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Vol 3, No 1
8 January 2001
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Social Costs of Transformation Social Costs of Transformation in Post-Socialist Countries:
The cases of Poland, the Czech Republic and Hungary

Jan Adam
St Martin's Press, 2000
ISBN 0312221606

Steven Saxonberg

Jan Adam's book, Social Costs of Transformation in Post-Socialist Countries: The Cases of Poland, the Czech Republic and Hungary, deals with an extremely important issue: the effects of the economic transformation on living standards. To paraphrase E F Schumacher, Adam wants to analyze the transformation "as if people really mattered."

Only the last part of the book addresses this issue, however. The first two parts of the book consist of an introduction and a very brief discussion of economic policies in Hungary, Poland and the Czech Republic. Here, Adam examines such issues as privatization policies, inflation, corruption, budget deficits and agricultural policies.

Finding fault with market liberalism

Perhaps because the book is a collection of different subjects, Adam does not try to develop a coherent theoretical argument. Nevertheless, it is clear that he is critical of the market-liberal transformation strategy which has dominated in the region. His criticism becomes most apparent in the concluding chapter, in which he insists that the Central European governments privatized too quickly, before making the necessary institutional arrangements to enable the privatization process to run smoothly.

To make matters worse, by selling off state firms so quickly, the governments did not receive nearly as much money as they could have. The lack of institutional arrangements for overseeing the stock market also meant that the privatization process was marred by fraud and that the new managers of private enterprises had little incentive to behave more efficiently.

In addition, according to Adam, the governments were too nonchalant about unemployment. Rather than accepting it as something inevitable, the governments should have considered its psychological costs as well as the political costs. In his words, "Without [employment the individual] is deprived of a great proportion of his or her democratic rights. An unemployed person is not a fully-fledged citizen." (p 176)

Adam also questions the conventional wisdom that social programs had to be cut. He argues that the Central European countries could have afforded to spend much more on social programs if they had pursued policies which would have kept unemployment to a minimum. Instead, money that could have gone to social programs mostly went toward unemployment policies. In his conclusion, Adam questions the necessity of privatizing portions of pension funds.

Unfortunately, Adam does not devote enough space to developing his ideas. His criticisms of the pension system and the lack of institutional oversight of the privatization process come mostly in the conclusion, where he should be giving a summary of the main arguments developed earlier in the book. Even the above citation about unemployment and citizenship illustrates this dilemma: while it is interesting that an economist examines the non-economic costs of economic issues, he does not fully explain his ideas. Why is an unemployed person "not a fully-fledged citizen"? The reader is left guessing.

Alternative approaches

The book would have been a much more exciting work if it had become a systematic critique of market-liberal transformation policies. It would have been especially fruitful if Adam had either provided an alternative model for transformation policies or if he had provided an alternative theoretical approach for studying the transformation.

For example, he could have questioned neo-classical economic theory and suggested an institutional approach, or he could have followed industrial sociologist David Stark in suggesting the use of evolutionary economics as an alternative approach to studying post-Communist economic policies.

Alternatively, he could have emphasized the psychological elements of the costs of the transformation and thus challenged neo-classical economic theory at a more fundamental level. Instead of concentrating on theory, however, Adam provides a collection of mostly empirical chapters that do not hold together thematically or theoretically.

Although Adam has some interesting insights, he devotes so little space to expounding on them that his paragraphs quite often only consist of a single sentence. Consequently, the book is more suitable as a reference book rather than a textbook or a social scientific treatise on the social costs of the transformation period.

In the introduction, the author makes it clear that not enough space was available in the book for him to develop all the issues he would have liked to address. Given these space constraints, it would have been preferable to eliminate part II, which concentrates on general economic policies, and devote the entire book to the main issue: social costs.

Another problem with the text is the abundance of poorly constructed sentences. A lack of solid proofreading appears in such sentences as: "Almost 95 of adults claimed privatization shares" (p 78). Adam's clear knowledge of the three countries (he is one of the few social scientists who can read texts in all three languages: Czech, Hungarian and Polish) does not prevent him from making some equally embarrassing factual errors, such as repeating several times that Lech Wałęsa lost the presidential elections in 1996, when the elections actually took place in 1995

Adam also contradicts himself at times. For example, he notes that in Poland and the Czech Republic citizens had to pay fees (though low ones) for purchasing privatization vouchers. Then he goes on to call them "free" a few sentences later.

