substantive agreement on the fundamentals of economics, as Bockman also acknowledges. The indiscriminate application of the neoclassical label to designate divergent analytical and normative traditions in economics might therefore strike some readers as obscuring rather than clarifying differences between divergent schools of thought in economics. Historical Materialism 23.4 (2015) 169–178 Socialism Betrayed ? 175 Second, and more critically for the book’s analysis of the broader historical context, the argument that socialist alternatives to neoliberal reform were possible in 1989 is also problematic. In Chapter 6, Bockman outlines several of the alternative paths which were envisioned by economists for the post1989 transition. In her assessment, among economists of the time, including the likes of Leszek Balcerowicz in Poland, Janos Kornai and Béla Csikós-Nagy in Hungary, Vaclav Klaus in Czechoslovakia, Yegor Gaidar in Russia, Branko Horvat, Jože Mencinger and Aleksandar Bajt in Yugoslavia, as well the World Bank (in a policy report published in 1987), there appeared several, and not only one, paths away from central planning (or, in Yugoslavia’s case, an ineffective decentralised model). These included ideas as varied as transitions to a ‘proper’ market socialism, which would introduce price competition among socialist firms, a reconstructed central-planning system, and full decentralisation which would finally attain the aspirations of the decentralised (Yugoslav or ‘Illyrian’) model of worker-control of firms. All of these, in Bockman’s view, represented viable alternatives to the neoliberal-type reforms that came to be implemented after 1989. However, the claim that the panoply of ideas of the reform economists in the late 1980s represented real historical alternatives rests on shoddy grounds. First, it is unclear that there was a coherent movement – among intellectual elites if not popular masses – in support of a reformed socialism. Surely, as Bockman demonstrates, debates on reforming socialism had been ongoing in Eastern Europe since at least the 1960s, if not earlier. Debates between economists in the 1980s were therefore no different in this regard, while the malperformance of central planning undoubtedly increased the urgency of reform. Second, even if there were proposals for reforming socialism, the suddenness of the events of 1989–90 overtook any notion that socialism in any form might be saved. The sudden Soviet withdrawal from the region and the collapse of Communist Party rule destroyed the political rationale for central planning, while important external shocks to East-European industry which took place in short succession in 1990, such as the removal of barriers for trade with the European Common Market and the sudden Soviet decision to pull the plug on the Council for Mutual Economic Assistance, deeply undermined the interbloc industrial relations which had sustained the classical-socialist model.7 For Bockman, it seems, varieties of socialism could have somehow still developed within individual national economies in the context of a globally hegemonic capitalism, but we are not told how this could have potentially 7 Lavigne 1991. Historical Materialism 23.4 (2015) 169–178 176 pula come about. More crucially, Bockman does not fully account for why many economists in Eastern Europe, even those whom she cites, suddenly performed an about-face and accepted – even advocated – the need for quick transitions to market-based capitalism and the rapid dismantling of the old system. Were they now thinking as political revolutionaries rather than as academic economists, perhaps? Indeed, for Bockman, the ultimate victory of neoliberalism was, evidently, a result of elite betrayal. According to Bockman, ‘postcommunist elites . . . reneged on their promises to workers and to society more generally [for “democratic market socialisms”], while expanding their support to managers, future owners, and technocratic experts’ (p. 217). Such a sweeping claim is hardly supportive of an analysis of the politics of reform and the power relations at the international level which determined the paths taken after 1989. The language of ‘transition to neoliberalism’ embraced by Bockman also tends to overstate the success of neoliberal politics, which was less than uniform across the region.8 While Bockman may have not wished to delve into a political analysis of post-1989 reforms given the more limited objectives of her book, it would have been wise to avoid offering statements which oversimplify a rather complex historical transformation. Third, the more important take-home message that Bockman wants to leave the reader with is the idea that there exist in the history of the economics discipline various, relatively well-elaborated models of alternative (non-Soviet) socialist economies. Indeed, Bockman suggests that models of alternative socialisms have been so extensively elaborated that ‘market transition models to nonstate socialism . . . remain today ready for use: market socialism, the Illyrian model (a perfected model abstracted from real Yugoslav worker selfmanagement), entrepreneurial socialism, cooperatives, and so on’ (p. 221). One is tempted to invoke Schumpeter, who noted that ‘no proof of the soundness of [the] logic [of a socialist economy] will convert anyone to socialism’.9 Surely, while the East-European socialist experience provides important and crucial lessons for radical projects of the present and future, the notion that blueprints for socialism lay sitting on our shelves, waiting to be rediscovered and implemented, not only ignores the problems with the socialist experiment in Eastern Europe, but also turns the problem of non-capitalist alternatives into an excessively trivial one, both intellectually and politically. Bockman’s analysis of the evolution of economic theory in the ‘liminal’ spaces of exchange during the Cold War, understandings of capitalism and 8 Bohle and Greskovits 2012; Crowley and Stanojevic 2011; King and Sznajder 2006. 9 Schumpeter 1950, p. 172. Historical Materialism 23.4 (2015) 169–178 Socialism Betrayed ? 177 socialism and experiments with alternatives, and the role of the neoclassical tradition in providing the groundwork for transnational exchanges is a useful intellectual and historical task. The book helps reclaim the broader economic imaginary in which East-European state socialism was embedded, against the simplistic but widespread notion that economic thought in Eastern Europe was conservative and inert while 1989 represented an irrefutable victory for the ideas of free-market capitalism. The book also does a remarkable job in reclaiming the tradition within mainstream economics of imagining alternatives to capitalism as constituted by hierarchical forms of ownership and control and ideologies of pure, anonymous, symmetrical, and ‘free’ markets as perfect coordinating mechanisms maximising social welfare. It does evoke, in a somewhat melancholic way, memory of a time in the nottoo-distant past when comparing alternatives to the fictitious ‘self-regulating market’10 constituted a common intellectual exercise among economists. But in giving less than sufficient attention to the nature of historical change and the reform politics of 1989, the book is less persuasive in its argument that 1989 was really aimed at saving socialism, and that a radically different historical path was indeed in the making in Eastern Europe, had only East-European economists not betrayed their original creed. 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