Claus Offe
Capitalism by Democratic
Design?
Democratic Theory Facing
the Tripie Transition in
East Central Europe
CONVERGENCE THEORIES OF THE 196OS AND I97OS PREDICTED THAT THE
two rival political-economic systems would more or less rapidly assimilate
each other and inevitably move toward one another. The East was to
be enriched with market elements, while the "mixed" economic order
of Westem capitalism had already adopted elements of state intervention
into production and distribution processes. The problem with this
theory, as is now becoming apparent, was that only the West was capable
of "mixing," whereas the socialist societies were constantly on the
verge of "capsizing" through concessions made to political liberalization
(party competition, freedom of opinion), national independence,
decentralized forms of ownership, and competitive price formation, to
say nothing about "economic democracy." Westem admixtures were
regularly taken back. Everywhere the self-transformation of socialist
societies foundered on the political elites' justified fear of downward
paths. The "oil-spill thesis," which predicts that the entire system will
be spoiled when just a single "alien" element or move is introduced,
turned out precisely not to apply to those systems for which it was
meant to hold true in the 1920s by von Mieses--that is, Westem capiORIGINALLY
PUBLISHED IN SOCIAL RESEARCH VOL. 58, NO. 4 (WINTER 1991)
social research Vol 71 : No 3 : Fall 2004 501
talist democracies. All the more clearly, however, was it corroborated
for the state-socialist regimes. As is shown by the results ofthe debates
of the '60s and '70s over economic reform in the Eastern bloc, these
regimes did not manage to incorporate their opposite principle in both
sufficient and harmless dosage.
Resolute "reforms from above" were ruled out in the eyes of
the Soviet leadership, for, as was suspected there, they would lead to
incalculable complications and destabilizations--even to dangerous
encouragement to "reforms from below" or, still worse, a "revolution
from below." What was left over in this blocked-up situation was a
way out, which seemed as unlikely before as it looks inevitable after
the fact: the way of a "revolution from the top," for which the name
Mikhail Gorbachev stands. This Soviet revolution from the top created
the conditions necessary for the success of the reforms and revolutions
from the bottom that followed on its heels in the other countries
belonging to the crumbhng Warsaw Pact and the Council for Mutual
Economic Assistance.
This upheaval is a revolution without a historical model and a
revolution without a revolutionary theory. Its most conspicuous distinguishing
characteristic is indeed the lack of any elaborated theoretical
assumptions and normative arguments addressing the following questions:
Who is to carry out which actions under which circumstances
and with what aims? Which dilemmas are to be expected along the
road? And how ought the new synthesis of a postrevolutionary order
be constituted, and what meaning should be assigned to the notion of
"progress"?
In all of the revolutions of the last two centuries some kind of
answers to these questions had been available, although most of them
proved wrong. These answers of revolutionary theorists were formulated
independently of the immediate contexts of action and were
known to the participating agents; in that sense, they were theoretical
answers. However, in the case ofthe Eastern and Central European
upheavals ofthe second half of the '80s, these questions remain for the
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time being unanswered or are only given tactically colored answers in
the form of self-explications and situation-bound ad hoc assessments by
participating actors. The rapid flow of events not only broke out unexpectedly:
they were also not guided by any premeditated sequence, or
by proven principles and interests about which the participants would
be clear. Instead of concepts, strategies, collective actors, and normative
principles, there are acting persons and their discoveries of the
moment with their deliberately opaque semantic content. Among them
are the catchwords glasnost, perestroihi, and the metaphor ofa "common
European home."
The distinctly "a-theoretical" character of the upheaval is
reflected in the literary forms that accompany it. Entirely absent are all
anal)^ical expressions and grandiose directives by revolutionary intellectuals.
Where the social theorists express themselves at all, they do
so not in the form of global interpretations ofthe events and their driving
dynamics, but rather in more modest descriptions of single aspects,
if not in the role of mere citizen and concerned person and without
claiming any professionally privileged insight. This upheaval, so it
seems, for the time being forces the ideologues and theoreticians to
a welcome silence, while being simultaneously the great hour of such
literary forms as the diary, reportage, the letter, and the autobiography.
In the absence of any valid, or, for that matter, any kind of prescriptive
"ex ante" revolutionary theory, the task ofthe social scientist is to
understand in retrospect what actually happened.
Under the label "transition to democracy," an important and
successful research branch in the social sciences has concerned itself
over the last decade with comparative studies of political modernizing
processes since the Second World War (O'Donnell, Schmitter, and
Whitehead, 1986). Three groups of countries stand at the center of
these investigations: the "postwar democracies" (Italy, Japan, and West
Germany): the Mediterranean democratic processes ofthe '70s (Portugal,
Spain, Greece): and the collapse of authoritarian regimes in South
America (Argentina, Brazil, Uruguay, Chile, Paraguay) during the '80s.
Capitalism by Democratic Design? 503
The suggestive temptation to add a fourth group to these--the
Central and East European states--and to analyze them with the
proven instruments supplied by this tradition turns out, however,
to be unsuitable and misleading. The revolution taking place in the
former socialist countries is, indeed, basically different in two respects
from the countries mentioned above. First, in the case ofthe postwar
democracies (with the exception of divided Germany), and the southern
European and South American countries, the territorial integrity
and organization of each country were largely preserved. Nor did the
process ofdemocratization in those countries occasion any large-scale
population migrations. These states retained their populations, and
the populations remained in their states. In Central and East Europe,
the situation is different: there the scene is dominated by territorial
disputes, migrations, minority or nationality conflicts, and corresponding
secessionist longings (again, not to mention the German
exception of the only national merger of two previously separate
states).