Necessity and absolute truths

An even more annoying stylistic problem is that the author often writes normative or potentially controversial statements without backing them up. One of his favorite terms is "necessary," which he repeats throughout the book without contemplating the possibility that somebody might indeed have good reasons for going against "necessity." For example: "It is also necessary to agree with Kornai that budget cutting should not be at the expense of output" (p 61, my italics). This combination of purporting to know an absolute truth and the lack of arguments to back up his statements gives the reader the impression that Adam is playing the role of a god who can swiftly pass judgement on other social scientists.

Most of Adam's godlike judgements come from a social liberal or social democratic view; however, that does not stop him from repeating one of the most common clichés of our neo-liberal era: "It is believed, and rightly so, that in a system where the state is the only owner of the means of production, as it was in the socialist system, and thus more or less the sole employer, democratic institutions can only be a formality." (p 70, my italics)

Again, Adam is so certain about the existence of absolute truths in the social sciences that he does not bother to provide any evidence, nor does he take up any possible arguments to the contrary. What about the fact, for example, that surveys taken in the post-Communist countries have not shown any correlation between support for democracy and support for the market?

Planned economies and democracy

Adam could argue that the fact that no centrally planned economies have so far been democratic provides an absolute truth, but, according to this logic, before the American Revolution it was an absolute truth that representative democracy was impossible for a large nation state, just as it was an absolute truth before 1948 that Jews would never be able to create an Israeli state, and so on.

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Since the writings of Karl Popper—not to mention the post-modernist movement—it is truly surprising that an author can make such strong statements. Isn't it also possible that the reason why planned economies were not democratic is that they were never introduced by democratic regimes? If the regimes that introduced a certain type of economic system were already totalitarian or authoritarian, then how can we be certain that planned economies automatically exclude the possibility of democratic governance?

Furthermore, I am not aware of any evidence that democratic governments—such as the Dutch and French in the Keynesian post-war era—which introduced elements of economic planning became any less democratic than the more laissez-faire American governments. I am not pleading for a planned economy, since I am doubtful that such an economic system would provide good economic results, but that is different from claiming that we can be absolutely certain that such an economy would make democratic government possible.

Social policy

The chapter on social policy is among the best in the book. Adam has more facts and allows greater room for extrapolation. However, he misses some important points, such as the connection between cutbacks in family policy and the rapid drop in fertility rates.

Another important issue neglected in the book is the gender aspect of the Polish pension reforms. According to the proposal that passed, women will be allowed to retire at earlier ages than men, which also means that they will receive lower pensions. At the time, this was a hot topic, and many women's groups and feminist scholars criticized the proposal.

Adam is at his best in the concluding chapter. This is where he really develops an original critique of certain policies, such as the pension reforms. So why does he wait so long before showing his analytical powers? Here, as throughout the book, he questions many market-liberal dogmas and argues for bringing in psychological costs when discussing the effects of economic policies. Unfortunately, the conclusion is the only chapter in which he devotes enough space to clearly develop his best ideas.

The last chapter leaves the reader with the disappointing feeling that with better editing, the entire book could have reached the same analytical level and made a real contribution to the discussions on post-Communist socioeconomic policy.

Steven Saxonberg, 8 January 2001

Moving on:


Ivana Gogova

Bernhard Seliger
Ten Years After

Mel Huang
Lithuania Fumbles

Sam Vaknin
Dirty Diplomats

Gusztáv Kosztolányi
Caring for Your Own

Slavko Živanov
A Lesson in Democracy

Gerhard Jochem
Paying for the Past

CzTV Crisis:
James Partridge
Getting Ahead in TV

Jan Čulík
Taking Them to
the Streets

Robert M Kokta
More of the Same?

Andrew Stroehlein
A Revolution in Television

Jan Čulík
Dead Air

Jana Dědečková

Miloš Zeman

Steven Saxonberg
Social Costs of Transformation

Henryk Grynberg:
Christina Manetti
Z ksiengi rodzaju

Christina Manetti

Brian J Požun
Shedding the Balkan Skin

Martin D Brown
Czech Historical Amnesia

Dejan Anastasijević (ed)
Out of Time

Gusztáv Kosztolányi
Hungarian Oil Scandal

Sam Vaknin
After the Rain

Press Reviews:
Andrea Mrozek
Who's the Boss?

Oliver Craske
Zoran and Göran


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