From Socialism to Capitalism: Eight Essays

4 The Speed of Transformation

4 The Speed of Transformation* Introduction Ten years have passed since the publication of my book The Road to a Free Economy: Shifting from a Socialist System—the Example of Hungary (referred to hereafter as Road.) It was the first book in the international literature to put forward comprehensive proposals for the post-socialist transition. This study sets out to assess the book as the author sees it ten years later.1 Is this not an extremely self-centered undertaking? An advertisement for an old book nobody is buying these days? No, there are good ethical and intellectual reasons for reassessing the book, and I hope the motivation will become clear in the course of the discussion. The customary indices of success in the academic world, such as the number of citations, are attempts to measure the impact that a work has had on its author’s colleagues. Here I can be satisfied. Several hundred references have been made to the book, including, of 61 * [I delivered the present paper as a Keynote Address to the Annual Bank Conference on Development Economics convened by the World Bank in Washington on April 20, 2000. I delivered an earlier version of this paper in Stockholm, as the Keynote Address to the Nobel Symposium held on September 11, 1999, marking the tenth anniversary of the beginning of the post-socialist transition. I am indebted to Stanislaw Gomulka, Karel Kouba, Kazimir Poznanski, Mihály Laki, and Peter Murrell for their stimulating comments and suggestions. I am grateful to Mária Barát, Ágnes Benedict, Andrea Despot, Cecília Hornok, and Julianna Parti for their efficient research assistance, and to Brian McLean for his excellent translation.] 1 I deal mainly with Road (1990), but there were a few other public lectures and publications at the beginning of the post-socialist transition that gave me a chance to clarify my views. The Tinbergen Lecture (1992a), delivered in 1991, concerned privatization. The Myrdal Lecture (1993b), which I gave in 1992, was about hardening the budget constraint. I have included these in this retrospective evaluation. course, ones by scholars who disagree with what I say. Authors are gratified also if their work turns out to be controversial. But with the work discussed here, this is not a sufficient criterion of success. The book offered policy recommendations, which means that a much more serious question has to be put. What was its impact on the outside world? I am not like a meteorologist, who makes a forecast, but the weather develops of its own accord. When I launched my book, I could expect it to have at least a modest impact on public opinion and political decision-makers, and ultimately, therefore, to influence the course of events. History is not simply shaped by blind forces. It is influenced by conscious people who bear responsibility for their actions. The main historical responsibility falls on political decision-makers, but in addition , it falls secondarily on advisers from the academic world. They too are accountable for what they say.2 Heated debate broke out at the beginning of the 1990s on what strategy to adopt for the transition. I will return to that debate, but let me emphasize in advance, not in a combative form. I will contrast my views with those of others, but without pointing a finger at anyone . There is a Hungarian proverb: “If it’s not your shirt, don’t put it on.”3 Perhaps this approach may help to prevent the debate from becoming personal and direct attention to the problems themselves. 62 S T U D Y 4 2 The word “adviser” in a narrower sense means people whom a government, a state or an international organization, a political party or a movement has officially called upon and invited to advise it. Many economists in the countries of the region and outside them, undertook to do this at the beginning of the post-socialist transition. For my part, I turned down all invitations of that kind. However, there is a broader, literal meaning to the word “adviser”: people who not only do positive research, but make policy recommendations as well, without anyone commissioning them to do so. As the author of Road (1990), I can count myself an adviser in the broader sense. When I was a young man, just before the 1956 Revolution, I belonged to a working group that made recommendations for reforms. After the defeat of the revolution (and here I quote from...