Markets in the Name of Socialism: 3 Reviews

Johanna Bockman, Markets in the name of socialism : the left-wing origins of neoliberalism  (Stanford University Press, 2011).  Review by, Zsuzsa Gille, in Slavic Review Vol. 71, No. 3, FALL 2012, pp. 655-657

Sociologist Johanna Bockman’s much-awaited book is undoubtedly an instant classic. Her argument about the left-wing origins of neoliberalism goes against  the grain of most theories about neoliberal globalization and the postsocialist transformations in Europe. As such, it is a must-read for scholars studying these processes in whatever region of the world.

This universal appeal of the volume, however, is not due to what Donna Haraway famously called “a view from everywhere and thus from nowhere in  particular.”(1)  Granted, writing this book required a thorough knowledge of economics—a discipline with strong immunity to local embeddedness and account- ability—but the author’s positionality is clearly that of a progressive student of state socialism and postsocialism. This work is based on archival research and interviews with economists in five countries, on a solid understanding of the history and sociology of Yugoslavia and Hungary, which constitute the book’s case studies, and even of the Soviet Union and Poland, while also firmly rooted in the scholarship on those countries.

The monograph is the logical culmination of the scholarly tradition that sees state socialism not as seamless and therefore not easily squeezed into one side of long-standing dichotomies, such as market versus state, resistance versus accommodation, and freedom versus dictatorship. Bockman demonstrates, not only that what counted for central planning in different countries and different times tended to encompass a rather dissimilar set of economic practices and institutions, but also that among these the exclusion of market mechanisms was more the exception than the rule. This is not an argument about the fuzziness of the categories of state and market, a path some postsocialist scholars have taken; it is rather a claim made from the position of intellectual history, showing that neoclassical economics, commonly assumed to be the ally of neoliberalism, had a nuanced but intensive relationship with central planning.

In contrast to the more macroeconomic focus of classical economics and Marxism, neoclassical economists, such as William Stanley Jevons and Léon Walras, who appeared on the scene in the 1870s, tended to concentrate on the micro level of the firm and rejected any objective theory of prices, including the labor theory of value. Focusing on individual actors and their preferences, they asked under what conditions equilibrium, that is a balance of supply and demand, would prevail and entail the most efficiency and greatest benefit. Bockman shows that already by the 1890s several neoclassical economists saw a competitive market economy and central planning as mathematically identical. To be sure, this was an ideologically neutral methodological position. Even economists radically opposed to any notion of socialism based their theories on the hypothetical figure of the social planner that has complete information about costs and preferences and makes choices about production for the sake of maximizing consumption.  This abstract model was then used as a basis of comparison to evaluate actual policies and institutions. Some even concluded from such comparisons that socialism could provide the best condition for markets.

Another link between neoclassical economics and central planning is an empirical one. The above-discussed shared methodological foundations made it possible for economists in socialist countries to provide their westerncounterparts with information for testing models. While there had already been some traffic before and during Vladimir Lenin’s New Economic Policy, exchange in the field really only took off after Iosif Stalin’s death, and then became regular with European détente. The scholars in such dialogues carved out what the author calls “liminal spaces,” a topographical metaphor similar to Douglas Weiner’s “little corners of freedom” (A Little Corner of Freedom, 1988), with the exception that, according to Bockman, western economists studying central planning also had to operate in the shadows to escape ideological extremes (another reason they were liminal) and were just as marginalized as the independently minded intellectuals of state socialism. Western economists of leftist persuasion used such methodologies and information in order to perfect central planning and thus to increase the appeal of a socialist society. They, together with reform economists in Yugoslavia and in Hungary, sought to develop models that not only targeted the “greatest utility at minimum costs” but could also ensure greater equality and economic democracy.

Just as—or perhaps more precisely because—neoclassical economists developed what we may call a transnational epistemic community that shared a certain democratic vision, the neoclassical economic agenda came to be hijacked and radically narrowed on both sides of the thinning Iron Curtain. The broader interpretation of this agenda raised questions about the type of institutions and mechanisms that are the most optimal for general equilibrium and efficiency. In the increasingly neoliberal atmosphere that eventually led to Margaret Thatcher’s and Ronald Reagan’s ascendance, one did not have to worry about institutions; those would arise automatically and would exist only to the extent that they were necessary for free markets to function. This abuse of neoclassical economics by neoliberal ideologues is the reason, according to the author, that today we tend to equate the two, thereby denying the former’s more progressive origins. Simultaneously with the rise of neoliberalism in the west, the socialist political elite used reforms imagined and informed by neoclassical economists to recentralize power. This east-west convergence suggests a greater degree of connectivity and interdependence than traditional scholarship has assumed, though some readers may take issue with Bockman’s ignoring the role the oil crisis played in this interdependence and authoritarian turn.

