Globalization and the State in Central and Eastern Europe

Reviews

Debatte: Journal of Contemporary Central and Eastern Europe, 17(2), 2009 (by Hugo Radice)

Jan Drahokoupil’s study addresses some key issues in the political economy of the restoration of capitalism in Central and Eastern Europe (CEE), namely the interactions between the states and their elites in the region, and the institutions and practices of global capitalism.  The focus of his research is especially on the successful ‘embedding’ of global capital through the construction of ‘competition states’, and the growth of a comprador service sector that provides strong social and political support to the outward orientation of these states.  The concept of competition state has become familiar in international political economy since the early 1990s;  in essence, it means that the focus of state economic and social policies is directed to enhancing the competitiveness of the national economy.  The conventional relationship by which states promote the wellbeing of their citizens is thereby mediated by the market forces of global capitalism.

    The author begins with a complex and highly nuanced account of different theoretical and methodological approaches to the emergence of the competition state in the region, which clearly reflects the book’s original presentation as a doctoral thesis.  This chapter will be of interest mainly to scholars of international political economy;  other readers will be relieved to move on to the substantive research results.  In chapter 2, Drahokoupil distils from the varied experience of the Visegrad 4 (with some reference also to Slovenia and other parts of CEE) a distinct regional form of the competition state, which he dubs the “Porterian workfare postnational regime”.  The first term tells us that competitiveness is understood in Michael Porter’s business management sense, rather than in conventional economic terms (e.g. comparative advantage);  the second term indicates that the regimes have adopted the Western norm of transforming their duty to citizens from welfare provision to enforced participation in labour markets;  and the third emphasises that their projects of national development are conditioned by the ongoing transnationalisation of their societies.

    The argument is then developed through five further chapters.  Chapter 3 examines the specific history of the Czech Republic’s initial ‘internal’ model of neoliberalism under Václav Klaus, epitomised by the voucher privatization strategy which effectively excluded foreign capital.  Given the particularly sharp break with communism in the Czech Republic, incumbent managers could be ousted, and neoliberalism then paradoxically imposed by state power, if with the support – broadly speaking – of unions, citizens and media as well as the emerging new enterpreneurial class.  In effect, this was a fusion of neoliberalism with populism, something also attempted in Argentina under Menem, but also with echoes of Mrs Thatcher’s popular privatisation programme in Britain.  In blocking an ‘external’ strategy that wanted, as in Hungary, to enlist foreign capital in the reconstruction of the economy, Klaus drew on a deep historical tradition of economic nationalism;  and continued state control of the banks (and through their control of investment funds, industry at large) permitted the régime to cushion the transition through maintaining employment and wages.  Chapter 4 then moves to a regional level, comparing the Czech case with Other states, all of which with the exception of Hungary also initially pursued internal strategies.  The Hungarian exception is explained primarily by the long tradition of market-oriented reforms in that country prior to 1989;  this had created a ‘common sense’ on which the reformers could easily build.  Each country’s path through the early transition years is carefully assessed in terms of economic, social and political factors shaping policy choices;  but it is noted that in certain respects, notably the international institutional context of the EU, NATO, IMF, etc., the groundwork for the shift to an externally-oriented strategy was being laid.

    Chapters 5 to 7 then chart the strategic shifts and convergence that set in in the late 1990s.  Internal transition strategies were gradually seen to have failed adequately to transform the economies of the region.  Drahokoupil identifies an emergent ‘comprador service sector’ as the critical factor:  these rising entrepreneurs chafed at their subordination to sluggish ‘national champion’ enterprises, and pressed for further liberalisation.  In some cases they could establish direct relations with world markets through contract work for TNCs, but this was made difficult by the unavailability or expense of credit;  alternatively they could press for big enterprises to be bought and transformed by foreign capital.  In the Czech case, the key changes were in the promotion of FDI by the state, and the privatisation of the banks – largely themselves sold to foreign owners by 2001.  The “comprador service sector” importantly includes, in addition to entrepreneurs, state officials in the relevant ministries and state agencies, together with business services and training providers, lawyers and accountants.  These elements, together with the local units of the newly-dominant TNCs, are analysed more fully in chapter 6, with a focus on the development of business associations, lobbying and public relations work.  This sets the scene for a richly-detailed study of the investment-promotion ‘machines’ in chapter 7, which includes a brief discussion of the absence of effective opposition to the new strategy whether from trade unions or other sectors of civil society such as environmental organisations.  

Overall, Drahokoupil provides a convincing and well-documented account of how the CEE states arrived at their shared externally-oriented strategy of restoration by the end of the first post-communist decade.  However, the study is subject to the two main problems that beset the neo-Gramscian project.  First and foremost, key Gramscian concepts such as ‘organic intelligentsia’ and ‘hegemonic bloc’, appear to be so readily applied to all circumstances (historical periods, regions, regimes) that their explanatory value becomes limited.  Secondly, if the underlying causal dynamic behind social change lies ‘outside’, in global capitalism, this points to the need for a global analysis of how these external forces are themselves shaped. 

Hugo Radice
POLIS, University of Leeds