János Kornai
By Force of Thought
Irregular Memoirs of an Intellectual Journey
Extracts
The Fifties: Waking up
Late in the summer of 1954, I was staying in a resort facility at Lake Balaton when
I met Sándor Haraszti, who had just been released after several years in prison.
He had been a Communist back in Horthy's time; and after 1945, he had become
editor in chief of the Communist newspaper, Szabadság (Freedom). We would
sometimes meet, and I had respectful feelings of friendship for him. He was the
father-in-law of Géza Losonczy, who was to die tragically as a martyr of the 1956
Revolution. Losonczy had been one of the heads of the Party daily Szabad Nép
when I started on the paper. Our acquaintance was superficial, but he was
generally known as an old and respected Party member. Haraszti had been arrested
in 1950 and Losonczy in 1951. It emerged later that Rákosi and his associates had
wanted to include them in a public trial in which János Kádár would have been the
main figure accused. That second public trial after Rajk's never took place, but the
men were kept in prison until released by the advent of the New Course.
My meeting with Sándor Haraszti had undermined the moral foundations on
which I had hitherto based my Communist convictions. The Party had lied in
saying that Haraszti was guilty, and I had believed the lie. If that trial had been
based on a lie, then the others must have been as well. We were surrounded by
lies and I, stupidly, had believed them without question. And, willy-nilly, I had
been spreading some lies myself.
The change in my ideas began on a meta-rational, not a rational, plane. My
faith in communism was shaken as I recognized the lies and brutality around me.
The collapse was in the moral foundations of my worldview.
If that, to use a geological metaphor, was the deepest layer, there was another
above it, in the rational range: the epistemological basis of Marxism. Marxism calls
itself the theory of scientific socialism. It dissociates itself from unscientific
versions of socialist ideas, branding them naďve and utopian. According to its own
assertions, Marxism alone presents a scientific method for researching society
and comprehending the body of knowledge about it.
I broke with Marxism because I became convinced that it lacked foundations
in precisely this respect. I am aware that I am on shaky ground when I start
expounding on scientific theory and methodology. There is no agreement among
philosophers who specialize in the subject on what makes a statement 'scientific'
or even on when the truth of a statement can be deemed to be confirmed. Nor is
it the purpose of this intellectual autobiography to try to decide such matters. All
I am trying to do is to present my personal history.
Up until 1955, in my eyes the closed character of the Marxian intellectual
edifice and its transparent logical structure offered sufficient evidence for saying
it was not only closed and logical, but true as well. When I started to internally
revise this theoretical conviction, full of disillusionment and suspicion as I was,
I began with increasing decisiveness to take another approach-to compare the
theory with reality. Its importance was enhanced by my bitter experience of being
deceived. How did the "theory of value" relate to real prices? How did the theory
of "pauperization" square with historical tendencies in living standards? How did
the "theory of capitalist crises" reflect the changes in business cycles in real life?
How did the theory of "classes" and "class warfare" compare with the actual
stratification of society and social conflicts? The problem was not just that the
theories performed badly in all these comparisons, that the Marxist dogmas failed
to match reality. The main trouble was that Marx himself and his later disciples
did not feel the primary intellectual duty to apply the elementary criterion of
scholarship: testing their ideas against reality. Marxism is not the only school in
the social sciences to commit this original sin, but in 1955-1956 I was calling on
Marxism to meet the fundamental requirement of science and compare theory
with the real world.
I started to see why the allocation of resources works badly in a socialist
system. The function of prices in such an economy is almost impossible to explain.
Marx certainly never undertook to say in advance quite what has to be done in a
socialist system, but it should at least have been shown in his writings what
happens under capitalism. Simply posing the question sufficed to make it clear to
me that Marx had failed to provide the answer. His works contain frequent
references to prices being set by "competition." But how? Volume 1 of Capital
floats in the air. Its main contention, that work is the sole creator of value,
epitomizes a proposition that cannot be tested or refuted-in other words that is
non-scientific. Nor is there any way to derive by strict deduction from the main
proposition in volume 1 the system of ideas in volume 3, where surplus value is
"converted" into average profit proportionate to capital. Here some testable,
refutable propositions appear but they perform poorly when confronted with
reality. What was putatively the explanatory theory of profit explains very poorly
what factors actually generate profit in capitalist reality. In a word, I concluded
that Marx's theory of value was inapplicable to reality.
The other Marxist economic propositions have been deposited onto the layers
discussed so far. Let us take just one as an example: the assertion about
pauperization of the working class. It does not follow in a deductive way from any
previous statement. If one accepts Marx's theory of value, the theories about
average profit and production price and all other auxiliary propositions in Capital,
it is equally consistent with them to say that the living standard of manual workers
declines, stagnates or rises relatively (compared to that of the other groups) or
absolutely (considering changes over the long term). As for empirical verification,
history has sharply refuted the Marxist tenet about pauperization as a long-term
trend. Statistics clearly confirm that the material consumption of working people
in all countries operating under a capitalist system rose substantially within one
or two centuries and their living conditions improved.
At some point, around the end of 1955, I gave up Marxism. I announced, first
to myself, that I was not a Marxist any longer. I would not reject every one of the
theory's methods or statements, but I would reject the '-ism' as such, the Marxian
intellectual edifice. Sometimes among close friends I would describe my
intellectual state by saying I had written off Marxism.1
"That is not by chance, Comrades," was the trite phase that often began a statement
in those days. Those conversant with Marxian philosophy would say that
Marx's works never reflected extreme fatalism or a belief that events were predestined.
But in daily life under the socialist system, party secretaries and journalists,
history teachers and planning office department heads liked to imply there
was no alternative. The only thing to do was what the historic forces of progress
dictated. And those dictates normally coincided with their instructions. There was
no other option but to collectivize agriculture. The economic plan was drawn up
in a single 'version' that every organization, though formally entitled to accept it or
reject it, had to endorse. There was only one party, and that one had to be elected.
During the second half of the 1950s, the opposite idea came at me in many
forms and from many sources: there was a choice.