An even more shocking revelation of Markets in the Name of Socialism is its story of privatizations. According to common wisdom, the privatization wave of the early 1990s in eastern Europe emerged organically out of the market reforms that had picked up speed again in the mid-1980s. Bockman thinks otherwise. She claims that by the late 1980s, an increasing number of employees exercised control and even ownership in production in Poland, Hungary, and Yugoslavia. While Bockman does not provide empirical evidence on how widespread worker self-management and ownership actually were, it is undoubtedly true that even as late as the first few years of the 1990s, employee ownership was the preferred model of privatization. This echoes Polish dissident Adam Michnik’s famous argument that what citizens wanted at that time was “communism without com-munists”—in this case, communism signifying actual workers’ control. Supranational organizations and consultants to newly elected postsocialist governments, however, insisted that the state reclaim enterprises and discharge these assets not to employees but primarily to investors and private firms, who, due to the lack of an indigenous capitalist class, ended up being mostly foreign. The state was called back in, not only to administer the transfer of economic power, but also to forestall democratic control that might have thwarted arguably unpopular reforms. The negative social and political results—the quick closing of newly privatized firms, massive unemployment and poverty, the corrupt process of selecting new owners, the loss of state income due to intentionally undervalued assets, and the fusion of economic and political elites—are well documented in the postsocialist literature. Less well known are the distinctly authoritarian intentions of the architects of the postsocialist transition, a finding that effectively disarms claims about a natural affinity between privatization and democratization.

There is an important corollary to the argument that assets had already been being privatized—though not to the actors the economic advisers thought fit to own the means of production. This is the radical notion, now gaining ground in postsocialist scholarship, that institutions, mechanisms, and the general trajectory of changes in late socialism could have been used constructively for building a freer, more equal, more prosperous, and, I might add, an environmentally friendlier society. Instead, agents of neoliberalism falsely depicted the economic regime of late socialism as Stalinist—that is, as free of markets, private property, and competition—so that they could justify the total destruction of existing institutions and thereby create the tabula rasa economists assume when calling for the implementation of their models. Logically, from the perspective of their narrowly neoclassical agenda, they did not bother with institutions; those were supposed to spring up in the vacuum created by the eventual disappearance of the state. Bockman rightly follows others in calling this position market fundamentalism and pointing out the many elements it shares with Stalinism.

Scholarship has tended to focus on the outcome of neoliberalism. Markets in the Name of Socialism instead interrogates its origins, as the author says, in order to shed light on what could have been and what may still be. Besides the sheer empirical merits of such a history, detailed above, there are other compelling reasons to read and tell transnational origin stories, reasons that have to do with the politics of academic knowledge. Bockman has been a pioneer of what I call, for lack of a better term, a relational perspective on the former Second World. She not only debunks the idea that state socialism was isolated but also demonstrates that the myriad of relations between east and west were bidirectional. The author, however, reworks even deeper layers of scholarship by restoring the balance of narrative structures about the west and the east. Instead of juxtaposing linear progress in the west with failed utopia in the east, the west-side story is now also shaped into a narrative of progressive ideals derailed by reactionary forces. With its clear prose, this is relational and transnational history at its best, and this work will undoubtedly shape scholarship for decades to come.

1. Donna Jeane Haraway, “Situated Knowledges: The Science Question in Feminism and the Privilege of Partial Perspective,” Simians, Cyborgs, and Women: The Reinvention of Nature (London, 1991), 183–202.

Reviewed work(s): Markets in the Name of Socialism: The Left-Wing Origins of Neoliberalism. By Joanna Bockman. Stanford, Calif.: Stanford University Press, 2011. Pp. xviii+332. $55.00.
Sarah BabbBoston College
American Journal of Sociology, Vol. 118, No. 4 (January 2013), pp. 1138-1140

In 1989, the Berlin Wall fell, and Harvard economist Jeffrey Sachs traveled a dozen times to Poland to advise its government. The package of reforms Sachs recommended to Poland (and later to all Eastern European governments) included drastic austerity measures, currency devaluation, and the rapid privatization of publicly owned firms. That same year, the term “Washington Consensus” was coined at a conference of economists and policy makers in Washington, D.C. Known as “neoliberalism” to its foes, the Washington Consensus referred to a standard set of policy prescriptions similar to those recommended by Sachs, inspired by neoclassical economics, and aiming to push economies around the world toward free-market capitalism.

