János Kornai: Threatening dangers

The Peterson Institute for International Relations (USA) and the School of Public Policy at the Central European University (Hungary) held a conference on “Transition in Perspective: 25 Years after the Fall of Communism” in Budapest on May 6 and 7, 2014. Among the attendees were Leszek Balcerowicz, Václav Klaus, Anatoly Chubais, and many other well-known economic policymakers and academic economists of the post-socialist transition period. This is the text of János Kornai’s keynote address.


I would really like to give a cheerful and optimistic talk. I was optimistic when I was working on my book The Road to a Free Economy in 1989.  I undertook comprehensive evaluations of the post-socialist transformation later, on various occasions, and although all the essays pointed out the problems, they always ended on a note of optimism. Even today, there are several developments that may give grounds for satisfaction: in many countries in Central-Eastern Europe and in the Baltic regions dictatorship has been replaced by democracy, the command economy by the market economy, socialism by capitalism. My sentiments, however, are overcast by two depressing developments.

David Levine: Business & financial figures, economists /New York Review of Books

David Levine: Business & financial figures, economists /New York Review of Books

I am Hungarian – my mind can barely stop processing the uninterrupted flow of gloomy news for a second.  Hungary was moving forward on the path of democratic development for 20 years. People were tormented by various troubles, however, it was to be hoped that sooner or later we would manage to overcome these too. But the situation changed for the worse in 2010, when the political forces leading the country performed a U-turn. Instead of the strengthening of democracy we saw the abolition or drastic restriction of numerous fundamental institutions of democracy. Instead of private property being reinforced, the security of private property came under attack. Instead of continuing decentralization, the tendency to centralize was revived.

What has taken place here in four years and what will, in all likelihood, continue for the next four is a unique phenomenon: Hungary is the first – and so far the only – one  among the countries that chose the democratic path in 1989 – 90 which made a U-turn. This one example, however, is enough to prove that such a change can happen. The path on which we started in 1989 is not necessarily a one-way road; the changes, of historical significance, are not irreversible. Quite the contrary – and this is one of the terrible aspects of the Hungarian state of affairs -, the situation after the U-turn may become irreversible for a very long time. Democracy, especially in countries where it has not yet taken deep root, might be unable to defend itself. It may be overpowered if it is attacked unscrupulously and with Machiavellian determination.

The other shadow over our celebration is cast by the Ukrainian situation. Nobody can tell for sure what the months to come will bring. But one thing has already happened, and this is the de facto annexation of the Crimean peninsula. One of the fundamental principles of the Accords signed in Helsinki in 1975 was the sanctity of the status quo: the state borders valid at that time were not to be changed for any reason whatsoever. The Crimean peninsula became part of Ukraine twenty years before the Helsinki Accords. One of the basic principles of the Accords was overthrown in March 2014, and the world took note of this and responded only by wagging a disapproving finger and introducing mild reprisals. Like the Hungarian changes, this constitutes a powerful precedent, according to which it is possible to change a lawful border using military force on some pretext or another, and for this purpose the most obvious excuse is ethnic.

All the things I wish to say tonight I will discuss in the light of these two precedent-forming events.


Let us imagine the map of the world and let us look at the Eastern half. We shall use three colors. Let’s cover the new democracies with green, the color of hope. I call them the post-communist democracies. Although many of their features are identical with those of traditional Western democracies, their political cultures still bear the marks of the communist past.