About that time, I came across the existentialist philosophers. The first work
I read was a short piece by Sartre. Then I studied others. My reading of these too
(perhaps because that was what I wanted to read into them) was that if there is no
God, people are free and obliged to choose. There are no desperate situations in
which no choice remains and the responsibility for deciding can be avoided. For
me, having had it drummed into me that "the Party will decide", it was vital to
understand that I was responsible for my decisions and I could not blame
circumstances.
By then, the model of rational choice had become the main conceptual framework
of my thinking as an economist as well. A later chapter deals in detail with
criticism of the theory. At this point, however, I want to emphasize one great virtue
the model has. Its underlying structure suggests that there is a choice. When it is
used for purposes of positive analysis, we must establish retrospectively, even
against the facts, what possible but rejected alternatives we had in the past. When
it is put to normative use, we must determine just what restrictions independent
of ourselves are on our choices. There is freedom of choice within this restricted
set of alternatives.
Let me try to sum up where I stood in my choices around 1959. Some people
may switch to a new career in a single dramatic turn. It took me some years, from
1954 to 1959, to work out how I wanted to live in the future. My basic decisions
had been taking shape through a series of conscious deliberations and improvisations,
intertwined with each other. At every moment the room for potential choices
was narrowed by pressures from the outside world. There was choice available in
each moment. Nevertheless-in retrospect-it could be stated that by 1959 some
of my basic decisions had already emerged. I emphasize five of them here.
1) I would break with the Communist Party.
2) I would not emigrate.
3) My vocation would be research, not politics. I would not indulge in heroic,
illegal forms of struggle against the Communist system. I wanted to contribute to
renewal through my scholarly activity.
4) I would break with Marxism.
5) I would learn the basics of modern economics. I wanted my studies and
researches to be part of the Western profession of economics.
The Sixties: The economic application of mathematical methods
As I progressed with my studies, it became clear to me that I would have to
study the application of mathematical methods if I wanted to do economic
research that matched the standards of the period.
As part of the empirical work on the post-1957 transformation in the methods
of economic administration in light industry, I began to be interested in the role
of enterprise profits. Western writers considered it self-evident that the motivation
of the decision-makers in a firm was linked to the firm's maximizing its profits.
Well, attempts were made in Hungary after 1957 to give a profit incentive to
managers, and even to all workers in light industrial enterprises. Various bonuses
were attached to profits, but in a curious way. Profit distributions depended on
whether profitability (as a proportion of sales) had improved over a specific level.
Managers were encouraged to maximize (in mathematical terms) not an absolute
sum-the enterprise's profits-but a quotient, the ratio between profits and sales.
Although many thought that the two kinds of incentive came to the same thing,
I saw that they would have different economic effects.
I began to formulate in mathematical form the two types of maximum criteria
and the programming tasks associated with them. I cobbled together a model, but
I was not satisfied with it.
That is when I came to know Tamás Lipták. Our working relations became ever
closer and were augmented by personal ties. It soon emerged that we shared
political views as well. Let us not forget it was 1957. Members of the intelligentsia
could not keep up an intimate friendship with anyone whom they had political
cause to fear.
He was an implausibly thin young man (and remained thin later in life). He had a
handsome face, a kind voice and a bright way of speaking that won people over in
seconds. His appearance was far from an advantage to him, but women adored him.
Lipták had an exceptional talent for mathematics. Perhaps it is no exaggeration
to say he had genius. Not only did he make use of his huge accumulated
knowledge with absolute certainty, but he could bring up unexpectedly some
theorem or method he had previously read, just when it was needed. He was an
original, innovative thinker.
I learned much from Lipták, who was my private tutor in mathematics for
several years. Rather than following a methodical course, he would bring up a
subject that was apposite at that juncture. He would recommend reading matter
and give me help in following it. Apart from the knowledge I gained with his
assistance, I learned a lot from him about how to address a problem. He never
tried to hide what abstract assumptions a model was based on or what
simplifications of reality it employed. On the contrary, he wanted to present the
simplifications in the model with maximum intellectual sincerity.
Let us turn to the economic issue that prompted me to seek out Lipták in 1957.
It soon emerged that the problem was hard to handle mathematically if accuracy
was insisted on, rather than simplifying matters until the complications caused by
reality disappeared. We had to analyze a specific type of non-linear programming task.
We went at it repeatedly. The chapters of the study were written in a dozen versions,
each after protracted head-scratching and numerous joint sessions of many hours.
Finally, a text of some 250 pages was ready and seemed acceptable to us both.
Then our work was broken off. Tamás was arrested. Sándor Fekete's Hungaricus
pamphlet, whose journey abroad I had aided, was previously distributed in
duplicated form in intellectual circles in Hungary. Tamás had helped by working
the duplicator. We had not yet known each other when we both did our bit in that
action. Later, as we began our struggle on the scholarly and not the political front,
this political past was something that we found we shared. Tamás's arrest did not
come as a surprise to us.
He was well down on the list of the accused. He spent about a year in pre-trial
detention and then in prison. Once, I wrote out a couple of mathematical
problems having to do with our joint research and gave them to his wife, Manyi,
to see if she could hand them over to Tamás, for him to think about in his cell. I did
not think the problems themselves were urgent, but I thought they might help
Tamás by diverting his attention from prison life.2 Poor Tamás, far from thinking
about mathematical or economics problems, attempted suicide. It was a catastrophic
sign of depression, which would overcome him later. Luckily, his life was saved.
Tamás was still in prison when I was dismissed from the Institute of
Economics. I sought help from the Ministry of Light Industry in publishing our
book-length manuscript. The ministry was prepared to shoulder the printing
costs, but insisted the name of the imprisoned Tamás Lipták could not appear on
it. I sought the advice of Alfréd Rényi, Tamás's superior and fatherly friend, and
agreed with him that the formula "With the cooperation of the Institute of
Mathematics of the Hungarian Academy of Sciences" should appear on the title
page instead of Tamás's name. In the end, the study came out in 1959 as a book
with a primitive appearance, using duplication.