In the decade that followed, neoliberal capitalism spread around the world, and there was a calcification of conventional wisdoms about neoliberalism, the postsocialist transitions, and the economics profession. In the conventional view, the Eastern European economies were all more or less the same: Stalinist, centrally planned, and inspired by orthodox Marxist political economy. Their universal failure could be attributed to their willful ignorance of the basic principles of neoclassical (read Anglo-American, capitalist, and neoliberal) economics. Once the state socialist governments had fallen, the transition to neoliberal capitalism was a foregone conclusion.

Johanna Bockman’s book, Markets in the Name of Socialism, seeks to chip away at these conventional wisdoms. To do so, she takes her readers on a historically and geographically ambitious worldwide tour of the history of economic thought. Markets, she argues, are neither synonymous with capitalism nor antithetical to socialism. True to its mid-19th-century origins, Marxism adhered to the labor theory of value it inherited from the classical theorists. Yet by the late 19th century, many economists were moving from an objective to a subjective theory in which value was determined by individuals in a system of free competition and exchange. This insight, and the “marginalist revolution” that it engendered, allowed economists to incorporate mathematics and metaphors from physics.

Orthodox Marxists were suspicious of both neoclassical theory and the markets they attempted to model. However, many non-Marxist (and even some Marxist) socialists of the late 19th and early 20th centuries believed that markets would play an important role in any future socialist society and were intrigued by the emerging neoclassical science of markets. Moreover, socialism served as both a normative goal and an important thought experiment for neoclassical scholars. Leon Walras, one of the founding fathers of neoclassical economics, was an ardent socialist. The Polish neoclassical scholar and socialist Oskar Lange maintained that only socialism could allow for truly free competition and advocated the use of neoclassical theory to improve socialist planning. Even contemporary neoclassical scholarship owes an intellectual debt to socialism in the form of the “social planner” still used in theoretical modeling. As Bockman puts it, “a model of a pure competitive market and a model of a socialist state sit at the core of neoclassical economics” (p. 216).

This elegantly written book reveals a compelling vision in which markets are not, as in the orthodox Marxist view, a Trojan horse for the social hierarchies of capitalism, but a variety of human interaction compatible with many different social systems. In this sense, the book resonates with the work of neoclassical-but-not-neoliberal economist Amartya Sen, who argues that markets are part of the human heritage and an expression of freedom. Neoclassical economics (e.g., Milton Friedman) is used by apologists for really existing capitalism and is often associated with scholarship in the United States. Yet in Bockman’s argument it is not mere bourgeois ideology or American hegemony, but a tool that can be applied to multiple political and social ends—and a universal language that allows for the sharing of ideas across national boundaries and even across geopolitical blocs.

For example, Bockman shows that after Stalin’s death in 1953 there was a flourishing of neoclassical economics in Eastern Europe. In both Yugoslavia and Hungary, economists from this intellectual tradition played an important role in “market socialist” economic reforms, albeit with varying success. Because the mathematical language they spoke was understood by colleagues abroad (but not by government censors) these economists were able to communicate with economists around the world, and to participate in international conferences. These were not one-way conversations in which Eastern Europeans absorbed the wisdom of their Western colleagues: they were mutually beneficial exchanges that enriched scholarship on both sides of the iron curtain.

Most provocatively of all, Bockman invites us to envision a counterfactual, more utopian postcommunist transition. By 1989, factories across Eastern Europe were no longer subject to Stalinist top-down control, but rather were being controlled by workers. Consequently, Sachs’s privatization could only be accomplished through having the state seize productive assets from workers and then sell them off, often to political elites eager to enrich themselves. Such measures were opposed by many Eastern European economists, some of whom continued to hope for a transition to a democratic, market-based socialism. In these cynical times, such a system may appear improbable. Yet most readers of this book should be persuaded that it would have fulfilled the dreams of many neoclassical thinkers, both past and present.

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Markets in the Name of Socialism: The Left-Wing Origins of Neoliberalism, by Johanna Bockman . Stanford, CA: Stanford University Press, 2011.
Nitsan Chorev, Brown University