East of this stretches a very wide zone, which I would cover with pale red: this is the zone of post-communist autocracies. Their prototype is Russia. After 1989 the transition towards a market economy was launched there as well. At the very beginning a democratic constitutional structure appeared : parliamentary elections among competing parties, debates between a government relying on its parliamentary majority and the opposition. The rule of democracy, however, proved to be a very brief episode. Following a few stormy years Putin seized power and a new political structure emerged. This has restored certain aspects of the communist system, especially the great power of the state, but it also differs from that in some significant ways. The number one leader (whatever his official legal status might be) is invested with an enormous amount of power and rules over a strictly centralized hierarchical state and political apparatus, but he does not possess the absolute monopoly over power of a real dictator. There are opposition parties, parliamentary elections do take place, although it is true that the opposition is very weak and doomed to lose the elections from the start. There are newspapers, radio and television stations and internet portals that are independent of the ruling group – their voice, however, is weak. This type of autocracy is halfway between the full-fledged Western-type democracy and a totalitarian dictatorship. What mainly distinguishes it from the latter is the fact that, although the regime is very repressive, it does not use the most brutal means: the arrest and confinement in cruel concentration camps or physical liquidation en masse of the representatives of alternative political movements. The other great difference from the communist system is that the autocratic political regime is connected to an economy in which private ownership is dominant. The ruling political powers hold important positions in the economy, both in the still significant state-owned and the very broad private sectors.  The larger part of the economy works according to the behavioral regularities of capitalism

Of the 15 successor states of the former Soviet Union, three Baltic countries have become relatively stable post-communist democracies. I would place Belarus and the Central-Asian republics together with Russia in the post-communist autocracy category. Now, 25 years after 1989, it can be stated that the situation in the post-communist autocratic countries is basically unchanged; there is absolutely no sign of the iron hand relaxing its grip.

Ukraine’s position is uncertain, and has actually now become especially problematic; over the past 25 years it has sometimes displayed the signs of post-communist democracy; at other times those of post-communist autocracy.

Let us go back to our map. To the east and south of the region of autocracies we can see China and Vietnam. These embody a third type, which I shall call post-communist dictatorship. Let us cover this region with a deep red color. The economy resembles, in many respects the Putin-type regime. Although the state sector has remained very significant, the larger part of economic resources are now in private ownership. Here too the political and economic worlds are closely intertwined. The significant difference lies in the fact that in China and Vietnam the ruling political parties have never for a moment given up their own power monopolies. The Chinese and Vietnamese communist leaders did a thorough analysis of the Gorbachev era. The series of events which started with glasnost and ended with the disintegration of the country, the loss of super-power status and the liquidation of political monopoly have been haunting them like horror dreams. Anything but that! The Chinese and Vietnamese leaders have made an unshakeable decision never to open the floodgates of free political movements.

The Chinese and Vietnamese governing parties are only ‘communist’ parties in name: nowadays they have absolutely nothing to do with the Marxist-Leninist program which intended to abolish capitalism. Lenin would classify these political formations as bourgeois. The Chinese and Vietnamese ruling parties accept capitalism in practice, they cooperate with it and profit from it.The case of China and Vietnam clearly demonstrate that capitalism is compatible with dictatorship. It is true that there is no democracy without capitalism, but this statement cannot be reversed. Capitalism can exist and function for a very long time without democracy. In spite of the hopes of many Western analysts, there are no signs of any tendency for the heavy-handed regimes to loosen their grasp.

I will not go on to discuss the situation of certain small countries: North Korea, Cuba and Venezuela. Instead, I will refer back briefly to the introduction of my lecture. In 2010 Hungary changed color: it turned from green into pale red. It is not a post-communist democracy anymore, but a post-communist autocracy. As I have said, this is a first and so-far unique event. But here I ask the participants of this conference: is there no danger that other countries which are still in the green zone will make a similar U-turn?


Historical developments show, that the problem of state borders and the relationships between ethnic groups within the borders is one of the most important issues of the post-socialist transformation; it is no less important than the form of political government and the radical transformation of property relations.

The Soviet Union disintegrated into 15 successor states. Czechoslovakia was divided into two. These two changes took place peacefully. The disintegration of Yugoslavia, on the other hand, was followed by bloody wars. Not long after the declaration of independence a war broke out between two successor states of the Soviet Union, Azerbaijan and Armenia. Fighting is now virtually continuous in the southern regions of today’s Russia. And now here we are in the middle of Ukrainian internal strife and the Ukrainian-Russian conflict.

