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Janos Kornai: The Great Transformation

Janos KornaiJanos Kornai is a Hungarian economist. Born in Budapest in 1928, he spent much of his teenage years hiding from the Nazis and most of his career in communist Hungary, at the Academy of Sciences. Starting in the mid-1960s, however, he was also a visiting professor at some of the most renowned Western universities, including Stanford, Yale, Harvard, Princeton and the London School of Economics. From 1986 to 2002 he was a professor at Harvard (in addition to his job in Budapest). Since 2005 he is a research professor at the Central European University in Budapest.

Here we do not look at Kornai’s major economic works (The Road to a Free Economy, Economics of Shortage, Overcentralisation), but at an essay he wrote in 2005 on “success and disappointment” in Central Europe’s post communist transformation. Kornai starts off by going back a couple of decades, recalling the mood and expectations of the people living in communist Central Europe, and contrasting it with what people think today.

“At that time, they felt it a hopeless daydream that within the foreseeable future their countries would become democratic market economies. Today however, though this has become a reality, many are disappointed and bitter.”

It is this paradox that Kornai explores in this text. He looks at the issue from two perspectives: the big historical perspective and the perspective of the individual.

“I am convinced that what took place in Central Eastern Europe during the past decade and a half is an unparalleled success story in history. I believe this, in spite of the fact that I am fully aware of the grief and disappointment it was associated with. (…) In spite of serious problems and anomalies – assessing the situation from the perspective of great historical changes – what took place in this part of the world is a success story.”

Kornai’s convictions stem from his appreciation of the benefits of democracy and human rights in the former communist countries, the successful establishment of a capitalist economy (which Kornai sees as a pre-condition for democracy), and the fact that these changes happened so quickly – and in a peaceful manner. It is difficult to disagree.

But Kornai does not deny the many problems and difficulties that the “great transformation” has brought to the people of Central and Eastern Europe.

“Emotions of success and failure intermingle in everyone’s life who either participated or was an emphatic observer of the transformation taking place in the Central Eastern European region. Far be it from me to engage in a cheap ‘success propaganda’ campaign. We are not facing imaginary difficulties, nor are these problems encountered by a small proportion of the populace; we are up against some very real and serious negative phenomena.”

In his analysis of the reasons for this level of dissatisfaction, Kornai puts considerable emphasis on psychological factors, such as the relationship between hope and expectations, shifting reference points (“Everyone has started to compare his own circumstances with that of Germany, France or Scandinavia.”), and the fact that “people very easily forget”:

“Nowadays it seems that I, once the author of a book entitled ‘Economics of Shortage’ (1980), will be left as the single individual in Eastern Europe, who still remembers the shortage economy and feels genuine joy that it is over.”

For those who do not view the transition by reference to history or political science, but to their own living standards, the picture looks less bright, says Kornai.

“Among those who offer these negative judgments, there is an unfortunate mixture of half-true and half-erroneous establishment of the facts, a combination of half-substantiated and half-mistaken causal analysis, and an ordering of values that places the values of everyday life at the forefront. Those who judge from this perspective are not thinking in centuries-long historical perspective. They do not care what results the capitalist economic system and the democratic political order will produce in the distant future. They are experiencing these problems today, they are suffering from them now, or they are hurt by seeing others who are suffering now – and for this reason, their experience of the change that occurred in the system is as a failure, rather than a success.”

No one holding such views is to blame, maintains Kornai. “Every person has only one life.” He also thinks that big historical arguments and the weight of individual experiences cannot be compared or weighed against one another.

“I keep two accounts and not one, and do not merge them. On one account, I gladly acknowledge a great success at the level of world-history: a system was created superior to the former one, without bloodshed, with incredible speed. On the other account, I have the list of good and bad experience in everyday life; much joy and much pain. I consider it both sensible and defensible to say that what has happened in this region can be simultaneously considered a success in terms of its global historical significance, and a failure in many important aspects because it caused pain, bitterness and disappointment for so many people.”

Kornai asks for a stronger role of the social sciences, particularly more interdisciplinary work, without which “it is impossible to understand and to evaluate the great transformations.”

“One of the reasons for the overly negative judgment prevailing in Central Eastern European public opinion circles regarding the current great transformation is that scholars of the social sciences have neglected to analyse and evaluate the results within the requisite historical framework.”

What Janos Kornai writes about the perception of the “great transformation” applies equally to the story of EU enlargement – which has had a crucial role in facilitating the transformation – and to those living on the western side of the former Iron Curtain. People in the old member states tend to look at the recent changes from an individual perspective – thinking about the impact of “Polish plumbers” on domestic labour markets, to draw on the famous cliché – rarely aware of, or interested in, the bigger picture. Like Kornai suggests, no individual is to be blamed for his or her own reasoning and for putting individual interest ahead of the historical dimension.

But looking at EU enlargement “within the requisite historical framework” would help, becoming, at the same time, part of what Timothy Garton Ash calls a “new European narrative”.

  • Janos Kornai, “The Great Transformation of Central Eastern Europe: Success and Disappointment”, Presidential Address, delivered at the 14th World Congress of the International Economic Association in Marrakech, Morocco, on 29 August 2005, revised in February 2006. An online version is available here.