Economics, History and Societies
Introduction
A recent PBS Nova show, ÒThe Great Math Mystery,Ó
discusses why mathematics appears to explain the universe. It notes that
mathematics accurately describes only that portion of the universe that we
choose to study with mathematics, and that much lies beyond; for instance the
dynamics of social systems. This perception is useful both in the natural and
especially the social sciences – where mathematical equilibrium economics
is now the general social model across the globe, against which the specifics
of local histories continually assert themselves.
An economic analysis might ignore history; but social
scientists now realize that the social evolution is Òpath dependent.Ó In other
words, present developments also depend upon a societyÕs history. A practical
person might ask, what are the uses of the generalities of the social sciences
and the specifics of history? When do generalities not glitter and the
specifics not mire? In the following, we use both at the same time, (but at
different levels) and let our readers be the judges of whether the following
analysis is useful, or at least thought provoking.
After the fall of the Berlin Wall in 1989, the political
scientist Francis Fukuyama published, ÒThe End of History (1992).Ó In that
bestselling book, he then argued that history was at an end, not the history of
events, but the history of ideas because liberal democracy, "(replaced)
the relationship of lordship and bondage with universal and equal recognition.
What man had been seeking throughout the course of history – what had
driven the prior Ôstages of historyÕ – was recognition. In the modern
world, he finally found it, and was Ôcompletely satisfied.ÕÓ 1
After the dissolution of the Soviet Union, it seemed
natural to assume that capitalism, spreading throughout the world, would
encourage liberal democracyÕs recognition of people as individuals in their
essential equality. The reason would be, not the abstract operation of some
19th century historical process, but a consistency between the liberal market
and the democratic political systems that finally emerged in England. National
politics and economics would then become mutually reinforcing.
However, events subsequent to 1989 did not always bear
this neat schema out. What determines whether a society adopts liberal
democracy?
An Empirical Demonstration
In 2005, the sociologist William Outhwaite of the
University of Sussex published, ÒSocial Theory and Postcommunism.Ó The first 66
pages of this book deal with the applicability of sociological theory to Eastern Europe
after the fall of Communism; it is more for sociologists. The rest of the book, however, is an encyclopedia of facts and
acute perceptions, describing how the different societies of Eastern Europe
evolved, starting with a laboratory experiment. The Eastern European nations
faced a common condition, the imposition of Soviet military power on their
societies after W.W.II. After its removal in 1991, what happened? What happened
were the specifics of history.
After the dissolution of the Soviet Union, the nations of
Eastern Europe took three main actions in preparation for home rule:
1)
They abolished the centralized
economic planning system that had failed so catastrophically.
2)
Freed prices, (our note: to a
degree).
3)
Privatized their companies, (our
note: to a degree). 2
The key words here are, Òto a degreeÓ. Outhwaite quotes,
Òthe postcommunist transition has to be viewed as basically a state project and
not a market project. Though the market is the ultimate objective of the
transition, the process of getting there is mainly in the stateÕs hands.Ó 3
This therefore means that how this transition might be accomplished was an act
of policy; and therefore conditioned, as the author crucially notes, on Òlocal
peculiarities.Ó
Postcommunist capitalism responds to, Òabsences, whether
of resources, skills, or legitimacy, in the contexts in which it operates.Ó 4
This is the main reason why the globalized market system spreads like kudzu; in
an unregulated form, it is very flexible. (Which argues for some financial
regulation, lest markets get out of control; as they surely did in 2008.)
How each Eastern European society responded to
globalization and the market system depended on:
1)
Prior social networks and Ònetworks that
emerge through institution buildingÉhence, given the importance of the state to
these there will continue to be different national forms of capitalism...Ó 5
2)
Òa path-dependent pattern of emergence
into postcommunism can create a fuzzy institutionalization of markets where
boundaries between state and economy, public and private, are
unclear.ÉDifficulties of creating a democratic culture and constitutional
system (are) exacerbated by lack of decommunization of administrative, police,
and security apparatuses, and enabled communist networks to persist in an
atmosphere of weak regulation." 6
3)
The new social space created,
Òrequires democratic political processes in which Non Governmental Organizations
can operateÉÓ to create public accountability. 7 The author
well describes the necessity of civil
society to democracies. ÒMany theories of democracy, from Locke through
Hegel and Tocqueville, claim that in complex societies relations between
individuals and the state are mediated through a sphere of civic activity and
values. In this literature, civil society constitutes a defense against both
excessive state power and atomized individualism, while the rise of
authoritarianism and totalitarianism is attributed to its absence or
destructionÉÓ 8
ÒThe
denser the networks the more secure are the bridges between civic life and
political association along with institutions of the state. Active, voluntary,
and informal groups and networks make for a more stable democracy and protect
against incursion by the state. The bridges envisaged here are based on
institutional links along with shared moral and civic values of reciprocity. Civil society in this sense has a recursive property; it protects
against state incursion yet strengthens the (liberal democratic) state. Conversely,
the absence of civil society is both an explanation and reinforcement of
authoritarian yet ineffective government.Ó 9
Relevant
to the Mideast, and now even to some extent in the United States, ÒSocial
integration requires that we agree not over substantive matters of identity and
opinion but on the rules through which public debate and conflict will be
conducted (our note)Éit is the disengagement
of political and juridical institutions from the lived bounds of solidarity,
that is a failure of civil society, that promotes new exclusive communities of
trust, such as ethnic nationalism.Ó 10
This
is why transitions from authoritarian regimes, when civil society is not
developed, can be very bloody - going back to the French Revolution of
1789. Perhaps this logic
holds: If democracy ⇒
civil society, then no civil society ⇒ no democracy. The
existence of civil society, or at least an incipient one, is likely a marker
that determines whether liberal democracy is possible.
