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Szalai Erzsebet

Chapter 1. The Power Structure and Ownership Relations of Semiperipheral Socialism

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1The leftist critical analysis of ‘existing socialism’ has produced a significant body of literature. The most relevant approaches from my point of view were made by the theoretical ancestor Trotsky (1976, 1977) and later by Djilas (1957), followed by György Bencze – János Kis (1983), György Konrád – Iván Szelényi (1989) and Ferenc Fehér – Ágnes Heller – György Márkus (1991).

2The findings of the Hungarian authors differ at several important points, but they all agree in that they do not regard ‘existing socialism’ either as a socialist or a capitalist, or even a transitory society: according to their definition it constituted an autonomous social and economic system. (In what follows I will not discuss these authors’ concepts in detail, but will express my agreement or disagreement with them as I expound my own position.) My own thesis is that the social formation called state socialism was in reality a social system located between state socialism and state capitalism—a transitory society which it would be more legitimate and exact to call semiperipheral socialism. Therefore my stance is closest to that of Trotsky and Djilas.

3My theoretical starting point is that while in a capitalist society based on capitalist private property—where therefore the economy is basically integrated by the market as defined by Károly Polányi (1976)—power relations may be deducted almost directly from ownership relations, while in ‘existing socialism,’ where (at least originally) the integrating factor was redistribution, the causal relationship is reversed: ownership relations may be deducted from power relations. I am going to follow this logic in my presentation.


4Who were the holders of power in the system of ‘existing socialism’? In fact, what is power, and what are its sources? Let us begin with Max Weber’s (1967) definition, which is eminently suited to grasping the conditions of ‘existing socialism’: “In general, we understand by ‘power’ the chance of a man or a number of men to realize their own will in a social action even against the resistance of others who are participating in the action. ‘Economically conditioned’ power is not, of course, identical with ‘power’ as such. On the contrary, the emergence of economic power may be the consequence of power existing on other grounds.” (Italics mine, E. Sz.)

5The Stalinist phase of state socialism was characterized by the monopoly on power of the ruling status group, to use the terminology of György Konrád and Iván Szelényi. Trotsky spoke about a ruling caste, meaning the party and state bureaucracy. The power of the ruling status group, or ruling caste, is clearly not based on economic but on political foundations. Its essence is pressure exerted through the power-enforcement machine, affecting even the sphere of private life.

6As a result of revolutionary movements sweeping through the Soviet empire, Stalinism had broken down by the late 50s and early 60s, and the post-Stalinist phase of state socialism had begun. Several analyses have been produced comparing the two periods, but they will not be presented here; I will concentrate only on the unchanging and changing elements of the nature of power.

7According to Konrád and his colleagues, the stability of the post-Stalinist period was based on the compromise alliance of the ruling status group performing teleological functions—essentially continuing the traditions of the previous period—and the technocracy. Both groups consisted of intellectuals intent on fully developing their comprehensive class rule. While in capitalist societies it is the ownership of capital that legitimizes disposal over surplus production, in state socialism, the “modern system of redistribution,” it is the redistributor’s or intellectual’s knowledge that has the same function of according legitimacy.

8Several problems, however, emerge in relation to this extraordinarily clever logic. The most important one derives from the fact that the authors have not consistently considered the consequences of their definition of the intellectual. According to that definition, “it is not knowledge that makes someone an intellectual, but the fact that he has no other entitlement than his knowledge to take up his status.” Further: “therefore the intellectuals are the monopolistic owners of such knowledge as is accepted by society as being transcontextual, and therefore used by it to orient its members.” And: “Society, or at least the general understanding of intellectuals, qualifies as valuable only those forms of knowledge that have any reference to concepts regulating the spontaneous teleology of society. Such forms of knowledge may at least be related to issues like what is good, what is bad, and what should be done.” If the authors quoted had said that a person regarded as an intellectual was legitimized exclusively by his specific knowledge as characterized above, I would agree with them. The problem arises from the fact that the position of those in power in the classical phase of the post-Stalinist period was not exclusively legitimized by this specific knowledge, just as it had not been in the Stalinist period. Moreover, the significance of this knowledge was rather modest. Furthermore: power in the Stalinist period was not at all legitimate, and its legitimacy in the post-Stalinist period was also rather low. In other words, it was not the intellectuals who were in power (although this does not mean that a group of intellectuals had no share in it). Who then were the real owners of power?