Even more important is a second difference. In the aforementioned
cases of "transition to democracy," the modernizing processes
are of a strictly political and constitutional sort; that is, they concem
the form ofgovernment and the legal relationships between the state and society,
whereas at the end of socialism the additional task of reforming
the economy is the order ofthe day. In the countries that underwent a
transition to democracy, capital remained in the hands of its owners,
and as a mle the owners remained in charge of their capital. On the
other hand, the Soviet Union and its former satellites are faced with
an acute and altogether different as well as more demanding problem:
the transfer of the hitherto state-owned productive assets to
other forms of property, and, to this end, the creation of an entirely
new class ofentrepreneurs and owners in a way that has to be decided
and justified in a political way and through politically visible actors.
The revolutionary installation of an entrepreneurial class (i.e., of a
previously nonexistent category of agents who are now to partake
504 social research
in market competition on the basis of property rights) is a task that
none ofthe previous transitions had to accomplish (and that is rather
belittled by the revolution's being described as just "catching up")
(Habermas, 1990:179-204).
The unique and unprecedented nature of the East Central
European process of transformation--and the challenges to democratic
theory emerging from it--is fully highlighted only if we
remind ourselves that any operative political system is the combined
outcome of three hierarchical levels of decision making (cf Easton,
1965, chaps. 10-13). At the most fundamental level a "decision" must
be made as to who "we" are; that is, a decision on identity, citizenship,
and the territorial as well as social and cultural boundaries of
the nation-state. At the second level, rules, procedures, and rights
must be established that together make up the constitution or the
institutional framework of the "regime." It is only at the highest
level that those processes and decisions go on that are sometimes
mistaken for the essence of politics, namely, decisions on who
gets what, when, and how--in terms of both political power and
economic resources.
Arguably, each of the three levels stands in close affinity and
invokes one ofthe three human capabilities that early modem political
philosophers have distinguished. The first relates to passions, virtue,
honor, and patriotism, the second to reason, and the third to interest.'
This three-tiered model clearly suggests links of upward determination:
"normal politics" that is going on at the third level is embedded
in identities and constitutions. In most political systems, this determination
is unilateral and causal rather than intentional. By unilateral
I mean the asymmetrical relationship that the lower levels determine
the higher ones, but that the causal arrow only rarely if ever points
in the opposite direction. For instance, the constitution will govern
normal politics much more often than it itself becoming the object of
normal politics, resulting in constitutional change. There is simply
not much retroactivity. By causal (rather than intentional) determinaCapitalism
by Democratic Design? 505
tion I mean that the effect that the lower level(s) will have upon the
higher one(s) is not due to some purposive action or design. It is exactly
because procedures are made certain by constitutions that outcomes
are contingent, as Przeworski has argued. That is to say, inserted among
the three levels are veils of ignorance that result from, among other
things, the markedly different temporal structure of our three levels:
we tend to believe--and experience tends to confirm--that nations
last for centuries, constitutions for many decades, and governments or
positive law passed by legislatures for just a few years. If this is so, how
could any conceivable actor design the boundaries of a nation-state
vdth the purpose of thereby determining the much more contingent
downstream phenomena of constitutions and regimes, governments,
and allocation decisions? As long as decisions at the two lower levels
must be taken as fixed, the system is highly path dependent, and its
parameters are strategy proof
As far as the third ofthese three levels is concerned, democratic
theory provides good answers, both positive and normative. Troubles
and paradoxes begin if we move down one level: should the players be
allowed to decide on the rules of the game they are in the process of
pla)dng, as well as the scope of what the game is "about?" And, if so,
under what precautionary conditions may they do so? Can democracy
itself be democratized (cf Holmes, 1988: 195-240)? And, if the answer
is no, in what sense can we still speak ofa "democracy" and its implication
of "popular sovereignty"? Even more thorny questions relate to the
first level, that is, those of nationhood, collective identity, and territorial
boundaries. Whatever the constitutional rules are, only those who
already enjoy citizenship rights are admitted to an active role in the
game. But does that mean that those basic admission rules can be based
only on the unilateral decisions of those who are, due to their place of
birth or inherited citizenship rights, already admitted to the game, or,
alternatively, upon the brute facts of international or civil wars, at best
constrained by the fragile web of international law and transnational
regimes? Or can democratic theory transcend its home territory of
506 sociai researcii
"normal politics" and provide criteria according to which both constitutional
change and the definition of boundaries can be ascribed the
quality of being more or less "democratic?"
During the past two years, these questions have movedfiromtheir
secluded place on the agenda of philosophical seminars into widely
perceived practical problems invoked by daily front-page news. What
used to be the second world ofthe Soviet empire is now undergoing a
triple transformation affecting all three levels of nationhood, constitution
making, as well as the "normal politics" of allocation. The very
simultaneity of the three transformations generates decision-loads of
unprecedented magnitude. Unlike the situation in the Western democracies,
there is no time for slow maturation, experience, and learning
along the evolutionary scale of nation building, constitution making,
and the politics of allocation and redistribution. And there are no
model cases that might be imitated or, for that matter, no victorious
power that would impose its will from the outside, as was the case with
the new East and West European postwar regimes. As a consequence,
the decisions made on all three of these levels may easily turn out to be
incompatible so as to obstruct each other rather than forming a coherent
whole.
This risk resulting from simultaneity is exacerbated by a second
one. The situation of extreme contingency invites opportunism, and
the veil of ignorance is lifted. Now actors are in a position to see which
constitutional design and which ethnic boundaries of a state will best
serve their interest in policy outcomes, or their passions for ethnic
identities and resentments. The situation is replete with opportunities,
rightly perceived to be unique in their scope, to improve one's "original
endowment," or to take revenge. Correspondingly, the amount of
"moral effort" increases that is required to overcome these temptations
generated by a situation that is no longer strategy proof In the absence
ofthe requisite amount of such eflFort, ever5^hing--boundaries, rights,
procedures, and the allocation of power, legal rights, and material
resources--^will be argued for and advocated in consequentialist terms.