We have divided the post-communist region into three zones on the basis of the defining features of their political structure. What the countries in all three zones share, however, is the existence of ethnic conflict. The intensity of conflicts varies. Relatively speaking, the ‘mildest’ form is nationalist rhetoric: blustering about the superiority of the majority ethnic group, vilifying ethnic minorities, or rabble-rousing against neighboring peoples. A graver situation is when nationalist, racist arrogance is manifested in deeds as well. It can happen in discrimination affecting schooling and the distribution of work places, or in the limitation of the free use and official acknowledgement of a minority language. Unfortunately, the most criminal forms of nationalism also take place. Although infrequently, violent behavior driven by racist motives occurs, such as the desecration of Jewish cemeteries and synagogues, and even Roma murders.

There is not a single country in the post-communist region which is immune to the epidemic of nationalism. There are degrees, of course: at one end of the scale we find the quietly thrown anti-Semitic or anti-Roma terms of abuse in ‘gentlemanly’ style. Next degree: hateful, cruel words. Next, more frightening degree: beating of members of the minority, threatening parades of uniformed commandos. And at the other end of the scale: murder. Who knows where the incitement to nationalism will lead?


In all three zones and every country of the post-communist region significant economic problems make themselves felt. Naturally, the constellation of difficulties, the relative gravity of the different issues varies from country to country. However, there are certain problems which are fairly general.

Post-communist transition has its winners and losers. Large numbers of people lost their jobs, unemployment became chronic. In many countries the inequality of income and wealth distribution escalated. Millions live in abject poverty, while others who have suddenly lined their own pockets enjoy their wealth in front of them. This explains why so many people think of capitalism with annoyance or hate. Few of them expect help from the extreme Left: the chances of a communist restoration are negligible. The number of those, on the other hand, who turn to the extreme Right, is significant. The ears of the disappointed, the losers and the needy quickly pick up the message of the populist demagoguery against profit, banks, and multinational companies.

The atmosphere of dissatisfaction is susceptible to the slogans of nationalism. “Life would be better if we lived again in an empire as large as it was during the tsar’s time” – they say in Russia. “If only we could get back those resource-rich parts of the country that we were stolen from us at Trianon in 1920!” – they say in Hungary.

So, what we have is a mass below, receptive to nationalism and slogans of “law and order”. And we have political parties and movements above which sense the opportunities provided by the angry mood of the masses. A vicious, self-inciting cycle evolves from disappointment in democracy, the attempts at anti-democratic governance, nationalism, and economic dissatisfaction. There are government intentions and mass sentiments at work which mutually reinforce each other.

The holders of power in Russia are anxiously observing how the growth of production is slowing down, how it has almost reached stagnation. This is when attention must be diverted from the problems of the economy towards ‘great national issues’ such as the plight of fellow-Russians living on the other side of the Western borders. Nationalism gives birth to an expansion drive. And this is no longer a domestic issue, but a tendency whose effect crosses national borders and threatens peace.

I have mentioned Russia because the looming monster of Russian expansion has appeared in our immediate vicinity. But we must also speak of China. The idea of nationalism is growing stronger there too. The rate of growth has fallen spectacularly. The inequality of income is extreme. There is a great deal of audible dissatisfaction about the fact that the rise in the living standards is far behind the growth of production.  Here too, nationalism proves to be the best way of diverting attention. Local protests are crushed not by eliminating economic problems, but by police measures. The people in charge are iron-fisted fighters for ‘order’.

Although in my imaginary map post-communist autocracies and post-communist dictatorships were given two different colors, in terms of nationalism, the tendency towards expansion and the heavy-handed restriction of democratic rights they share many features. These create a strong kinship between them, bonds which are strong enough even after the shared beliefs in Marxist-Leninist ideology disappeared. Most likely this political kinship also plays a part in the fact that so often the international political actions of the countries in the pale red and deep red zones correspond.  At important sessions of the United Nations they vote the same way, they support or turn down the same interventions. They have no joint center, but it is as if they were marching to the same drum on crucial issues. The axis of repressive powers opposing Western democracies is in the making – if I may borrow the expression “Axis” from the vocabulary of the period preceding the Second World War, when it was the name of the Alliance between Germany, Italy and Japan.


I am no Cassandra: I am not blessed or cursed with the ability to foresee the future. All I can say is that present-day events recall historical memories in me.