9In keeping with, and further developing, the logic of Trotsky, Djilas, and their disciples, it was the party and state bureaucracy—the bureaucracy of the state party and the party state—and the stratum of big-company managers who possessed power. In fact, according to broad empirical evidence, it was these groups who made the fundamental decisions related to redistribution, and who could assert their will against the rest of the society. The power position of big-company managers emerged as a result of the major wave of company mergers in the 60s and of the economic reforms aiming at slow market development, because these processes enhanced the decision-making competency of big-company managers by leaps and bounds (Schweitzer, 1982; Szalai, 1981, 1989; Voszka, 1983; Kornai, 1993).

10In the satellite countries of the Soviet empire, the source of power held by those in authority was largely an external one. The party and state bureaucracy enjoyed the support of the Soviet party leadership, and the Soviet market offered unlimited opportunities of sales and the acquisition of raw materials for the big companies, that is, for their managers.

11The rather low social acceptance of the system, that is, its legitimacy in the sociological sense of the term, was maintained by the principle of “who is not against us is with us.” One of the major achievements of the revolutionary movements of the 1950s was the continuous satisfaction of individual consumer demand, carried out slowly but on a rising scale, and the lasting ‘incorporation’ of the related social demand. On the other hand—and this change was most spectacular in Hungary—authority had no further claim on the private lives of the people. According to Júlia Szalai (1988), the families “in their restored freedom” built a work ethic, aims in life, and attitudes that were well-founded in social history, along lines broken off by the war and made impossible by dictatorship up to the mid-1970s. Thus the peasants’, clerks’, and workers’ prewar aspiration to become petit bourgeois could be realized, and that on a very broad societal base despite the political, institutional, economic, occupational, and societal rearrangement that had taken place.

12Thus the main source of legitimacy was represented by a continuous improvement of living standards and by the tolerated existence and growing influence of the second society and economy. Since the fabric of societal integration was not institutionalized, the second society and economy were built close to the first, and the relationship between power and the individual was characterized by an attraction to the borderline between the institutional and the noninstitutional, by an informal and individual separate bargain.