Outhwaite goes on the detail the role of civic cultures in
several Eastern European societies:
Poland
Of all the countries of Eastern
Europe, Poland had the easiest transition to market capitalism. Unlike other
countries, it endured only two years of GDP decline after the shock of
transition; between 1994-1997 it experienced an average annual GDP growth rate
of 6.3%. 11
The relative ease of this transition was due to the
historical fact that, ÒDespite Soviet repression, the Polish people still
possessed the traditions of the political and economic institutions necessary
for success in an open economy. Furthermore, despite communismÕs failure,
Poland did emerge from the shadow of the USSR with valuable assets: developed
infrastructure (and) an industrially skilled workforceÉThe fact that Poland
already possessed the basic capital needed to compete in a global economy eased
its transition into the free market.Ó 12
A civil society of protest also existed, supported by the
Roman Catholic Church 13 and later led by the Solidarity union that,
Òbypassed and ridiculed, rather than engaged with, the state...Ó 14
which was simply taken over in 1990 when Lech Wałęsa won the
presidential election. The success of the Solidarity movement heralded the
collapse of communism throughout Eastern Europe.
Bulgaria
Bulgaria had a difficult transition to market capitalism.
It endured 6 years of GDP decline; between 1994-1997 it experienced an average GDP
growth of -3.6%. 15
The difficulty of this transition was due to BulgariaÕs
history, Ò(It) was particularly receptive to Soviet hegemony...Russia was
perceived as the liberator of the nation from earlier Turkish rule.Ó 16
As a result, ÒSoviet influence was less resented than elsewhere in the bloc and
the country experienced a ÔGentle RevolutionÕ in 1989.Ó 17 So to
speak; this was actually nomenklatura
privatization, ÒThe other side of its gentleness was a certain degree of
incompletion highly favorable to members of the former elites.ÉThese
are good examples of the development of closed networks as a means of
protecting the local economy against global competition." 18
According to a 3/11 political study by the
Friedrich Ebert Foundation, "The civic sector in today's Bulgaria is strongly
dependent on external funding; it is lacking sufficient internal support."
Russia
The Òshock therapyÓ economic transition under Boris
Yeltsin produced a social chaos that paved the way for the authoritarianism of
Vladimir Putin. Russia endured 7 years of GDP decline; between 1994-1997; it
experienced an average GDP growth of -5.3%. 19
Outhwaite writes, ÒThe implosion of Soviet communism
marked the failure of state socialist civilizationÉGlobal integration through trade,
debt, and televisual communications exacerbated the effects of long-term
systematic and social problems, but they were not the primary causes of the
collapse.ÉUnderlying this was a structural problem that the reforms of the
1980s had attempted to address, namely that the centrally planned system was
incapable of generating domestic innovation or the volume of exports required
to sustain the required level of imports of technologyÉthe system collapsed
largely as a result of unintended consequences of reforms, the intention of
which had been to stabilize the regime. This can again be understood only with
reference to Russian society and history.Ó 20
A 5/14 Foreign
Policy magazine article is titled, ÒPutinÕs Assault on Civil Society
Continues.Ó Russian NGOs are having
trouble, Òit is still very difficult for Russian NGOs to reach broad segments
of the population, who remain mired in a submissive and paternalistic relation
with the state. Second, the NGOs are struggling to cope with deepening levels of
repression against Russians seeking the active exercise of their rights as
citizens.Ó 21
Conclusion
Societies differ; their responses to
the challenges of globalization differ according to their histories, new
developments and leaderships. Societies benefit from gradual transitions to a
market economy. However, as these three examples suggest, a
nation's culture and history determines the thoroughness of the economic
transition possible, at least in the medium-term. Changes have to be meaningful in terms of the past.
We have also emphasized civil
society, rather than income level, as a crucial factor determining whether
liberal democracy is also possible. Liberal democracies need civil society, for government to remain "relevant," to use a Silicon
Valley term. Conversely, civil societies need governments to achieve necessary long-term goals that markets alone cannot address. 22 Civil societies are built upon the social capital of trust and civility.
What happens when societies lack civility? In a 5/27/15 NYT article, Thomas Friedman writes:
"The whole Arab world package, with its artificially straight-line borders, was held together by oil and brute force. In the wreckage, people are falling back on the only identities they think might keep them safe: tribe and sect.
For now, I see only two ways coherent self-government can re-emerge in Libya, Iraq, Yemen and Syria: If an outside power totally ocupies them, snuffs out their sectarian wars, suppresses the extremists and spends the next 50 years trying to get Iraqis, Syrians, Yeminis and Libyans to share power as equal citizens. Even that might not work. Anyway, it's not going to happen. The other is just wait for the fires to burn themselves out....The Lebanese civil war ended after 14 years by reconciliation-through-exhaustion. All sides accepted the principle of 'no victor/no vanquished,' and everyone got a piece of the pie...
We cannot effectively intervene in a region where so few share our goals. For instance, in Iraq and Syria, both Iran and Saudi Arabia have acted as 'arsonists' and 'firefighters.'"
To return to our earlier culinary analogy, the Mideast is like scrambled eggs. Sending in the Marines won't do the job. Maybe a solution is to reestablish in the Mideast a balance of power, that is also constructive. This is preferable to the dangerous chaos that now exists, due to the large-scale democracy experiment in Iraq which went awry.