Once Tamás was out of prison, we decided to publish our results in the West.
We prepared an article of journal length in English.3 Tamás was in his element.
I had just started to get to know the style and formal requirements of mathematical
and economics journals in the West, but Tamás had been reading them for some
years. The content of the article was our joint intellectual product, but its mathematical
precision and its Western structure and style were all to Tamás's credit.
At this time and for a long time afterward, no writer of a scientific or scholarly
work was supposed to send it to the West without first obtaining permission. The
usual procedure was for the researcher, who in most cases would be an employee
of a research institute or a university, to present the article to his or her official
superior. It would then be passed to that person's superior. If it was politically
problematic, it would be sent to the Party headquarters as well.4 The decision
would then be made at one level or another whether it could be submitted for
publication in the West.
Lipták and I decided not to apply for any such permit. We simply put the article
in an envelope and mailed it. Those who had been accused, among other things,
of sending the work of Sándor Fekete abroad illegally were still in prison at the
time. Both Lipták and I had been embroiled in that affair. Even if the article we
were now sending was free of politics, we were doing something illegal. We both
felt it was important not to submit ourselves to a prescribed official procedure. For
me, the move was a precedent that I followed thereafter with all my publications
abroad. I did not ask for my superiors' permission but simply sent the work
straight to a journal or publisher. In this, I did something different from many
colleagues in Hungary and other socialist countries, who later complained they
had not received authorization to publish abroad. I followed the example of
Hasek's Good Soldier Svejk under the Austro-Hungarian Empire: do not ask, for if
you do, the answer is going to be no.
We submitted our article to Econometrica, the leading journal of mathematical
economics. Several years later, I heard that it had come into the hands of Edmond
Malinvaud, the journal's French co-editor, who immediately accepted it without
changing a word or a comma.5 It appeared in January 1962.
The article dealt with a very specific problem, since it analyzed incentives that
were used exclusively for firms in Hungary. It underlined that we were examining
a socialist economy. Even posing the question was an intellectual challenge:
The incentive is not determined in advance. Rather than arising naturally or
spontaneously out of property relations or institutional conditions, it is decided
on a case-by-case basis. This approach was in fact a forerunner of a later line of
research-the major body of literature on incentives and the relation between
principal and agent.
The prices are not determined in advance either. Rather than their being set by
the market, there is central price control. The article analyses the rich system of
relations between enterprise incentives and prices on the one hand and quantity
and composition of production on the other. Which incentive leads to production
that is under or over capacity? In which direction does it push the range of output?
I often used to hear Eastern European economists say that they have not
published in Western journals because the editors were not interested in their
economy. My experience was the opposite, with that study in Econometrica and
with my later publications. They attracted interest precisely because they had been
written by an author living in a socialist country and were reporting on a world
distant from that of the editors-but in their idiom, the language of modern
economics.
A blighted attempt at a 'fabricated trial'
As I write this, I have at hand a photocopy of a letter written to me on October
14, 1964, by John Michael Montias, an American economics professor at Yale
University. He was planning to come to Hungary on a scholarship and requested
some advice on his work. He also mentioned that he had begun to learn
Hungarian.
The letter had a short history behind it. I first learned about Montias's work
from his writings, and then I met him in person in Budapest in 1963, where he was
taking part in a conference on mathematical economics. Montias attracted the
attention of all the participants at the conference when he volunteered to do a
simultaneous translation from Russian into English of a presentation by Leonid
Kantorovich. He also interpreted the ensuing debate in both directions. We
afterward met once more in Venice in 1965 at a conference of Western and Eastern
economists specialising in the study of the Soviet Union and Eastern Europe.
I found the letter addressed to me not in my own collection of letters but in the
secret service archives. An American professor's personal letter to me had been
opened and photocopied in Budapest, then sealed again and delivered to me by
the Hungarian post office. Everybody suspected that things like that often
happened, but it was still a strange feeling to have firsthand evidence of it.
At the time, I only saw bits of the Montias case. But I have managed now to
reconstruct more or less the full story from the police records.
Montias was an outstanding figure among American Sovietologists. Most of his
colleagues knew only one of the many languages spoken in the Soviet region,
whereas Montias spoke several and was able to read even more. Although most
Sovietologists in those days were qualified economists and had extensive
knowledge of the political and economic situation in the Soviet Union or certain
Eastern European countries, they were not skilled in the theories of modern
economics written in formal mathematical language. Montias, in contrast, belonged
to a new generation that handled such modern tools with great skill.
I was happy to help Montias prepare for his trip to Budapest. I gave him some
advice on his choice of topic and offered to introduce him to Hungarian colleagues.
We exchanged letters several times. Montias handed in a regular application
in which he described his scientific program and Hungarian connections. My
name was among those in the relevant part of the application form.
While in the foreground everything was proceeding according to the rules and
practice of international scientific relations, behind the scenes the secret police
continued to work at full throttle. The first warning came from Czechoslovakia:
there was reason to believe that Montias was a CIA agent.6
As the date of the visit approached, more and more people became involved in
the case. They fished out the 'material' they had on the Hungarian scholars whom
Montias had named in his application. There were some other names in the files
as well, but what I managed to find out from the archives was what actions were
taken concerning me.
Counterespionage officials must have thought they were going to make a big
catch!
My files in the various branch offices of the III/III Department for the period
between 1956 and 1959 were retrieved, as well as those for my trips to England in
1963 and 1964. Then Captain Z. Z. wrote a summary report taking stock of
everything they had against me.
While studying the written documents of the secret service, I came across
transcripts of tapped telephone conversations dating from 1963. A list was drawn
up with the names of everyone I had contacts with. This produced nothing of
interest for them. The list contained the names of friends in Budapest, relatives,
and economist colleagues. Here is a quote from one of the scripts: "Helga? Olga?
Paid Kornai money." Here the police agents used a Hungarian slang term, applied
when, for example, a man is paying money to his mistress for her services. Very
suspicious. Kornai is being paid by a woman. As a matter of fact, it was a dear
acquaintance of long standing named Elga, to whom I had lent some money
during the summer vacation.