The internal legitimacy of power—in other words, the arguments by which those in power proved the ‘rightfulness’ of their power in their bargaining and justified the necessity of enhancing their power or influence—was of greater significance than the low level of societal acceptance of the system. In fact it was this internal legitimacy that guaranteed the internal cohesion of those in power, on the one hand, and the necessary room for maneuver in the struggle between groups with different interests within the organization of power, on the other. (Here I am using the term ‘legitimacy’ in a somewhat unusual sense, but have not been able to find a better one to describe the phenomenon.)
There are clear differences between the basis, method, and arguments concerning the legitimacy of the ruling estate (the top party leadership), of technocracy (that part of the state party and party state outside the top party leadership), and of the managers of large firms. The internal legitimacy of the ruling status group was based on the fact that it was this group that guaranteed the internal cohesion and mutual loyalty of those in power primarily by asserting party discipline (in which this status group in particular had a primary interest). A ‘past in the movement’ was a rather weak base of personal legitimacy; the argument that the “Soviet leadership trusts us” was much stronger; and strongest perhaps was the ‘negative’ argument that in Hungary “we are implementing the maximum of reforms under the given conditions of foreign policy: we are still the best, and only worse people could follow in our place.” It is common knowledge, but rather significant that the most important and fundamental arguments of legitimacy were unofficial ones, mostly stated in conversations in corridors: in other words, it may be said with some exaggeration that the internal legitimacy of the ruling status group was primarily a corridor legitimacy.
While the basis and arguments of the internal legitimacy of the ruling status group were primarily political, those of the technocracy and large-firm managers were primarily economic. The officials of the functional governing organs of the state bureaucracy, and their associates in the party bureaucracy, pleaded the requirements of the general external and internal balance of the country’s economy (and the need to improve it). The officials of the local branches and territorial institutions, and the managers of big companies closely cooperating with them, were responsible for specific areas of the economy: consequently the major means of asserting their internal legitimacy and interest was to prove that their branch, specialization or territory was important and even indispensable for the external and internal balance of the economy as a whole.
At the same time, the officials of the local branches and territorial institutions, and the managers of big companies, in their quest for legitimacy did not avoid political arguments either. In fact, political arguments acquired primacy in certain periods—to mention only the change in the economic policy opposing reform in 1972, when the leaders of branches and the managers of big companies successfully fought for the exemption of the fifty biggest firms from general regulations, by referring primarily to the interests of the workers in big industries (Szalai, 1981).
So far I have discussed the bases and arguments the ruling status group, on the one hand, and the technocracy and the managerial stratum of big companies, on the other, used to legitimize themselves in front of each other. An additional important part of internal legitimacy was the acceptance of, and support for, each group by the other (although the level of legitimacy ensured in this way was hardly more than what was called by Csaba Gombár [1983] an “apathetic readiness to follow”). The ruling status group canonized the economic power of the technocracy and of the big-company managers by its own political means, while in return the technocracy and the stratum of big-company managers continuously justified and stabilized the political power of the ruling status group by their economic achievement.


13Having introduced the concept of economic power one may ask: did those in power in ‘existing socialism’ constitute a class or were they some other kind of social formation?

14In the wording of Marxism, history was nothing but the history of class struggle, while Max Weber uses the concept of class exclusively to describe the structure of market economies, and the category of status group to describe nonmarket, i.e. ‘redistributive,’ economies. In his view, class positions emerge exclusively through the mediation of the market, and the position of the class in power can be explained exclusively by economic causes. He points out that status groups are primarily communities based on a common way of life and a common set of values, but adds: “For all practical purposes, stratification by status goes hand in hand with a monopolization of ideal and material goods or opportunities, in a manner we have come to know as typical.” Classes may function as status groups, but they do not necessarily do so.

15I have serious reservations concerning Max Weber’s, and therefore Károly Polányi’s, conceptualization. Although it is true that the proportion of redistributive and market elements is different in each society, a pure redistributive or a pure market economy cannot be envisaged even as an ideal type, because in this respect every society is a ‘mixed’ one. Therefore ‘existing socialism’ was also a ‘mixed’ society. However, this does not mean that we must abandon the use of Max Weber’s concepts—or those of Marx either.

16The self-regulating market (the mechanism of demand–supply–price) did not operate—or, if it did, played only a weak part—in the economy of ‘existing socialism.’ Nevertheless, there was a market economy, although in different degrees, in the different countries, one reason being that an increasing number of market elements entered the behavior of economic units as the conditions of the period unfolded (Gábor, 1981; Szalai, 1989b).

“The behavior of economic units shows a market element, or elements, when the economic organization manifests one or part of the following modes of behavior: it flexibly adjusts to conditions of demand and supply; it acts in the same way when it is autonomously interpreting the indirect expectations of the party and state bureaucracy; it strives to assert its own economical considerations in the course of adjustment; in managing the means of production it is guided by considerations of adjustment to market conditions and of economical operation; in shaping its external relations it is guided by similar considerations.” (Szalai, 1989b).