Capitalism by Democratic Design? S07
rather than on the basis of historical antecedents and principles of
justice, freedom, and peace.
THE DILEMMA OF SIMULTANEITY
In view of these two added dimensions, the revolutionary transformation
in Eastern Europe can be analyzed only with conceptual means
whose use has not been called for in almost all ofWestern and Southern
Europe since the First World War. In the Soviet Union and most of its
former satellites are simultaneously at stake
* the territorial issue^--that is, the determination ofthe borders for
a state and a population, and the consolidation of these borders
within the framework of a European order of states ("common
European house")
* the issue of democracy--that is, the dissolution ofthe monopoly
claims of a party and its replacement by a constitutionally tamed
exercise of authority and party competition in the context of guarantees
of basic human and citizen rights ("glasnost"), the issue of
the economic and property order, and the orderly political management
of pressing production and distribution problems ("pere-
stroika").
The stages of a process, which in the case of the "normal" Western
European examples were mastered over a centuries-long sequence
(from the nation-state to capitalism, and then to democracy), must
thus be traversed nearly simultaneously in Eastern Europe, just as both
components of a "modern" political economy, namely, democracy
and private property, had been also simultaneously abolished by the
October revolution. This occasions not only gigantic decision-making
burdens, but also mutual effects of obstruction. It may well be that each
of those problems will admit of being solved only when the situation
makes it possible to assume that one ofthe other two problems has (or
even both have) already been solved or is (are) presently not in need
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of a solution. In the following I wish to examine the phenomenon of
mutual blockage of solutions to problems and thereby to show that
although the proverbial advice to do "one thing at a time" rather than
"everything at the same time" may have good grounds speaking in its
favor, the protagonists may well find themselves in the tragic situation
of having to refuse taking this piece of advice and to decline recognizing
these good grounds with equally good grounds.
All of this would amount to idle considerations if it were to be
shown that the opening ofthe hitherto planned economy to a market
economy and the democratization ofthe political decision-process do
not exclude and mutually impede each other, but rather reinforce and
enhance one another. In point of fact, there are analyses ofthe existent
socialist systems that attempt to establish that such an interaction does
take place between the two goals--already desirable by themselves--of
economic and political modernization. Taking into view the political
and economic development in Czechoslovakia prior to 1968, Jiri Kosta
has tried to show "that the process ofreforming the economy [which was
forced on the regime at the beginning ofthe '60s by the manifest inefficiency
ofthe planning procedures]... would over the course of only a
few years change to a democratic movement, which would sweep away
the old leadership" (Kosta, 1991: 302fF). To be sure, there remained the
problem that this virtuous circle allegedly obtaining between economic
liberalization and political democratization was broken by the third
issue, that of national integrity and sovereignty, namely, by the events
of August 1968 and the proclamation ofthe Brezhnev doctrine.
A PANDORA'S BOX FULL OF PARADOXES
Today, on the other hand, the field is dominated in all ofthe concerned
disciplines and political camps by rather pessimistic vicious-circle
assumptions. The only circumstance under which the market economy
and democracy can be simultaneously implanted and prosper is the
one in which both are forced upon a societyfi-omthe outside and guaranteed
by international relations of dependency and supervision for
Capitalism by Democratic Design? 509
a long period of time. This, at least, is arguably the lesson offered by
the war-ruined postwar democracies of Japan and, with qualification,
ofthe Federal Republic of Germany--and perhaps soon ofthe former
German Democratic Republic. Otherwise, there reigns ever3^where an
(at least) as5Tnmetrical antagonism: "The market requires the development
of a democracy, but democracy does not demand the emergence
of a market If perestroika founders, then it is also soon over
with glasnost"^ (Engels, 1989:110). The members ofthe former Polish,
Bulgarian, Romanian, and Soviet bureaucracies who are newly oriented
toward economic reform may feel in complete agreement with this
resolutely free-market message, when they plead that the iron hand
of a strong presidential regime is now required, and not a "premature"
democratic opening, which is feared by them to invite all kinds of counterproductive
conflicts. The Stalinists who rescued themselves to the
shores of postcommunism diverge from the free-market thesis only to
the extent that they proclaim that if perestroika is not to founder, then
glasnost must be forgotten.
A further dilemma may be outlined as follows: a constitutional
and democratic political system flnds its appropriate content of issues
and cleavages, the smooth processing of which in turn continuously
reproduces its legitimacy, only if a certain measure of autonomous
economic development has already taken place and when interest
coalitions, collective actors, and themes of conflict have--in contrast to
what is the case in the forcibly homogenized societies of existent socialism--emerged
from the system of the social division of labor. Only a
somewhat developed free-market society with a relatively high level of
wealth enables competitive democracy to work as a procedure for the
arbitration and reconciliation of interests (Lipset, 1981: 469-476). In a
society in which a labor market is unknown and where the overwhelming
majority of the adult population consists of so-called Werktiitige
("working people," trudjasdjsja) with similar incomes and uniformly
regulated educational, dwelling, and living conditions, competitive
democracy lacks, due to this atomized (cf Schopflin, 1991: 235-250)
510 social research
social structure of repressed "difference," sufficiently formed protagonists,
collective actors, and issues considered worth processing through
the machinery of democratic politics. Or, alternatively, the lack of a
developed complexity in civil society leads to the dominance of themes
that, albeit suited to conflict, are not also suited to compromise. In both
of these seemingly polar cases, perfect homogeneity and deep antagonism,
the social structure lacks the requisite degree of differentiation:
that is, division of labor, status, interest, and cultural identity that only
a developed market society will generate. But homogeneity may just be
the surface appearance of repressed antagonism. The Polish sociologist
Jadwiga Staniskis has that case in mind when she writes: "As long as
the economic foundations for a genuine civil society do not exist, the
massive political mobilization ofthe population is only possible along
nationalist or fundamentalist lines" (Staniskis, 1991: 326). She implies
that such themes of mobilization would lead to the rapid perversion of
the democratic openness into a populist authoritarian regime hostile
to intemal or extemal minorities. As a consequence, not only the freemarket
economy but also democracy itself would go to ruin if the latter
were too hastily introduced. What this seems to suggest, again, is that
the market must precede democracy.