There is a comment on Captain Z. Z.'s report, handwritten by his boss, advising
him not to use me for 'throwing under'. I consulted experts to find out what that
meant. The secret service had to find an agent who was, in secret service terms,
reliable and obedient, and who could gain the confidence of the person under
surveillance. Such an agent was said to be 'thrown under' the person under
surveillance and would in turn provide the secret service with useful information.
Let us return to the visible surface. Montias's application was accepted by the
Hungarian cultural relations bodies and he was granted a visa. So Montias arrived.
He met and talked to several Hungarian economists. He started to learn Hungarian.
He lived the usual life of foreign visitors, went to the opera with his wife
and sometimes ate out with Hungarian colleagues. We wined and dined them, too.
It transpires from the files that he was shadowed all along. His phone was
tapped and he was followed about in the streets. I read the observers' reports:
absolutely nothing comes out of the piles of pages. We lived on Pusztaszeri út, and
so instead of referring to us as Kornai and Laky (my wife), the report called us
"Mr and Mrs Puszta." Montias could certainly not appear in the confidential
internal reports as Montias. Instead, he was given the name "Zimelio" (and in the
street observation reports, he features as "Master" for a change).
The plan took shape. Montias would be accused of obtaining-by misusing his
position as a visiting research scholar-classified information about the Hungarian
economy and Comecon (the Council for Mutual Economic Assistance). The
Hungarian economists with whom Montias was in touch were interrogated.
I was interrogated too. I have recently reread the reports. None of the witnesses
made any accusations against Montias. None of them confirmed the suspicion
that Montias had collected classified information.
Before long, Montias was expelled from Hungary, effective immediately. An
article was published in a newspaper explaining Montias's expulsion. He was
accused of gathering secret information, of spying. This accusation, however,
could not be supported by facts, testimony, or any other evidence. There was not
going to be a spectacular espionage trial.
The story is remarkable in many ways. It is a case that illustrates that the world
of scholarship was not a privileged or protected area. The tentacles of the
totalitarian state reached deep into it, and it was observed and terrorized.
While there was continuity between the Rákosi and Kádár eras, there were
some essential changes as well. In the days of the old ÁVH, all the players would
have been arrested-the American professor and his Hungarian friends-and
tortured until they confessed and it could be confirmed in court that they had been
spying for the CIA all along. Even then, in 1965, the interrogations were depressing
and very trying for the Hungarian witnesses. But we did have the chance to
refute the false accusations.7
At the time of the Montias case, there were two opposite political trends on the
Hungarian political scene. The 'soft-liner' or reform-oriented forces were out to
establish friendly relations with the West, especially in culture and science; the
'hard-liner' or anti-reform forces, however, tried to seize every opportunity to
blight East-West relations. Uncovering an American agent would have come
handy to the hard-liners, but the plan turned out to be a failure in the end.
Two postcripts need to be added to the story.
In 1970, I spent six months at Yale University. There Mike and I met and talked
a lot. We did not discuss the story of his expulsion. He-rightly-felt it proper not
to bring it up, as he was aware that I would be returning to Hungary. Later, we
would meet each time I visited Yale. I even gave a talk at the institute he headed.
Montias would have liked to visit Hungary again in the 1970s, but the Hungarian
authorities did not grant him permission to enter the country. His name was not
removed from Hungary's persona non grata list until the final hours of the old
regime in 1989.
Unfortunately, his Hungarian adventure rather dampened Montias's
enthusiasm for 'Sovietology.' This was a real loss to the profession. He gradually
turned to art history. His books on seventeenth-century Dutch painting are widely
regarded by art historians as classics in the subject.
I have to finish this story with a sad report: Mike died recently, in 2005.
The other postscript relates to a Budapest experience of mine. When I first
asked to look into the files of the Montias case in 1998, I was granted permission-
with a number of restrictions, however. I was not allowed then to make
photocopies of the documents. While reading the files, someone from the office
was to be present. Perhaps he was told to keep an eye on me, lest I try to sneak
out one of the files secretly. He was a pleasant man. After I had finished reading,
he started to chat, saying, among others things, something to the effect of "Well,
yes, we never managed to catch the man." I could not quote him word for word. I
did not tape the conversation so as to be able to report his words verbatim. This
much is certain: he made this remark as someone who fully identified with the
counter-intelligence people working on the case, in the first-person plural,
ironically and with some tone of regret in his voice. A weird continuity.
The Seventies: How I became an academician
The Hungarian Academy of Sciences, following the Soviet pattern, had several
functions. I was its paid employee, since I worked at one of its institutes. It
employed several tens of thousands of people.
At the same time, the Hungarian Academy of Sciences also had the traditional
function of a national academy, declaring itself the body of the best scholars in the
country. But how were they judged to be the best? The qualifying procedure
prescribed by the statutes of the Academy resembled that of the great Western
academies. After careful prior assessment the members of the Academy would
elect new members by majority decision in a secret ballot.8 But it is worth considering
more closely how the election process went in practice. This can be
followed through my own example.
Scrutiny of the Academy's charter at that time reveals that its members were
expected to have "the most progressive worldview";9 in other words, a member
must be a Marxist-Leninist. That was a troublesome criterion for those recom-
mending me as an academician.10 When the question of my membership was first
raised in the early 1970s, I had already gained a reputation at home and even abroad.
Perhaps more awkward still, the American Academy of Arts and Sciences had elected
me an honorary foreign member and I had had other marks of international
recognition as well. The Kádár regime, at that time, was anxious to demonstrate how
civilized, cultured and Western intellectual life in Hungary was. How did it look if a
Hungarian researcher was a member of the American Academy but not of the Hungarian
Academy? Consideration of my membership could not be postponed any longer.
Most of the academicians were party members. It was generally known that the
'official' nomination meetings of the sections were preceded by the meetings of
their Party members; there they agreed on which of the possible candidates to
vote for and against. Since the Party members formed a majority of the committee,
they ultimately decided who was going to be a member.