17The position of those in power is explained partly by political and partly by economic factors. As mentioned before, the ruling status group was originally and basically a political phenomenon. After the Stalinist phase, however, in order to stabilize its power, it was obliged to extend the authority of the technocracy and to create a stratum of big-company managers, who, having been puppets, now came to life. The technocracy and the managers of big companies acquired significant economic power, which primarily meant that they could endanger the stability of the ruling status group by holding back their output. Therefore the relationship between the ruling status group, the technocracy, and the stratum of big-company managers was a dual one: in so far as it was in their common interest to preserve their joint power position they depended on each other, but behind this united front there was an ongoing struggle for the extension of the power of one party to the detriment of another.

18It is time, however, to put the question: who constituted the ruling status group, that is, the top party leadership? It was the members of the Political Committee and the party bureaucracy directly serving them. It was they in whom, at least formally, the teleological functions were centralized. The Central Committee was the forum of interest conciliation between the ruling status group, the technocracy, and the managers of big companies, although in a general sense all the institutions of the party and state bureaucracy had the same role. In addition to the conciliation of interests, the continuous changes of place and circulation of cadres also occurred in these institutions (Csanádi, 1987). As a result of these movements, a refined network of contacts evolved among those in power, with their way of life and values converging. A most important feature of their common ethos was the sense of privilege described as follows by Tamás Bauer (1982):

“The mechanism of the command economy had created an elite of economic management forged from former ‘professional revolutionaries,’ technicians, ‘planning bureaucrats,’ old and new ‘captains of industry’ (including worker-managers). This elite, in its totality rather than its parts, had become the agent of ‘rational redistribution.’ The stratum as a whole had evolved a specific messianic consciousness of being the transformers of the economy and society (into something professional), which was reflected in the fact that it was they who made all the economic decisions, free of any social control, either on the part of political democracy, or on that of the market mechanism.”

19Based on the above, I consider the owners of power in ‘existing socialism,’ in Max Weber’s terms, as a status group with some traits of a class, and will call them the status group in power. It was a status group by virtue of intra-group relations and because its power originally was not of an economic nature, but it possessed class features because its power was becoming increasingly economic, as was tested in the market, albeit at a low level. The status group in power had interests that were definitely separate from those of the society, and it was able to assert those interests.

20The next question is that of ownership: can the category of ownership be applied at all when describing the power relations of ‘existing socialism’? If one sets out from the economic and sociological concept of ownership, the essence of which is the right of disposal (Sárközy, 1982), then the answer is undoubtedly yes: according to every relevant piece of empirical research, it was primarily the status group in power that had the right of disposal over anything called social or state property. In addition it held not only the rights of disposal, but, at least in certain periods, also the rights of operation (down to the minutest day-to-day decisions), as well as receiving a far greater than average share of the profits of the so-called social or state property (Bence–Kis, 1983; Szalai 1989b; Fehér–Heller–Márkus, 1991). Although the members of the status group in power could not bequeath any ownership rights directly to their descendants, it can be stated, with the concepts of Bourdieu (1983) in mind, that they could transfer much greater than average cultural and social capital (or more exactly, the ability to acquire it) to their children, who, in their turn would be able to convert it even into economic capital. (More about this later.)

21Therefore the power structure showed class traits not only in the Weberian, but also in the Marxian sense: the status group in power collectively possessed almost all the ownership rights. As this ownership was a diffuse and momentary one, it provoked constant struggles, the aim of which was the acquisition of as many rights as possible and the avoidance and shifting of as much responsibility as possible (Szalai, 1989b, 1991, 2001). Ferenc Fehér – Ágnes Heller – György Márkus (1991) hold a similar view: “We have characterized the basic economic condition of Soviet-type societies as one in which the apparatus of power is in corporate possession of the objective means of social production, from which labor has not been totally separated.”

22The last half sentence quoted leads us to the concrete relationship between power and society, but by way of introduction I must make a slight detour.