On the other hand, already prior to the introduction of private
property and the market economy, procedures are requisite which
hold the political elites accountable and enable participation on the
part ofthe majority ofthe population--in other words, at least mdimentary
democratic procedures are necessary at the initial stage ofthe
transformation. This is so not only because democratic concessions
will alone, apart from being a minimum condition for much-needed
economic aid, be able to appease the indignation at arbitrariness and
paternalist authoritarianism that were practiced by the old regime, but
also because from a certain point of view democratization appears--
despite the three opposite points made before--as the precondition
of economic transformation. In contrast to its Westem pendant, the
market economy that is emerging in Eastem Europe will be, if it in fact
Capitalism by Democratic Design? 511
emerges, "political capitalism." It is a capitalism designed, organized,
and set into motion by reform elites. Its driving motive is not the prepolitical
datum ofthe owner's (Lockean) natural right to his property and
its free enjojmient. Rather, the driving motive is what in the case of
the Western countries was only discovered subsequently as a welcome
functional side effect of an economic order based on the freedom to
property, namely, the fact that an efficient economic mechanism serves
at least arguably and in the long run the overall interest of society. Thus
the reform elites, by taking responsibility for and helping to start a
capitalist economic mechanism, represent the interests of society,
without, however, being able in the process to rely upon and comply
with the demands of an already existing class of capitalist owners and
their interests, power, and ideological propositions.
Again, the contrast to the Western pattern of the growth of
capitalism is obvious. There, a class of proprietors claims rights that
it bases upon moral and ideological arguments that are critical ofthe
forces and institutions of the absolutist, mercantilistic, and feudal old
regimes; efficiency, economic growth, and eventually prosperity are
mere by-products ofthe victorious ideological initiatives taken by early
entrepreneurial and commercial class protagonists. There, in contrast,
privatization and marketization are not rights-driven but outcomeoriented;
not class-based but elite-initiated; not creeping and halting
but sudden and highly visible; not supported by moral and ideological
arguments on rights and freedoms but defended in the name of vehemently
and universally desired economic prosperity.
That the introduction of property rights and market mechanisms
is actually in the interest of society as a whole is, however, tjT)ically
not reliably recognized and appreciated by the empirical will of the
majority of the population. Such reluctance to believe in the desired
beneficial outcomes proclaimed and promised by reform elites is due to
two quite sound reasons: First, the population has grounds to suspect
that the privatizing initiatives of the new reforming elites might not
necessarily be in the service ofthe universal improvement of economic
512 social research
conditions, but contribute in the first place to the enrichment ofthe
members of the state apparatus and its clientele. Second, no one can
guarantee that the envisaged improvement ofthe economic situation
will in fact occur, and that it will come about wdthout massive and at
least passing absolute economic deprivation of a sizable portion ofthe
population. These two misgivings--that the powerful vdll enrich themselves
and that the powerless vidll fall victims to the market--can be
cleared, and their destructive potential restrained, only if the elites in
charge of reform secure a solid democratic mandate for their privatizing
initiatives and recognize a fair accountability to the majority ofthe
people. Such a mandate can in turn be obtained only through democratic
means--which leads to the paradoxical result that in the case of
economies ofthe Soviet t5T)e and when a state-managed withdrawal of
the state from the economy is to be undertaken, democracy is a necessary
precondition of economic transformation. This is obviously the
exact, albeit no less compelling, antithesis of the inferences set forth
above.
Even though in many instances and according to the reformers'
doctrinaire aspirations the reformed economic order may represent a
"purer" variety of capitalism than is anj^where to be encountered in the
West, it remains a political project according to the postsocialist mode
and its statist form of realization. This "capitalism by design" (or capitalism
vdthout capitalists as active promoters of their class interests)
depends in every detail on highly visible decisions that require justification,
and its development cannot rely on blind evolutionary emergences,
which has largely been the pattern in the history of pioneering
Western capitalisms. The new class of entrepreneurs (and, correspondingly,
the new class of employees, into which the previous "working
people" see themselves reconstituted) is created according to a blueprint
designed by political elites.
In any event this blueprint contains multiple parameters, each
of which is contingent and might be set in numerous different ways
(cf Stark, 1990: 351-392, and Stark, "Privatization Strategies in East
Capitalism by Democratic Design? 513
Central Europe," ms.). Should all productive assets be privatized, or
should state enterprises be maintained? In which sectors and over what
stretches of time should the structural transformation take place? How
should the new owners acquire their property--for example, through
the gratuitous distribution of the capital stock (or a portion thereof)
to the population or to the employees or managers of enterprises? Or
should it happen by auctioning off the capital stock to any possessor of
money capital? Or by being returned to the possibly still-living former
owners? Or also to their heirs? Should it be returned only to native or
also to foreign interested parties? With or without liberalization ofthe
capital market? With or without qualifications concerning such vital
issues as categories of persons authorized to purchase, upper limits of
capital acquisition per capita, maximum prices and minimum wages,
the license to engage in foreign trade or not, and dozens of further variables?
