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Polányi, regime change and the demand for populism

By István Kollai

The regime change that the socialist countries of Central and Eastern Europe went through required their economic and political institutions to undergo transformation both from socialism to capitalism and from dictatorship to democracy. What made the transformations even more difficult is that they occurred simultaneously. According to Claus Offe, the losers of economic reforms related to transformation and stabilization have the power to reverse them through democratic elections. This argument aligns with the critical political economic theory of Karl Polanyi. In his book, The Great Transformation, he describes how the capitalist transformation or marketization of the 18th and 19th centuries caused the economy to become disembedded from society. When this happens, economic activities are no longer controlled by society, which leads to the establishment of fictitious commodities, such as money, land and labour (first movement). Although Polanyi does not question the fact that this process led to an unprecedented increase in material wealth, it cannot last forever, as it “means to subordinate the substance of society itself to the laws of the market” (Polanyi 2001: 74–5). This first retributive movement will cause society to push for protection against the negative effects of marketization (second movement or countermovement). He described the politically and economically stormy 1920s and 1930s as examples of his theory, arguing that the various undemocratic leftist and rightist movements of these times were the result of the disembedding economy of the 19th century. In this sense, Offe’s argument, mentioned above, describes a countermovement against marketization through regime change, just as the recent emergence of populism in the developed world can be identified as a countermovement against the negative effects of globalization.

Despite these concerns in CEE the parallel transitions happened rather smoothly: there was no turning back, at least, until the recession of 2008 and 2009. Does this mean, however, that there was no social pressure or demand for anti-market and anti-democratic or populist politics? In our research, we tried to identify if there was any demand for populism in the Visegrad 4 countries (Hungary, Poland, Czechia and Slovakia), due to the socio-economic shocks of the regime change.

According to van Leeuwen and Foldvari, the overall picture of the regime change, in absolute terms, has been positive. Although the early 1990s brought about a social crisis with increasing poverty, inequality and social insecurity, the second waves of stabilization (in Hungary 1995, in Poland the turn of the millennium, in Slovakia after 1998) prompted economic and social development in the new millennium. Welfare indicators improved, such as the Human Development Index, where even some convergence with Southern and Western Europe was visible. However, in many other variables, there are still evident disparities, i.e. in real income levels (see the figure below); in addition, the overall happiness level of the V4 is still below that of Western Europe. The number of hypertension-related deaths is still high in the region, indicating stress and insecurity in society.

Net income after taxes in thousand US Dollars (PPP) single person at 100% of average earnings, no child source: Scheiring (2020: 155)

This means that the changes did not reap results comparable to those in the West. Moreover, the changes destablised society by increasing inequalities, insecurity and tore up social ties. And although welfare indicators subsequently improved, the damage to social networks seems more permanent.

According to the World Values Survey data, active membership in trade unions, voluntary charitable and social organizations and educational organizations is low. For example, in Hungary less than 5% of WVS respondents were members of a charitable or humanitarian organization. This can be credited to the decrease in the overall level of trust in society. According to the European Values Survey, most Europeans do not believe that others can be trusted. However respondents from Western and Northern Europe were more likely to be optimistic than respondents from other European regions.

Institutional trust in the V4 declined in the two decades after the regime change more so than in Western European countries. While trust in the legal system was above 50% throughout Germany and above 60% in Finland, in the Visegrad countries (except Poland) it fell below 40% by the 2000s. By 2008, the level of general institutional trust had fallen to a minimum. Compared to 1991, trust in the legal system had fallen to two-thirds of its original level (38%) and trust in the press had almost halved (23%).

Not only did confidence in the political institutional system falter after the change of regime but the legitimacy of the economic system also quickly declined. According to Laszlo Bruszt, in 1990 more than two-thirds (68%) of Hungarians agreed that “capitalism is the best for the country” and “this system makes it possible to solve the country’s problems.” By 1993, less than half of all Hungarians (48%) agreed with both statements. While in 1991, 31% of Hungarians had a positive opinion of the new system and 40% a negative opinion, by 1995, only 26% thought the new system was better and 50% thought it worse (Figure 2). In the 4 years after 1991, the perception of the new system in all V4 countries deteriorated markedly. By 1995, the relative majority of Czechs and Poles still saw the new system positively (44% -39%; 57% -23% respectively). Only Slovaks had a similarly negative opinion to Hungarians (32% -51%). Also two-thirds of Hungarians (67%) saw themselves as the losers of the regime change in 1995, making it the first among the Visegrad countries (PL: 56%; CZ: 32%; SK: 54%). The perception of regime change has not improved over time. In the EBRD’s Life in Transition Survey, more than 75% of Hungarians thought that the country’s economic situation was worse in 2006 than 1989, while the rate was around 30% among Czechs, around 40% among Poles, and over 40% among Slovaks.

The Pew Research Center asked people twice, in 2009 and 2019, who they think benefited from the regime change. In both years and in all countries around 90% of respondents said politicians were the winner of the transition. According to respondents, business owners also gained from the regime change but far fewer thought that ordinary people benefited. This figure was extremely low in 2009 in Hungary.

“During the second half of the 19th century most of the area adopted the Zeitgeist of laissez-faire, free trade and export-led industrialization, and joined the international European economy. That attempt, however, failed, or, at least met with only limited success: Central and Eastern Europe remained agricultural, rural, and traditional, compared to the industrialized and urbanized West,” writes Ivan Berend in his book, History Derailed. This led to a ‘countermovement’, a revolutionary and then anti-revolutionary interwar period, where populism made its first appearance in the region.

In many ways, we might feel that the situation is very similar to that of the turning point of the long 19th century. It seems Offe’s predictions did not come to pass in the 1990s as capitalist and democratic transitions prevailed together. We can see from the analysis above that it did not necessarily happen due to the lack of demand. Rather it was a lack of supply,  as observed. However, after 2008, the societies of the V4 countries have started to feel that (neo)“liberalism failed to deliver”, and some sort of ‘countermovement’ is now observable.

It looks like the people of Eastern Europe act as Albert Hirschman (1970) described: they either exit, mostly through increasing emigration, or use their voice, through electing politicians who use the antiliberal narrative. For future research one must examine the supply side and do what is rarely done by analyzing the policy steps taken by these populist governments.

The author is a researcher on the POPREBEL project. This project has received funding from the European Union’s Horizon 2020 research and innovation programme under grant agreement No 822682.