My nomination was defeated at the first attempt, during the preparation for the
election of members in 1973, right at the first phase-the meeting of the Academy's
Party members. From what I have gathered from the archival material now available,
the relevant department of the Party headquarters prepared a report for the
Politburo, the supreme decision-making body, on the preparations for the 1973
General Assembly of the Academy. This contained an account of whose
nominations the Party members supported and whose they rejected. The Political
Committee considered my nomination and "did not support" (i.e., forbade) it.
The following election was scheduled at the 1976 General Assembly. The usual
preparatory procedure took place. This time only a thin majority opposed my
Academy membership at the Party members' meeting.
As usual, the relevant department of the Party headquarters submitted its report
on the preparations for the Academy's 1976 General Assembly in October 1975,
dealing, among other things, with my case. The report refers to the Politburo's
negative decision two years before and adds the following comment: "The situation
has, in essence, not changed." This time the Politburo did not decide immediately on
the nominations to the Academy, but resolved to return to the question later.
After that, the story took an unexpected turn. Not much later, the meeting of
the Academy's section of economics and law (Section IX of the Academy of
Sciences) was held; there all the members of the section, not just the Party
members, took part. This body 'decides' de jure on the nominations. On paper,
I could not have attained a majority in the secret ballot if every Party member
academician had voted in accordance with their previous decision-that is, if
each had voted against me. To general surprise, my candidacy was approved by a
large majority. Clearly, Party members who had not spoken up in support of my
candidacy at their own meeting nevertheless had flouted party discipline under
cover of the secret ballot and voted for me after all. Apart from me, another
economist (with whom the Party had no political problem) received the necessary
majority.
The situation was complicated, however: two more economists, whose
candidacy the Party headquarters had been promoting, received exactly 50 percent
in the secret ballot. According to the letter of the Academy statutes, their names
could not go forward, as they had not received a majority.
The functionaries responsible for Academy affairs found this outcome an embarrassment.
There was Kornai, politically suspect, gaining a majority, while two reliable
people of theirs did not. It was too grave a problem to resolve in the formal venue of
the Academy or even at the middle level of Party management. The matter had to go
up to the country's supreme political body, the Politburo of the Communist Party.
In January 1976, the Politburo again discussed the issue of nominations. A new
submission was prepared, and in the debate, the submitter of the report stated
that they had inquired widely about my work; this time, the opinions had been
favourable. Finally, János Kádár took the following view (quoted word for word
from the minutes): "As far as these changes are concerned, I believe Kornai is
acceptable, because the political aspect is not so relevant. It is difficult to
compare, but we are not dealing with party functions or party membership, but
with the Academy of Sciences, where it is possible that some people with minor
political problems will, if their scholarly work is otherwise positive, become
productive and useful members of the Academy. So his not meeting the
ideological rigour of old Party members is not a reason to exclude him."
With that, the issue was decided. My membership in the Academy could now
follow the regular course.
Yet a need for balance was still felt at Party headquarters. The Academy statutes
were bent and the two names with precisely 50 percent approval were also put
forward at the General Assembly. With three reliable new people joining the
Academy along with Kornai, the required balance would be ensured. And that is
what happened: four new economists became corresponding members in 1976.
That is how the autonomy of the Academy was maintained in the 1970s, with
sovereign secret voting and valid statutes. In the course of selection, the assessment
of genuine scholarly performance was mixed, as in every sphere of life, with
the Communist Party's desire to wield power. Selection according to political
criteria left a marked impression on the composition of the body of the Academy,
with consequences that are felt to this day.
As well as whittling down the Academy's independence, the incident also
illustrates another important phenomenon: the willingness to make concessions,
typical of the cultural policy of Kádár and György Aczél. Kádár and his men did not
recoil from making occasional compromises. My 'admission' to the Academy was
one such compromise, if some recalcitrant Party members, taking refuge behind
the secret ballot, so wished. At the same time, they wanted to ensure that the
leading positions remained in their hands; if such a compromise was the formal
condition of their exercising their political will within an 'autonomous' organization,
those faithfully following the Party line should be the majority.
Building a new home
In 1974 a condominium for ourselves and four other families was completed.
Legally, this type of undertaking was known as 'self-built construction,' which
meant that there was no outside contractor to coordinate all the necessary activities.
The future occupants themselves hired the people to do each task, either
tradesmen with official permits or moonlighters from the 'grey' economy. They
also had to procure most of the materials and equipment for themselves.
As the work ground on, my wife and I had increasingly become the unwitting
managers of the work. We found ourselves up against the reality that it was nearly
impossible to obtain the building materials required. Finding clinker bricks or
bathroom tiles meant long searches and, if need be, painful reductions in our
quality requirements.11 We passed all the Stations of the Cross endured by consumers
in a shortage economy, which I later put into a systematic order in Economics
of Shortage. In each case, we had to choose between searching, waiting,
making forced substitutions imposed by chronic shortages or giving up our buying
intentions. Apart from the product shortages, we came up against labour
shortages as now one and now another skilled tradesman failed to turn up and
thereby stalled the whole operation. We had to realize that shortage leads to
corruption. We learned how much to give to the warehouseman at each factory to
obtain the missing material and what brand of brandy it was appropriate to
present to the official at the district council who issued the permits.12
I visited the West quite often in those years, and on each occasion, I took a
shopping list with me. Not a list of things that were cheaper in the West than in
Hungary, or of what local specialities were worth buying, but a list of what could not
be had at home and could be found in a normally functioning market economy.
An experience I had in Moscow seemed to emblematize the East-West difference
in buyer-seller relations. Taxis stand in lines outside airports in the West.
Passengers hop in and say where they want to go. Taxis pulled up intermittently
in Moscow, to be besieged by passengers asking where the taxi was going. Those
wanting to go where the taxi driver fancied going got in. Who should choose the
destination: passenger or taxi driver?