It is barely conceivable that one can take a single step into this
vast arena without arming oneself with strong legitimating reasons,
which cannot be gained otherwise than through democratic politics.
Even if an extensive societal consensus were to be assumed about
whether the constitution of the economy should henceforth be "capitalist"--whether
it should be characterized by private property and
marketization of goods, services, capital, and labor--this consensus
could not be a substitute for a democratic mandate for reform initiatives.
The point is precisely what is meant in operational terms by the
only seemingly unequivocal concept of "capitalism" or "market economy"--to
say nothing about "social" market economy. But not even
such a global and diffuse consensus in favor of capitalism--as a structure
and process, as opposed to prosperity as the supposed outcome
of both--can be assumed seriously. For the situation that took place
in the Soviet Union after the "revolution from above," and which set
the ball rolling in the other countries of Central and Eastern Europe,
cannot be compared to the overwhelming imperative force ofthe "zero
hour" as it hit the Germans in 1945 after their total military, moral,
and material defeat and implied an inescapable commitment, enforced
514 social research
by the occup)dng powers, to a new political and economic beginning
whose parameters were fixed and enforced by the occupying forces.
The Romanians and the Bulgarians are not alone today in seeming far
removed from the consciousness of such a commitment, and no one can
block their conceivable way back into some form of a state-managed
economy. Instead, the political majority culture of an "authoritarian
egalitarianism" that seems to prevail in at least these two countries
stands in the way of both a market economy and of democracy as
uncontested goals for the process of reform. This pattern, as cultivated
by and inherited from the old regime (and beyond that, by much of
the East European historical experience) (cf Schopfiin, 1991), does not
allow a market economy to unfold. For the latter functions under the
premise that a general increase of output can be achieved only at the
price of a minority's being in a position to increase its income far more
substantially and more rapidly than the majority, which, at least for an
interval of unknovra duration, may even lose out. The market economy
produces, along with the growing output of goods, a growing inequality--a
tendency that is resisted by the egalitarian resentment. As for
democracy, it is reproached with burdening the decision process with
frictions, uncertainties, and discontinuities that threaten to interfere
vdth the already precariously poor level of economic performance. This
constellation of expectations and fears (which can of course also be
activated by the memory of frustration vdth so many failed attempts
at reform and broken promises in the past) would obviously have the
consequence that, precisely because the economic situation is so dire,
promising attempts at economic reform--and at its democratic legitimation--are
blocked by a majority ofthe population.
To summarize the propositions that I have discussed so far: A
market economy is set in motion only under predemocratic conditions.
In order to promote it, democratic rights must be held back to allow
for a healthy dose of original accumulation. Only a developed market
economy produces the social structural conditions for stable democracy
and makes it possible to form compromises within the framework
Capitalism by Democratic Design? 515
of what is perceived as a positivesum game. But the introduction ofa
market economy in the postsocialist societies is a "political" project,
which has prospects of success only if it rests on a strong democratic
legitimation. And it is possible that the majority ofthe population finds
neither democracy nor a market economy a desirable perspective. If all
ofthese propositions hold true at the same time, then we are faced with
a Pandora's box of paradoxes, in the face of which every "theory"--or,
for that matter, rational strategy--of the transition must fail.
The core problem of the political and economic modernization
ofthe former socialist societies resides in their lacking any noncontingent
"givens" that would be suitable fixed parameters ofthe politics of
reform. Precisely because the system is at such a deadlock, everything
becomes contingent, and nothing can self-evidently remain as it is. The
absence ofa fixed set of trustworthy or at least uncontested social facts
and binding institutions forces the reform politicians to some gigantic
"bootstrapping act" (Elster, 1990). For this reason also, the quest for
reliable foundations of societal and political accord clings to national
identities and desires for ethnic self-assertion. Or, as Staniskis reports
from Poland, it clings to "exemplary communities" and doctrines
such as the Roman Catholic social doctrine, which is now called on
as a binding guide in the strategy to maintain political order. Others
stylize the doctrines of neoclassical political economy to the status of
a revealed doctrine of salvation. Others think that they have found
the Archimedean point for the lever gear of reform policies if in their
countries they simply reproduce minutely one of the tested Western
constitutional systems (such as the German Basic Law). These attempts
at inventing traditions, exemplary models, and dogmas are hardly
promising, since the element of arbitrariness is evident with which the
political movements and elites choose these allegedly "prepolitical"
fundamental truths and proclaim them as their program.
This unavoidable circularity is particularly patent when, as in
Poland, Bulgaria, Romania, and Czechoslovakia, the newly elected
parliaments also function as constituent assemblies. This indeed means
516 social research
nothing other than that the players determine the rules according to
which the future game will be played, and with which it will be decided
who will be a fellow player. Actors are judges in their own case. Even
though in the struggle over constitutional principles they appear as
persons arguing in accordance with norms, they v^all be defenseless
against the suspicion that in reality they are conducting their deliberations
solely with their own interests in mind.
This suspicion is radicalized bythe citizens' movements in Eastern
and Central European countries. The "logical" difference between their
way of proceeding and the activities of "new social movements" in the
West lies in the fact that the Western movements operate within the
context of already created and solidly established democratic institutions
and focus on overcoming some ofthe built-in biases, deficiencies,
and blind spots of these institutions. In so doing, they can base themselves
on a core of institutionally stable principles (Habermas, 1985:
79-99).'' At times, they have criticized political elites and constitutional
practices by referring to the "spirit" ofthe constitution itself and established
principles of political culture.
This refiexive pattern is not available to our Eastern neighbors.