Johanna Bockman’s book, Markets in the Name of Socialism: The Left-Wing Origins of Neoliberalism, describes the origins of neoliberalism from a unique perspective that has hardly been explored so far, namely, the contribution of Eastern European economists to the articulation and implementation of neoclassical economic theories. In so doing, the book offers a number of important insights regarding the economic theories informing policies and programs under Communism and what Bockman refers to as “The Left-Wing Origins of Neoliberalism.” While Bockman frames the book around the second insight, I find the first one to be the more significant contribution. (An equally fitting title might have been Socialism in the Name of Markets.)
Bockman convincingly suggests that the literature on neoliberalism misleadingly conflates neoliberalism and neoclassical economics. The two do share some concepts and beliefs in common, most centrally the emphasis on free competition. But Bockman shows that, in contrast to what most of us believe, free competition has been understood by neoclassical economists to be entirely compatible with socialism. In fact, in their mathematical models, neoclassical economists considered free competition and a “social planner” to be equivalent in their capacity to bring optimal economic results. For neoclassical economists from Eastern Europe, private property was hardly a condition for free competition, which was to be achieved at the firm level. Yugoslavia, for example, advocated an economic system that was based on the social ownership of the means of production, combined with decentralization and worker self-management. Bockman’s important insight is that the neoliberalism which emerged in the West in the early 1980s, and then was implemented in Eastern Europe, was a decidedly narrow version of neoclassical economics that rejected the democratic principles emphasized by Eastern European economists and favored instead “hierarchical firms controlled by managers and owners, rather than by workers” (p. 4). As Bockman succinctly summarizes, “neoliberalism incorporated the transnational discussion about socialism in support of competitive markets but replaced the socialist calls for political and economic democracy with capitalist demands for hierarchical institutions” (p. 10).
The book’s empirical exploration begins with a chapter that describes how economists in Eastern Europe drew on neoclassical economics to analyze socialist economic systems. Bockman then discusses the existence of a transnational network in which ideas and theories were exchanged among economists in the East and economists in the West. Particularly fascinating is her evidence of illicit intellectual exchanges during the Stalinist era between the Soviet Union and economists in the United States during the McCarthy era. In the next two chapters, the book turns to an examination of Yugoslav and Hungarian alternatives to both Soviet socialism and Western capitalism. These experiences provide particularly convincing accounts of how Eastern European economists integrated neoclassical economics into the economic study of socialism. After devoting a chapter to the Center for the Study of Economic and Social Problems in Italy, which Bockman draws on to demonstrate the exchange of ideas between East and West, she ends the book with two particularly important accounts. In one chapter she describes the reforms in the Soviet Union just before 1989, which to a large extent realized a market socialist tradition within neoclassical economics. The last chapter before the conclusion then addresses the defeat of “market socialism” and the ultimate victory of the conservative, narrow version of neoliberalism.
The book provides an important sociological perspective on the intellectual developments in Eastern Europe during the Communist era. Surprisingly, the study of economics in Eastern Europe did not rely on Marxism-Leninism—Bockman shows that economists considered the Marxist analysis, because of its focus on capitalism, irrelevant to their needs and instead adapted neoclassical economic theories and methods. Bockman also offers a fascinating description of the different ways that economists of socialism considered markets and competition to be entirely compatible with the socialist project rather in opposition to it. (It would be fascinating to think about China’s recent economic reforms through this lens.) Bockman then makes the argument that the theories developed in Eastern Europe constituted the “left-wing origins” of neoliberalism.
The second part of the analysis was slightly less persuasive. Bockman convincingly demonstrates the existence of a long-term intellectual exchange between economists from the United States, Western Europe, and Eastern Europe, but she does not provide details regarding the actual contribution of Eastern European economists to their Western counterparts. Indeed, neoclassical economists in the West used a “social planner” model that resembled the socialist state, but this is hardly an indication of the socialists’ own contributions. While the book reveals the existence of exchange, it does not show that economists supporting socialism had any effect on the trajectory of neoclassical economics in the West. At a minimum, it does not show that the theoretical contributions made by economists from Eastern Europe were inherently socialist or “left-wing.” Even if neoclassical economics was the joint intellectual outcome of economists from both West and East, Bockman herself makes it clear that the conservative version, supported by Milton Friedman and others, has prevailed over the versions favored by those who wanted to save, rather than replace, socialism.
Bockman shows great knowledge of the intellectual debates among economists, but she does not fully resolve the question as to why conservatives prevailed in the struggle. She also convincingly refers to the fact that the mathematical models dominating neoclassical economics (which are hard to understand and seem neutral) were particularly tempting in the politically repressive context of the Soviet Union, although it is only in the last chapter that the political economic context of economic knowledge becomes central. Bockman implies that after 1989, once the Berlin Wall fell, technocrats and “political elites” forced the transition to capitalism. It would have been interesting to know more about those elites and their allies and what allowed them to prevail. It would also be interesting to find out what happened to the economists who played such an important role until 1989. While some important questions remain open, however, the book is a major contribution to our understanding of the translation of neoclassical economics both to socialism and to neoliberalism, and as such is a particularly important addition to the field.