Everyone constantly had similar experiences. Whomever I spoke to, from
research workers to cleaners, from company managers to drivers, would be full of
tales of annoyances and trials related to the shortage economy. All of these had
settled in me, and they emerged when I set about writing a book about shortage.
The Eighties: Moving to Cambridge
It was felt in the economics department at Harvard some time in 1983-1984 that
they needed a specialist in the Communist economies. The search may have
gained urgency because Abram Bergson was preparing to retire. He was the most
prestigious American scholar in Sovietology and, apart from that, made an
important contribution to the theory of welfare economics with the introduction
of the social welfare function named after him (the Bergson-Samuelson function).
At some point in the search process, my name came up. I was personally known
well by colleagues at several American universities. Some I could count as friends,
but I happened not to have close relations with anyone at Harvard, apart from
meeting in passing with a professor or two. So they wanted to get to know me.
I was invited first to give a lecture, followed by dinner and a professional
discussion over the tablecloth. Next came an invitation to fill the prestigious
Taussig guest professorship for 1984-1985. I was to move there and the department
would find me accommodation. I would teach just one course and spend the
rest of the time on research.
At the age of fifty-six I had to start from scratch. The main subject on which
I lectured was titled "The Political Economy of the Socialist System". My teaching
was addressed exclusively to graduate students in programs leading to a master's
degree or a doctorate. Some Western textbooks touched on the subject and
I assigned occasional chapters as recommended reading, but I wanted to present
the subject in my own way. I had never attended any other professor's lectures on
the same subject, so I could not know how others were doing what I had to do.
I made use of the huge published literature, of course, but ultimately, I shaped all I
wanted to say and all the material I wanted to present, from the first sentence to the
last. Furthermore, mine was not a settled, developed subdiscipline such as standard
microeconomics or macroeconomics. There the reality defined by the theory is
relatively fixed, and changes from year to year are almost imperceptible. In contrast,
talking about the socialist economy was like shooting at a moving target. I started
teaching at Harvard in the mid-1980s, by which time the Communist camp was in
ferment and one event of world-historical importance was followed by another. In
the Soviet Union it was the time of glasnost and perestroika. In Beijing's Tiananmen
Square millions demonstrated-and the protest was followed by bloody reprisals.13
And finally, in 1989 the Berlin Wall was falling. I had to recast the course as "The
Political Economy of Socialism and the Post-Socialist Transition".
Although my lectures differed from others in spirit, that was by no means
unusual. Harvard University (and many other institutions of American higher
education) strove expressly for diversity. Students could choose from a range of
intellectual strands, philosophies and scientific schools of thought.
Amartya Sen divided his time between the economics and philosophy
departments and for many years ran a philosophy seminar with Robert Nozick.
When Nozick's Anarchy, State and Utopia appeared, he was viewed as a brilliant new
star in the firmament of libertarianism.14 Sen was at the opposite end of the political
spectrum. He researched problems of poverty and famine and called unconditionally
for the state to play a redistributive role. The difference in their views never disturbed
their sincere friendship and it gave their joint seminar its spark of excitement.
There were various schools of economic thought within our department and
representatives of political views that not merely differed but were bitter rivals.
Among the faculty were Steve Marglin, a radical left-wing economist, and a few oldstyle
Keynesians. Another member was Robert Barro, who engaged in theoretical
research while contributing regularly to the conservative Wall Street Journal on daily
policy issues. Certain professors served in presidents' administrations for longer or
shorter periods before returning to the university. By the time I arrived, John Kenneth
Galbraith was over 80 and retired, but he still came into the department periodically.
(We also saw his erect, lanky figure regularly at the swimming pool.) Apart from the
enormous reputation he had gained with his books, he had belonged to the circles of
Presidents Kennedy and Johnson and served as U.S. ambassador to India. Martin
Feldstein coordinated the massive organizational and educational task of providing
undergraduate teaching in economics on a mass scale. He belonged to the other
political hemisphere, having served President Reagan as senior adviser for several
years. Another colleague was Larry Summers, until he left teaching for public service
as vice president of the World Bank. He was later deputy secretary, then secretary of
the treasury in the Clinton administration. Thereafter he returned to Harvard.
Although he nominally remained a member of the faculty of the economics
department, he became president of the university in 2001. Following his resignation,
effective at the end of the 2006 academic year, he is expected to return to the
department as a distinguished professor. The economics department, like the
philosophy department, had its pair of professors-in its case, Robert Barro and
Gregory Mankiw-who would display their clashing views before the audience at
their joint seminars.
1990 onward: A pessimist turned optimist
Understanding the concept of a system has been a central topic throughout my
scholarly career. I had been engaged for decades in comparing contemporaneous
systems. There was now a unique chance to observe and interpret what
it meant for different systems to appear consecutively. Though everyone keeps
using the expression 'change of system,' there is still no consensus about what it
means. Indeed, some current interpretations are strongly opposed and the disagreement
causes confusion in political discourse.
I clarified this problem for myself as I worked on my book The Socialist System,
whose title underscores that 'system' is a central concept in it. Let me sum up here
the three characteristics that I see as distinguishing the 'great' systems: (1)
political structure and associated dominant political ideology, (2) property
relations and (3) coordination mechanisms (the relative weight of market
coordination, bureaucratic coordination or other mechanisms). The numbering is
not random but refers to the rank order of the three principal components. These
three characteristics go on to determine other important features of the system:
behavioural regularities, enduring market forces, and so on.
The characteristic features of the classical socialist system are a monopoly of
power held by a Communist Party opposed to private ownership and to the market
and the predominance of public ownership and bureaucratic coordination. The
characteristic features of the capitalist system are a regime friendly toward private
ownership and toward the market and the predominance of private ownership and
market coordination. The change of system occurred when the socialist system
yielded to a new system exhibiting the characteristics of capitalism. Demagogic,
populist remarks are often made about how the change of system has not
occurred yet. I am afraid those who preach such texts have no idea what "system"
or "change of system" really means.
Of course, the mere fact that the transition between the great systems has
occurred, that capitalism has succeeded socialism, leaves many questions open.