There the citizens' movements often have an unconditionally antiinstitutional,
if not outright antipolitical, bent to them, which is all too
understandable in view of their past experiences. Because they cannot
refer to already established routines and call for the redemption ofthe
principles embodied in them, they are exposed to the danger of wearing
themselves out in idle populist expression, of romantically overrating
direct democracy and extraparliamentaiy forms of action, and of
thereby overlooking the capacity for negotiation and compromise that
would alone be capable of converting social mobilization into political
power. As is to be expected, if this transformation fails, the mobilization
will collapse and, in an abrupt reversal, give way to symptoms
of apathy, cynicism, and vwthdrawal into privacy among the majority
ofthe people. At the end of such a cycle, the initial "atomized" state
of the post-totalitarian society would not be somehow overcome, but
Capitalism by Democratic Design? 517
rather reproduced and reinforced. Because the negative coalitions of
dissidents and citizens' movements do not have a coherent political
and economic project of their own, there is a risk that they will fall to
pieces at the very moment when the bureaucracy ofthe old regime is
deprived of its power and thus is eliminated as the only factor in relation
to which the opposition is unified.
Jon Elster has attempted in a series of recent works (Elster, 1990)
to explore and conceptualize the interdependencies and antinomies that
arise in the process ofcarrying out political and economic reforms. In the
case of economic refonn, the two components at issue are those of price
reform (deregulation, and dismantling ofthe system ofpermanent subsidies
provided for by soft budget constraints) and property reform (privatization).
A price reform without a property reform would induce the
temptation in the managers of state-owned firms to ignore price signals
and to keep on squandering public capital byusing it inefficiently. A price
refonn with a property reform would ofcourse establish a complete capitalist
system ofcontrol, that is, one with labor and capital markets, which
is to say one with extensive layoffs and business collapses. It is today
entirely unclear--although on the whole it seems rather improbable--
whether in this respect promising and feasible intermediate solutions
are available. They could be democratic with regard to the enterprise
level (i.e., of a cooperative sort): in that case, one would have a capital
market vdthout a labor market. Or they could be democratic as regards
the economy as a whole: there would then be a labor market without a
capital market, and in place ofthe latter the investment funds would
continue being allocated through some state agency.
The political reform also consists oftwo measures: constitutional
guarantee of citizens' rights and democratic rights of participation. The
first one without the second would amount to a classical liberal constitutional
state, in whose framework, as was shown above, the vast decision-making
burdens of the project of "political capitalism" could not
be handled.
Additionally, liberal constitutional guarantees would easily
be exposed to the opportunistic grip of political elites if the risk of
518 social research
their being democratically voted out of office did not stand in their
way: "Power must be divided to ensure that the constitution will be
respected." The second one without the first (for example, mass democracy
without freedom of the press) would be equally absurd and in
Eastern Europe would have to boil down to forms of authoritarian
populism, for they are lacking in sufficiently powerful intermediary
collective actors (political parties, associations, trade unions, churches,
local governments) which could exercise a function of control vis-a-vis
the demagogic presidential regimes.
From these assumptions in the model, Elster derives the conclusion
that property and price reforms as well as the guarantees of freedom
and democracy condition each other mutually, that the guarantee
of liberty and the reform of property stand in a harmonious relationship,
but that there is an irreconcilable antagonism between democracy
and property and price reforms, if the consequences of both of these
economic reforms (namely, unemployment and inflation) are going
to be as disastrous for the former countries ofthe Council for Mutual
Economic Assistance as must be anticipated. The core of this antinomy
is obvious: people do not want to wait until the blessings ofthe market
economy reach them too and the shock waves of the transition have
subsided. And neither are they willing to see the new economic elites
(which may often be composed of elements ofthe old ones) becoming
rich at their expense. In this mixture ofthe feelings of fear, resentment,
and envy, they are encouraged by their own dispositions acquired under
the old regime, as well as by the interested parties in the "conservative"
circles ofthe old political elites. Add to that the fact that intermediary
institutions and agents are largely lacking that would be capable
of making the individual costs and risks ofthe transition a subjectively
acceptable burden, and of guaranteeing that the pains and burdens of
the economic transition would eventually be compensated for by equitable
returns.
One way to elaborate and refine Elster's model further might be
the following. Each of the two reforms, constitutional and economic,
involves three steps: institutional framework, unfolding process, and
Capitalism by Democratic Design? 519
desired outcome. Democratic reforms thus consist in setting up a constitutional
framework of citizen rights and parliamentary government.
These will supposedly lead to "normal" competitive democratic politics
and the allocation of power and material resources through it. The
overall result is the peaceful resolution of social and political conflict.
Similarly, economic reforms consist in property rights and privatization,
an unfolding process of competitive price-setting, and the desired
result of productivity gains, growth, and prosperity. Moreover, both
chains of stnicture-process-result are intertwined and are supposed to
mutually reinforce each other. If this is the theory, practice may have
a number of unpleasant surprises in store. The seven most likely and
plausible of them are these:
* Democratic politics may block or distort the road to privatization
and hence marketization.
* Privatization may succeed, but fail to lead to marketization and
hence to growth and prosperity; this could be due to the conservation
of cartels and monopolistic structures that make the transition
one that occurs not from "plan to market" but "from plan to clan"
(D. Stark).
* Privatization may succeed, but lead to the obstruction of democratic
politics through powerfiil interferences originating from
domestic or intemationai owners of capital.
* Democratic politics may evolve, but fail to lead to the peaceful resolution
of social conflict as it is dominated by ethnic, territorial, and
minority conflicts that do not lend themselves to democratic forms
of compromise.
* Marketization may succeed, but fail to generate the reality of (or
even the widely perceived prospect for) an equitable distribution of
its beneflts.