Hungarian current events remind me of the end of the Weimar Republic. There is great economic dissatisfaction. Millions of patriotic Germans feel humiliated by the terms of peace. More and more join the Nazi side. In the meantime, the anti-Hitler forces are at each others’ throats. In the 1933 multi-party election, which are conducted lawfully, Hitler’s party emerges victorious, but without a parliamentary majority. And then the moderate right-wing Centrum party is ready to enter a governing coalition with the Nazis … I shall stop this story here.

Thinking about the Ukrainian events Hitler’s first conquests come to my mind: the occupation of the Saarland, then the annexation of Austria. The aggression is based on ethnic reasoning: the territories in question are inhabited by Germans. Then comes the Munich agreement; Chamberlain’s joyful announcement: we have saved the peace at the price of Czechoslovak territories inhabited by Sudeten Germans being annexed to the German empire. Soon comes the dismemberment of Czechoslovakia. Then the plan to conquer Danzig, referring to ethnic reasoning… Here I shall leave this story too.

Who knows how the history-writers of the distant future will view the conference on Ukraine recently held in Geneva. Was it merely an insignificant diplomatic event? Or did it give birth to a new, albeit minor, Munich agreement, encouraging further aggression?

It was George Kennan who in 1946 pronounced the principle of containment. It is time to declare this principle again. Now it is not the spreading of communist principles, the Stalinist expansion, but the spread of nationalist principles, the expansion of post-communist autocracies and dictatorships, that need to be contained.

It is not for me to work out the methods by which the new principle of containment could be applied in practice. I can say this in the plural: we academic researchers are not fit for this task. I regret, but I cannot present the present company with a plan of action.

Let me finish here. I am just not able to end my lecture with words of reassurance. My intention was to alarm you, to unsettle you, to arouse in you the sense of threatening dangers.


  1. Thanks Eva for posting János Kornai’s keynote address at the Conference. In his book, The Socialist System, The Political Economy of Communism he developed one of the most comprehensive critiques of the economics of existing socialism and the problems of bureaucratic administration of state firms. He unfortunately does not apply that stinging critique to the present reality of market capitalism in many central European states.

    What I found to be very interesting about his address was that he did not focus on the relationship between those states he calls “post-communist dictatorships” and the failure of capitalist transition in some states like Russia and the relative success of other states like China. It is possible that China represents a unique form of a hybrid economy akin to something like state capitalism as opposed to criminal capitalism in Russia where the oligarchs in some cases have direct links to both Putin’s United Russia Party and the criminal underground. Capitalism as both Marx and János Kornai have known it may have morphed into yet new forms we as yet do not fully comprehend.

    János Kornai in his presentation focuses, I think too much, on democracy in the abstract and too little about the inner dynamics of politics on economic development. He is largely correct about the rise of nationalism and he does link that to these very perceptive comments: “Large numbers of people lost their jobs, unemployment became chronic. In many countries the inequality of income and wealth distribution escalated. . . . This explains why so many people think of capitalism with annoyance or hate. Few of them expect help from the extreme Left: the chances of a communist restoration are negligible. The number of those, on the other hand, who turn to the extreme Right, is significant. The ears of the disappointed, the losers and the needy quickly pick up the message of the populist demagoguery against profit, banks, and multinational companies.”

    But I am not sure it’s all just “populist demagoguery” against international capitalism, there are issues of economic dominance by Germany and other advanced market economies in relation to Central European economies even though they may not always appear on a balance of trade spread sheet. A party like the Jobbik understands this dynamic, so does Fidesz, and so does Putin, the Left in Hungary and other Central European states does not.

  2. In case you had missed this:

    Fidesz want to change their own brand new House Rules.

    In the last 24 years, the Speaker did not vote unless there was a tie.

    But now they need the vote of the Speaker to exercise their 2/3 majority
    (of the elected members)
    to change the “Basic Law” at will,
    to elect new judges to the Constitutional Court,
    to appoint a new Chief Prosecutor,
    to appoint a new head of Judiciary or Kuria

    Click to access 00132.pdf

    Click to access 00132-0005.pdf

    They also want to have 20 extremely urgent laws a year.
    In the past, they needed 4/5 of the elected representatives for this,
    they want to change this to 4/5 of the representatives present.