There are many types of capitalism. Some assign a significant role to the state and
some a less significant. Some have obtrusive and some unobtrusive inequalities
in the distribution of power, rights, or wealth and income. Some provide stronger
and some weaker incentives to technical advance, and so on. The real issue for
further debate is not whether the change of system has occurred, but what specific
direction the changes are taking. The connecting normative question is, what
direction would we like to go in? And that brings us to the issue of value judgments.
Many people in Hungary and the Eastern European region are disappointed. They
expected the change of system to bring something different, something greater and
better. I am not thinking just of those who actually did badly-losing their jobs,
descending the income scale, or being deprived of privileges. Disillusionment is also
found among many members of the intelligentsia, who have not lost financially or
have even benefited, who have not suffered any personal harm and may have gained
extra recognition. They are embittered by the widespread dishonesty and mendacity
they see and by the dissipation of state wealth. They shudder at the sterile verbal
battles in politics, the undiscovered corruption, the revelations that are never followed
up or that fail to even take place and the interpenetration of business and politics.
It offends their sense of justice to see flaunted wealth and dire poverty juxtaposed.
I share those feelings of bitterness and indignation. But I would not add that
I am disillusioned. Disillusionment comes from having expected more, and my
expectations must have been more modest than those of many friends and
acquaintances who feel that the change of system has let them down.
In one of my articles I referred ironically to those who see history as a convenient
supermarket, where the attractive features of various systems are put in
the shopping basket and taken home in a combination that best meets one's taste.
History offers 'packages,' including 'existing' capitalism with its own immanent,
system-specific problems.
In 1983, I wrote an essay titled "The Health of Nations", briefly reviewing the
pathologies of seven grave diseases: inflation, unemployment, shortages, excessive
growth of foreign debt, disturbances of growth, malignant inequalities, and bureaucratization.
(Plenty more could be added to the list, of course.) I then took the risk of
saying that there is no such thing as a disease-free socioeconomic system, but we can
choose our diseases. Let us be glad to have developed a social system that suffers from
only two or three of those diseases. In the worst cases, countries suffer from four or five.
I was not surprised to find that the transition from socialism to capitalism brought
mass unemployment. The most we could do was to struggle to keep it down, but it
could not be overcome altogether. I was not surprised that income differences suddenly
grew. Radical equalization would be impossible, but it was worth making an effort to
help the needy and guarantee to all the conditions required for human dignity.
A number of factors tended to make my expectations more realistic than those of my
peers. I am a professional researcher specializing in comparative social science-it is
my trade. My studies had been focused for decades on exploring the nature of socialism
and capitalism and comparing them. And my image of the developed capitalist
countries had come not from books or short visits as a tourist, but from daily experience
over periods amounting to several years. I took the opportunity to compare the written
accounts with what I saw with my own eyes and can safely say I have no illusions about
capitalism.15 Despite its detrimental and morally nasty features, I concluded I would
sooner live under the capitalist system than in the happiest barrack in the socialist camp.
I have to add another explanation of why the change of system did not disillusion
me. Deeply ingrained in me is a rule of analysis: positive and normative approaches to
a phenomenon need to be kept strictly separate. We all have a right to our dreams-
how sad if poets gave them up. But I am irritated at people who style themselves social
scientists and mix utopia with reality, especially if they make a virtue of their mental
confusion and shrug it off when their dreams are compared with realistic possibilities.
I am sometimes more or less alone in the company of intellectuals with my view
that the change of system we have been living through is really a huge achieve-
ment. My feeling of taking part in a fortunate turning point in history did not end
with the first euphoria of 1989-1990. It persists today, a decade and a half later.
Before the systemic change, I tended toward a variant of pessimism. Pessimism
cannot preclude action, I argued in 1983 in the "Health of Nations" study mentioned
earlier. I quoted Camus' novel The Plague. Rieux, the physician, is talking
to his friend Tarrou, who has been helping him combat the plague. " 'Yes. But your
victories will never be lasting; that's all.' Rieux's face darkened. 'Yes, I know that.
But it's no reason for giving up the struggle.' "
I write as follows in my preface to the American edition of Contradictions and
Dilemmas in 1986:
I must warn the reader: this is not an optimistic book. But neither is it pessimistic. There
has been a Hungarian tradition for centuries: you are resigned or desperate or angry and
a happy outlook is uncertain or improbable-and yet, you work hard and honestly for
improvement. Those who have read classics of Hungarian drama or poetry (some are
translated into English), or have listened to Bartók's music, will know exactly this
contradictory mood. Perhaps a member of a grey and non-philosophical profession, like
that of an economist, can follow the same tradition.
In me, the mix of optimism and pessimism has tipped toward optimism since
the change of system. It would be irresponsible to sketch in a few lines a balance
of the favourable and unfavorable aspects of the changes in progress in the country
and the world-even another long book would be insufficient for that. I will
mention only a few phenomena to illustrate the kinds of changes that have affected
my attitude toward life. I do not deny the problems and I face up to them, but I see
a different future since the chance of freedom has opened up before hundreds of
millions of people in the post-socialist region. Following that opening, a new, great
wave of democracy has augmented other, earlier waves of democracy. In historical
terms, the area of the world under tyranny has narrowed and the area covered by
democratic institutions, stronger or weaker, has widened considerably. Though the
process may be coming to a halt in some places or even going into reverse, I am
convinced that such setbacks can last only briefly. I, too, shiver to learn of the
dreadful deeds of extremists, and I sense what the unforeseeable consequences
may be if weapons of mass destruction come into the hands of terrorists. Nevertheless,
I believe that the historical process of the spread of democracy, in line with
the trend of former decades and centuries, will continue.
Production is growing everywhere, though unevenly, technology is developing,
and the quantity of resources available for human consumption has grown. I am
fully aware that there always are new difficulties to overcome. Still, I am not going
to bewail the woes of a consumer society or an aging society or the spread of
computers. To me, it is an advance if lights burn in villages and sewage is piped away,
if epidemics are stemmed and life expectancy is extended, and if people are better
linked by modern information technology and telecommunications. I have turned
into an optimist who recognizes the problems and wishes to alleviate them. 