23On the one hand, I must explain why I define the power structure as merely a conglomerate with class traits and not as a class. I do so above all because that part of the society which was outside its power structure—in relation to certain factors to be presented shortly—was not organized into a class, and there is no society with one class only. In the post-Stalinist period no class struggle in the Marxian sense was in progress within ‘existing socialism’ (with the exception of Poland), whereas one of the essential points of Marxian class theory, which I regard as the most relevant, is that the classes (sooner or later) ‘acquire’ their existence and form in their conflicts and struggles. (This essentially derives from Marx’s assumption that the class struggle is the most decisive engine of incessant societal development. I have some problems with this assumption and I shall come back to it.)

24On the other hand, I have to reflect on the theses of György Bencze – János Kis and Ferenc Fehér – Ágnes Heller – György Márkus concerning ownership relations. Their shared view is that the power conglomerate of ‘existing socialism’ operated the means of production on the basis of motivations and criteria that were totally different from those of individual capitalists working in the capitalist system, and the relationship of that conglomerate to the means of production was determined by the logic of politics and power, and not by that of profitable production. In other words, here the motivation of economic decisions was the stabilization and extension of political power and not the desire to ensure and enhance efficiency measured by profit. György Bencze and János Kis draw the conclusion that the existing power conglomerate was not the owner of the means of production, and Ferenc Fehér – Ágnes Heller – György Márkus, speaking about the ownership position of the conglomerate, stress vigorously the difference between it and capitalist ownership.

25I, for my part, feel that the difference between the ownership relations of ‘existing socialism’ and capitalism are far less marked. The power conglomerate, particularly in the Stalinist period of ‘existing socialism,’ actually exercised a “dictatorship of modernization” (Iván Berend T.), in which it was obliged for a long time to dispense with the inclusion of short-term market signals, short-term efficiency and profitability in economic decisions. Based on Gerschenkron’s (1984) theory, it can be argued that semi-feudal conditions, economic backwardness, and the resultant need to catch up entailed the emergence of a strong central power here as in other societies with similar conditions. (This is the point of view of functionalism, as opposed to the approach of conflict theory applied by me so far.) In addition to hard power considerations, there was a decisive (and real) demand to establish an industrial society, which, requiring the radical breaking-up of the old societal and economic structure and the building of a brand new one, almost totally excluded any considerations of efficiency of a market type suited for managing a more balanced and shorter-term resource allocation. More exactly: considerations deriving from the need for modernization became the efficiency criteria of the proprietorial decisions of the power conglomerate—with the emphasis on ‘proprietorial.’ What may be their results in the long run—how ‘effective’ they may prove in a historical perspective—is to be answered by this book as a whole.

26The dividing line between ‘existing socialism’ and capitalism was also made less sharp, as described earlier, by the way the managers of big companies during the post-Stalinist period of ‘existing socialism’ became part of the power, so that, counter to popular understanding, the power was not only a political one, but was increasingly based on the economy and acquired an ‘economic nature.’ This cannot be separated from the fact that the crisis of the economy—particularly in the post-Stalinist period, when economic expansion met efficiency barriers of a market type—forced the technocrats of the party state or state party to incorporate more and more efficiency criteria into the decision-making mechanisms of redistribution. A good example is provided by the fact that when the fifth five-year plan was drawn up in Hungary in the mid-1970s, in addition to the natural ‘supply tasks,’ including ‘socialist’ exports, the efficiency and ‘profitability’ of exports to the West played an outstanding role in the bargaining process between the ‘governing organizations’ and the managers of big companies—in other words, this consideration was an important element of state redistribution already at that time, and its significance has continued to grow since (Szalai, 1989b). In parallel to this process, the economic reforms which created increasing space for the market elements, presented earlier, also became inevitable (Bauer, 1982).

27To conclude: in the post-Stalinist period the status group in power, with significant differences between different countries, was beginning increasingly to resemble capitalist private owners. I may add that this applies not only to its decisions, but also to its values and way of life.

© Central European University Press, 2005

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