* Accumulated disappointments and frustrations with these failures
may give rise to demands for a type of "democracy" that is based on
an institutional structure other than civil liberties and representative
government--for example, populist presidential dictatorship.
520 social research
ˇ Conversely, frustrations with economic performance and distribution
may also lead to demands for marketization without private
property; for example, a return to state ownership of productive
assets.
THE TUNNEL EFFECT
AND THE POLITICAL ECONOMY OF PATIENCE
Decisive is the temporal structure of processes. This applies not only
to the macroscopic level, where, as the Western model teaches us,
a sufficient time interval between the three modernizing thrusts
(nation-state, market economy, democracy, and finally the welfare
state) as well as different degrees of rigidity among our three levels
fosters their cumulative success, but also to the microscopic level
of individual actors. They must, if the simultaneous mastery of the
three tasks of modernization is to succeed, be ready to muster a large
measure of patience, confidence, and trust. As macroevents have
assumed an incredible speed, the painful task of patient waiting falls
upon individuals. They must quickly adapt themselves to the new
circumstances and then be ready to wait long for the fhiits of this
adaptation. They need this patience in order not to interfere with the
"creative destruction" that will follow the price and property reform
in a perfectly intended manner, although by making use of their newly
won civil rights they would be quite capable of doing so. Not only
must they be sufficiently disciplined to willingly undergo shock therapy,
but they must also hold fast in the process, in spite of commonly
available evidence to the contrary, to the (perhaps self-fulfilling) belief
that the shock will actually be a therapeutic one. Requisite are therefore
precisely the virtues and moral resources of fiexibility, of patient
waiting, of deliberating, probing, and weighing one's short-term vs.
long-term and individual vs. collective preferences, and of tolerance
for highly unequal distribution patterns, which over the course oftwo
(three in the case of the Soviet Union) generations of the "construction
of socialist society" were either discouraged and entirely underCapitaiism
by Democratic Design? 521
utilized or, to the contrary, excessively put to the test, and frustrated
as a result. Who would predict with any confidence that these virtues
would fiourish precisely now?
Albert 0. Hirschman has modeled this problem ofthe ability to
wait, or ofthe political economy of patience, to the metaphor ofthe
tunnel effect (Hirschman, 1981, 39-58). The analogy is that of a tunnel
for cars in which there are two traffic lanes going in the same direction.
There occurs a nasty traffic jam. In both lanes the automobiles come
to a standstill, and no one sees what is going on. Suddenly, the cars in
the right lane begin moving and pass by the vehicles still blocked in
the left lane. The occupants ofthe latter are now enduring a cognitive
and emotional dynamics ranging from hopeful relief ("Well, after all,
it'll soon be our turn to go!"), through envy ofthe lucky ones and indignation
at an obviously unfair traffic regulation, to open aggression on
the part of those who try to force themselves illicitly into the moving
traffic of the right lane and through the ensuing collisions bring the
traffic to a renewed complete standstill. The question is: Why is it that
this nightmarish scenario sometimes unfolds more swiftly, sometimes
more slowly, while at other times it does not unfold at all--the latter
in the happy case when the civilized behavior and the patience ofthe
less-fortunate ones prevail until the jam clears up of itself or when, for
that matter, some ofthe more-fortunate drivers in the right lane voluntarily
cede their right of way? And there is the additional question: is it
possible to generate this kind of patience and civilized behavior where
they are lacking by the judicious use of political resources and institutional
reforms?
Transferring this question to the political economy of the postsocialist
transformation processes yields at least four conceivable
categories of answers. The first and simplest one is that, thanks to
advantageous circumstances, not much patience is necessary in the first
place. This corresponds to the case of the "economic miracle," or a
vigorous takeoflFinto self-sustained growth. The gains in prosperity are
so rapid and steady that all the participants find it an obvious dictate
of good sense to keep to the rules; and, in the process, getting used to
522 sociai research
the value of the rules comes easily, and compliance with rules thus
becomes more robust.
The second response is a mixture of positive and negative
encouragements and incentives, arising from the international system.
External support ofthe new order (Marshall Plan, occupation regime)
was--along with, and as a necessary condition of, the "economic miracle"--the
key to the success story ofthe Federal Republic of Germany
and other postwar democracies. Since in the case of the Eastern
European transformation it is a matter neither of a postwar nor of a
cold war situation, military threats have no role to play here--or only
negatively, as strategy of the discontinuation of military threat, that
is, of a consistently continued politics of disarmament and detente.
Besides, this policy of refraining from the threat of military intervention
would have the desired effect of canceling a part ofthe conceivable
pretexts for intervention on the part ofthe former Warsaw Pact countries
militaries. Some form of military intervention would, however,
have to be kept on reserve in case "reactionary" regimes in Southeast
Europe should try to resist transformation by military aggression and
civil war. But, in contrast to the situation after World War II, there is
no obvious "patron power" that would be a natural candidate for the
task of supervising and enforcing the peaceftil nature ofthe transition
process.
Neither is there an obvious candidate that would be able to
dispense the carrot along with the stick. It all depends on the robustness
and the capacity to act of supranational regimes such as the European
Community and the Commission for Security and Cooperation in
Europe. The reward would consist in a policy of granting international
credits and transfers, whose ftinction, so to speak, would be to subsidize
the population's patience. Built into such loans for the external subsidization
ofthe transition would be the soft, disciplining threat that the
credit grantors could suspend their aid or favorable trade agreements
in case the intended integration of profitable economic and political
developments in the countries benefiting from the credits failed
to materialize. This strategy of providing "support from the outside"
Capitalism by Democratic Design? 523
poses difficulties for a number of reasons. The necessary volume of
loans may exceed the capacity of the lending countries, which may
have more narrowly defined priorities. Or the latter expose themselves
to the beneficiaries' suspicion (justified or not) that the real intention
behind the loans is not the subsidization of patience, but rather the
long-term exploitation ofthe recipients, which would be consequently
more likely to occasion impatience. Or the transferred funds have the
unintended effect not of subsidizing patience for the uncertainties that
attach to the process of economic and democratic renewal, but on the
contrary of making bearable the costs which arise firom the conservation
of structures, from the waiving of renewal.