    Click to access 00132-0004.pdf

  3. The new strong man (or strongman) of Europe: Viktor Orban.

    Orban single-handedly prevented Juncker from being the president of the commission (and the EPP will still need Orban’s vote so, it will forgive him soon, especially as the German conservatives just adore and protect him).

    Three years ago the Europeans wanted a virtual coup d’etat against Orban, now Orban is the most influential politician of Europe.

    Get this EU and Hungarian communist dreamers!

    Orban is a force to be reckoned with!

    Hungary shall never give in to the new moscovites of Brussels!

  4. Valuable and outrages comments so far.

    I agree, a few wealthy Hungarians, Russians have become influential inside the government and the criminal world at the same time.

    If legal means don’t work in their interest, they turn to the thugs and the cheap mob of fidesz/Jobbik.

    The sad accompanying result is a large increase in poverty.

    Nothing will happen until the West defeats these trends by a new Eastern Spring, a cleansing from the this negative forces.

    Orban can continue his grotesque game for a short time, but his end is near. His funds are running short.

  5. “Hungary was moving forward on the path of democratic development for 20 years.”

    I detest the present Fidesz-Jobbik regime but is that really a true fact?

    Yes, elections were (until this year) free and fair but I would say the average citizen had no greater love or awareness of what democracy actually meant in 2009 than in 1989. They were sold and believed a “no-responsibility” vision of democracy
    , “Of course you can have all the pros of Western free-market democracy- cheap loans, German cars, foreign holidays. But you can also keep the old commie safety net- in terms of u/e cover, sickness etc.”

    Wasn’t possible to combine the best of both systems and every single government has lied since 1989 when telling the citizens that it was. And the result is the joke of a State and government that we have now; a government of idiots and thugs, overseen by a dictator and voted for by sheep who believe every ridiculous and illogical word he tells them.

  6. János Lázár is having a lot of fun with those Norwegians.

    He will show them that those lame Scandinavians cannot mess with the Hungarian government. If the Hungarian government wants to decide about the Norwegian funds and wants a veto right, then it will get it.

    He will make those Norwegians suffer.

    Lázár will fight until the last bullet, until the Norwegians submit to the power of Orbán-Lázár.

    This is Hungary.

    It’s gonna be fun: the next four years will be about Hungary’s crusade against the decadent West.

    Unfortunately for the West, Hungary will win (sorry, I wanted to say: there will be ‘reasonable compromises’).

  7. Lady Gaga: “Orban single-handedly prevented Juncker from being the president of the commission”.

    It will be Cameron’s achievement If Juncker is not elected.

  8. OT: Origo managed to win a court case relating to Lazar’s travel expenses. It seems he and an unnamed “other” were racking up enormous hotel bills in London and Switzerland which the Hungarian tax payer reimbursed. The question is who was he traveling with at public expense? Lázár has now decided, after issuing a desperately cynical letter to Origo, to repay the money (2 million forints!) out of his own pocket in the hope that he won’t have to name whoever it was he was traveling with. Presumably a partner of the non-political kind!

    Since the election, I do sense that Fidesz and its friends are becoming ever more brazen and shameless.

  9. Lady Gaga
    May 28, 2014 at 4:32 am
    The new strong man (or strongman) of Europe: Viktor Orban.

    Get this EU and Hungarian communist dreamers!

    All the Hungarian communist dreamers are getting it. Did you forget that most communists are sitting in the Fidesz? All the Hungarian communists obviously voted for them. Were you one of them? Are you get it?

  10. Kalamari
    May 28, 2014 at 10:33 am
    Well, maybe it will be Cameron’s achievement, but Orban will sell it to Hungary as his own.

    And when was the last time Orban, the ex-communist did not lie in a day?
    Of course he will sell it as his own. If he looses, it will be because all of the liberal conspirators.

    Let’s put it this way, he maybe bet on the right horse, but he will sell himself as the rider. Nothing new.

  11. @ D7 Democrat

    Well said. 98% of Hungarians haven’t the foggiest of what ‘Democracy’ entails.