1
I broke radically from Marxist theory and ideology. Yet I went on believing for quite a while that
socialism could be reformed. Later, I gradually gave up being a 'naive reformer'.
2
The idea was not completely stupid. It turned out later that some of the 1956 prisoners learned
foreign languages and did translations or were writers and tried to compose literary works.
3
The Hungarian text was translated as ''A Mathematical Investigation of Some Economic Effects
of Profit Sharing in Socialist Firms,'' by (Baron) József Hatvany, whose earlier life deserves a whole
novel, not just a footnote. A member of the extremely wealthy, celebrated Hatvany family, he was a
nephew of Lajos Hatvany, one of those who had promoted the superlative poets Endre Ady and Attila
József; his uncle gave generous support to these two literary giants and many other writers and was
an enthusiastic organizing force in Hungarian literature.
József Hatvany had read physics at Cambridge and learned to speak and write English like a native.
He had become a Communist in England, and after the war, he felt obliged to return to socialist Hungary,
only to be imprisoned as an ostensible British spy. For what else, it was argued, could have induced
this enthusiastic young Communist to leave the comforts of academic life in England and a rich, noble
family to return home? He was among those released in 1954, but imprisoned again after 1956. After
his second release, he earned his living as a translator for a time, seeking worthwhile work that would
interest him, as well as earn him money. That is how I came to ask him to translate several works of
mine. Hatvany later went back to academic life and became one of the intellectual forces behind
computer technology research in Hungary, gaining international fame and appreciation in that field.
4
As I write in 2004 and 2005 a book containing politically sensitive statements is going through
the publication process in China. The first publisher to accept it found the work problematic and sent
it to Chinese Party headquarters for approval. Publication was not permitted the first time. A second
publisher has taken up the task, and permission has been refused again.
5
Much later, when I became familiar with the editing and reviewing practices of leading Western
journals-such as rejecting most manuscripts and sending others back for repeated revision-
I appreciated better what a tribute that immediate acceptance without changes had been.
6
Documents recently obtained reveal just how closely the secret services of the Communist
countries cooperated. The Czechoslovak state security bureau conducted a secret search in 1963 of
Montias's apartment in Czechoslovakia, and found in his coat a slip of paper with my name and home
telephone number on it. This they reported to their Hungarian colleagues (IH 1656. 2/2-2358, p. 3.
Date: May 8, 1964. Also IH 34-4-797/1965, p. 4. Date: April 23, 1965).
7
I have written in an earlier chapter that after 1956, I resolved to become a member of the Western
economic profession. I was well aware of the risks involved. Still fresh in our memory were the times
when the mere fact of having a 'Western connection' was enough to make one suspect, and when
innocent professional interaction would be classified as 'spying' in trumped-up criminal proceedings.
This nightmare haunted us for as long as the Communist system existed. We know now, in retrospect,
of course, that there was no Stalinist restoration. But nobody then, in advance, could say for sure that
such an attempt at restoration would necessarily fail.
8
Membership has two grades: corresponding membership and full membership. Obtaining the
lower grade was the big hurdle; a strong argument for the nomination had to be made by a full
member. The next step was easy. Corresponding members became full members almost automatically
after a time.
9
Section (1) of paragraph 1 of the statutes of the Hungarian Academy of Sciences prescribed that
the Academy should pursue its activity "on the basis of the scientific worldview of dialectic
materialism."
10
Some individuals 'volunteered' for membership, lobbying academicians for recommendations and
trying to persuade other academicians to vote for them. Others felt such self-advertisement to be
unworthy and trusted the choice to their colleagues' professional conscience. I was among the latter,
in this case and with other honours too. Those proposing me as a member in the 1970s did so on their
own initiative, according to their own judgment.
11
I had to draw on connections in Szolnok to obtain a bathtub. The one found was slightly faulty,
but we brought it 100 km to Budapest.
12
János Kenedi published a little diary-like book about his similar experiences of building privately.
He wittily chose as his title an old slogan of Mátyás Rákosi's: "The country is yours, you build it for
yourself." The book was printed in the series Magyar Füzetek Könyvei (Hungarian Pamphlet Books)
published by a group of Hungarian émigrés in Paris.
13
During the dramatic occurrences in Beijing, my wife and I were practically glued to the television,
watching live the eruption-and suppression-of the Chinese student movement. Anybody who had
lived through 1956 in Hungary could see many similarities. We had deep sympathy for my Chinese
students and shared their apprehension as the events unfolded.
14
Nozick came to alter his earlier, radically libertarian views on several issues. A bold thinker,
excellent writer and man of warm humour and kindness, he died in 2002, at the peak of his powers.
15
I see similarities between two clusters of illusions. The New Left built fantasies on a socialist utopia
and turned in disgust from the socialism that actually appeared. At the same time, many members of
the intelligentsia before the change of system built up a distorted picture of 'the West' and its
democracy and market economy. Faced with real capitalism, they were aghast, as they compared it not
with realistic expectations, but with their own imagined utopia.
János Kornai
is Allie S. Freed Professor of Economics Emeritus at Harvard University. After his
appointment in 1986 as Professor of Economics at Harvard University until his retirement
in 2002 he divided his time between Cambridge, Massachusetts and Budapest, Hungary,
where he was a research professor at the Institute of Economics of the Hungarian Academy
of Sciences till 1992, when he became an emeritus fellow of Collegium Budapest, Institute
for Advanced Study. His books include Overcentralization of Economic Administration
(1956); Anti-Equilibrium (1971); Economics of Shortage, perhaps his most influential work
(1980); The Socialist System. The Political Economy of Communism (1992); The Road to
a Free Economy (1990); Highway and Byways (1995); Struggle and Hope (1997) and, most
recently, Welfare in Transition (2001), co-authored by Karen Eggleston. The above excerpts
appear by arrangement with MIT Press Cambridge, Massachusetts and London, England,
who will publish the book at the end of 2006.