A third method to buy the time and to engender the moral credit
and thrust requisite for the simultaneous transition to a market economy
and democracy consists in an effective sociopolitical mitigation
of the pains of transition by a continued and fine-tuned mechanism
of internal redistribution. Granted, such mitigation has thus far not
even occurred under the extraordinarily favored special conditions of
the former German Democratic Republic. Presumably, tolerance for
a transformation toward a market economy, in the course of which
inequality inevitably increases (for some must do a lot better quickly in
order for all to do somewhat better in the long run), will be more likely
to be summoned up if the danger that a substantial part ofthe population
will be, and for some extended period of time, absolutely worse
off is ruled out. Here the design question boils down to whether you
want to provide status security to the economic core groups or the unconditional
guarantee of an adequate subsistence minimum for everyone. At
any rate, the beneficiaries ofthe transformation to a market economy
would have to be made to compensate the victims ofthe transformation
with some kind of welfare-state security and unemployment benefits.
This would certainly constitute an inversion ofthe sequence of Western
constitutional development as it was postulated by T. H. Marshall (i.e.,
the sequence: liberal constitutional state, democratic state, and welfare
state), and the welfare state would be recognized as the precondition
for both the market and democracy (just as democracy, in another
524 social research
inversion ofthe Western "model," would be the precondition for the
market, as argued above). So far this has succeeded nowhere; at best, it
foundered in such a way that (as in the case of Argentinean Peronism)
a kind of welfare state was designed to serve as a permanent substitute
for liberal democracy. The difficulties are plain to see: the resources
which are earmarked for the social insurance against "creative destruction"
do make the latter less destructive, but they may also make it
less creative. Correspondingly, the prospects for a politically successful
privatizing ofthe system of production, and for concomitantly governing
the distribution of incomes and services by means of state guarantees,
are viewed pessimistically nearly without exception (cf Deacon
and Szalai, 1990). This is all the more so because social security and
protection can also easily be denounced as being ideas inherited from
the old regime and thus as interfering with the unfolding ofthe new
economic order and its hoped-for finiits.
Even more difficult to realize would have to be a fourth solution
to the problem of patience, which would consist in forming collective
actors such as associations, federations, trade unions, parties, and local
authorities within the East European "civil society." If each person
could be assured of enjoying the protection ofa robust representation
and negotiation capacity fi-om such mediating bodies, whose constitutions
would have to make it impossible for them to form "exploitative
coalitions" or "clans" that would work at the expense of excluded third
parties, then at least a part ofthese fears would lose their weight--fears
that otherwise might turn into a "democratic" blockage ofthe transformation
toward a market economy and eventually make democracy
itself, due to its allegedly adverse economic consequences, pointless.
These mediating bodies would not be allowed to be state artifacts and
would have to enjoy constitutional guarantees that would make them
relatively unavailable to opportunistic strategies. At least, they would
be able to "deliberate" and find "synthetic solutions" to the conflicting
preferences that prevail within their respective constituencies.
Also, they would have to be able, due to the representational monopoly
granted to them and the strength they derive from it, to explore
Capitalism by Democratic Design? 525
the availability of their opponents for cooperative strategies without
running the risk of ending up as the "sucker" (cf Bates, 1988: 387-401).
Third, they would have a moral basis in the feelings of solidarity and
mutual obligation within "civil society." If such a combination of the
institutional as well as moral patterns of "civic republicanism"-cum"democratic
corporatism" is a rarity even in the affluent societies of
the West, how could it flourish on the soil ofthe atomized social structures
of postsocialist societies? Instead of that, and corresponding to
the atomized state ofthe society, we see ahead of us, at least in some
ofthe countries undergoing the triple transformation, a type of "charismatic"
politics and presidentialist constitution-making unmediated
by intermediary structures, in the shadow of which the forces of a civil
self-organization beyond market, state, and ethnic "community" are
having an exceedingly hard time to assert themselves.
Translated by Pierre Adler
NOTES
This paper was presented at the first plenary session, Intemational
Political Science Association (IPSA) congress, Buenos Aires, Argentina,
July 1991.
1. I owe this parallel to the unpublished work ofJ. Elster.
2. In their expectation of a proletarian world revolution, the founders
of the Soviet Union have dispensed themselves with indicating the
geographical placement ofthe state in its official name, the Union of
Soviet Socialist Republics. This is probably the only modem case of a
state's doing so without naming its place in space. Even the United
States of America operates with such a self-localization, although it is
a misleading one since it concems the entire continent. In the case of
the Soviet Union, what was perhaps meant as an invitation to other
"Soviet Republics" that might be emerging elsewhere in the world
to join the Union turns precisely into an invitation to all the bearers
of hitherto oppressed and denied ethnic and national identities to
secede, for they no longer have any reason to include themselves in
the now empty category of "Soviet citizen."
526 social research
3. The words are those of Wolfram Engels, a leading German neoclassical
economist and editor of Wirtschaftswoche, a major business weekly.
He also refers to the exemplary cases of Pinochet's Chile and South
Korea.
4. Cf J. Habermas's defense of "civil disobedience" as conducted in the
name ofwidely shared norms and values of civility itself
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