    Hungarian thinking goes something like this: “We can pretend. We’ll have elections; we’ll have
    a constitution; we’ll have a supreme court (which anyone with money can subvert); and we’ll enter the EU and siphon whatever we can pretending to be fellow democrats interested in developing the idea of a common europe. Who’ll ever figure that we don’t give a damn and just
    want to get whatever we can?”

    If Hungarians cared to teach their children about Democracy they might’ve, long ago, put in courses about the development of democracy in a) ancient Greece, b) England, c) the US.
    I doubt if there are any courses in Hungarian high schools on Democracy…

  12. Nice article, but I think Mr. Kornai doesn’t realize that nationalism, per se, is not seen as a big problem in most countries of the west, since they mostly engage in it themselves. Thus, there will be no policy of containment against nationalism exactly, but hopefully it can be labeled something else, like threats to democracy or growing authoritarianism. I myself am in full agreement that nationalism is a cancer in Europe, especially, but right now it is a popular cancer that is being nurtured everywhere.

  13. Kalamari,

    You may be right about Orbán’s popularity among the Bavarian conservatives, but you may not have read about the EU elections last week in Germany – the CSU was hit badly (lost 3 out of 8 seats), and the big winner was the Alternative for Germany, which is against Orbán’s big-government/anti-EU positions.

    The CDU, on the other hand, including Angela Merkel, is not very fond of Orbán, for all the usual reasons. You seem to be putting too much faith in German support for Hungary’s new authoritarian leader. Lady Gaga, on the other hand, is obviously a Fidesz shill.

  14. @Googly:

    You took the words right out of my mouth …

    The CSU has been sincerely weakened in the EU elections – which probably suits Mrs Merkel, those loonies like Seehofer (who always talks about Christian family values but left his secretary when she made him the “proud” father of a boy …) are a thorn in her side.

  15. Forced self-censorship was introduced today in the Hungarian internet:

    The Constitutional Court, stuffed by Orban, just made it possible for a plaintiff to sue any website for comments made on the website, even if the offending comments were removed later.


    The natural consequence of this ruling will be the elimination of all comments on Hungarian websites.

    This is another nail in the coffin of the Hungarian democracy.


  16. On the whole one can detect (with effort) some criticism of current Hungary after the introductory words of Janos Kornai, but it is very indirect. In the “nationalism” part, there is no mention of Hungary, but of Yugoslavia or Armenia, and as a current example: Ukraine, as if Russia’s interest there were due to “nationalism” and not its “empire” (Russia grants “autonomy” freely if only these autonomous units show general obedience to Russia). Janos Kornai chose a very large set of countries, more often quite challenged by the “transition”, but a transition to where exactly. Russia lost track of democratisation rather early in the 1990s, since Putin came to power there has been no pretence of interest in Western democracy. China has been transiting (economically) now for 35 years but so far the goal of “democracy” has not been stated. Hungary started with a different idea of “transition”, and it even chose to join the EU. So why is Hungary – despite its rather comfortable starting point, despite its membership in the EU and despite its Central European location and heritage – now getting “radical”, “nationalist” (if I infer from the topics that Hungary might be meant ALSO) and somehow part of the group that has not made it (and in some cases never wanted to try)? Within such a broad set of countries the hard question why Hungary has made the U-turn which the countries in the vicinity have so far avoided, cannot be even asked. It appears to be just one case of complicated transitions, such as that of Russia or China or Vietnam.

  17. This is how much Hungary has to pay to Russia in the next 32 years for the Paks-2 atomic power plant, even if it will never be operational:

    orange: repayment of capital
    red: interest

  18. “Hungary shall never give in to the new moscovites of Brussels!”

    That is all fine and dandy but then you should first stop giving in again and again to your yearning for Brussels money.

  19. The distribution of the votes for EU Parliament of the 6234 registered Hungarians living abroad:

    Fidesz 45.4%
    Jobbik 12.6% (The two parties combined make up 58.0%)

    Együtt-PM 17.1%
    DK 5.2%
    MSzP 4.1%
    LMP 15.2% (The four parties combined make up 41.6%)

Comments are closed.