Manual The Political Economy of Dual Transformations: Market Reform and Democratization in Hungary

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The regime's commitment against unemployment was a product of the politics of De-Stalinization, not Stalinism. Hungarian Employment Policy and the Politics of Joblessness The fourth chapter is also organized around a puzzling aspect of Hungarian politics. During the s and s unemployment was regarded as unthinkable, its abolition touted as one of socialism's defining achievements and proof of superiority over Western capitalism. Industrial groups and unions were able to block radical market reform in the late s largely by evoking fears of unemployment. Yet a historical review of this period reveals numerous policy initiatives to lay-off workers and public discussion of some groups' great difficulty finding employment.

I ask why some kinds of dismissals were politically unproblematic, while other kinds of lay-offs were treated with the greatest of care or regarded as politically taboo. Secondly, I ask why the political salience of these categories changed: in particular why in the mids a full-fledged mandatory contribution unemployment insurance system was prepared and the Hungarian press and public officials began for the first time to run articles and give speeches which regularly referred to "unemployment" in Hungary.

While the number of officially unemployed were small, they nonetheless represented a quantum leap in Hungarian unemployment politics. Through a detailed examination of the Communist-controlled press, as well as Party policies, memorandum and internal reports, I show how the categories of socially-endorsed and -discouraged joblessness were changed over time.

Definitions of unemployment reflected dominant views about what employment should be and what strategies are best pursuant of those goals.

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The regime's repeatedly embrace of new unemployment concepts resolved ongoing tensions between economic pressures and inherited political commitments. The political constraint against unemployment was changed by policies and political rhetoric which altered the meaning of employment. For instance, when the Hungarian Communist Party decided to reduce the labor supply in the s, unemployment was defined in contrast to an orderly back and forth between households and workplaces.

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The joblessness of less core workers such as young women or the unskilled was treated as part of a desirable two-way flow back to the household sector. Other dismissals were treated as necessary discipline for individual deviants who shirked work or drifted in search of ever higher wages. When policies later emphasized active labor market institutions such as training, then unemployment was conceptually defined as against more proper and productive societal coordination of displaced workers that did not reduce their incomes.

By this logic core workers displaced by industrial restructuring were not unemployed because they were guaranteed the same kind of work in other enterprises or later, other kinds of work at their old wages. When the number of job-seekers increased while shortages simultaneously increased for other types of workers, then unemployment was defined against situations where the total number of job-seekers exceeded job-vacancies.

These shifts were more than mere exculpatory posturing since each change was also reflected in administrative practice. Unemployment effectively did not exist because those without jobs were recognized under other institutional categories: core workers were relocated or retrained; less core workers were eased back into the household through new social policies; and individuals who had left acceptable work and had no legitimate excuse for not working were treated as deviants outside of state commitments. Thus, there is more truth than might first appear in the refrain of one leading Hungarian economist in that full employment existed "so long as society does not have to take care of the unemployed as unemployed.

In the mids core workers were laid-off in a series of well-documented dismissals. Unemployment had became more politically acceptable because policies during the late s and early s had diluted the political importance of this core employment. New laws encouraged secondary and informal jobs. The new Five-year plan relied heavily on production from these previously unrecognized activities.

The political economy of dual transformations : market reform and democratization in Hungary

Statistical categories were even altered to include these forms of employment and reflect their importance. And the Labor and Wage Office revised the definition of its own commitment from one of providing "employment" to one of ensuring "income opportunities. Chapter five examines how the acceleration of these trends explains the surprising disappearance of unemployment as a political issue in post-communist politics.

Although in Hungary the taboo against unemployment was broken during communism, this can not fully explain how unemployment ceased to be a major political issue in the face of rapidly rising unemployment Ashwin The jobless rate was a mere 0. All six parties which entered Parliament in had explicitly asserted a commitment to full-employment and opinion surveys had found Hungarians highly intolerant of unemployment Miller, White et al.

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When unemployment shot up to almost fourteen percent only thirteen months later there was surprisingly little popular outcry or political attention. Despite dire warnings that unemployment would be a major issue of post-Communist political cleavage Evans ; Przeworski , the sudden onset of mass unemployment has not been directly associated with popular outrage or the focus of opposition.

Bartlett notes that in Hungary, "far from intensifying political opposition to economic transition, rising unemployment diminished it Using coded data collected by Ekiert and Kubrik on seven hundred protest events mentioned in major newspapers between to , there are only eight events in which the unemployed are identifiably involved and very few in which unemployment or lay-offs were mentioned as grievances.

Again we can best understand changes in the political valence of unemployment through shifts in the political meaning of employment. In the final years of communism the government gradually redefined its commitment for employment provision to merely mean the availability of income opportunities. For instance, disability pensions were increasingly used as income supplements to mitigate the effects of lay-offs.

I make use of various years of county-level data from local labor offices on job-seeker to vacancy ratios, which I compare to county-level social security data on disability claims.

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This data show how the disability system under the final years of communism and initial years of post-communism was a kind of surrogate unemployment relief program in those places where jobs were most scarce. Not only did the number of pensions rapidly increase with lay-offs, the distribution of disability claims among counties became increasingly sensitive to labor surpluses. After the importance of primary jobs was further eroded by falling wages, especially in the state sector.

Secondary and informal jobs were further encouraged by rising taxes, the removal of old controls on commercial activity, and policies oriented towards entrepreneurship. It did not matter that the unemployed were no more likely to participate in these informal or entrepreneurial jobs; what mattered is that policy commitments and debates came to presume that most Hungarians held a diverse portfolio of income sources and a lack of a primary job could therefore be acceptable so long as alternative income sources were made available.

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Already by the mids the party was discussing solutions to employment problems in terms of providing greater opportunities for entrepreneurship. Post-communist panel surveys have shown that the independent effect of unemployment as a predictor of poverty became weak in all East European countries, especially in countries where multiple job-holding is common such as Hungary Sik We can see in Hungarian Parliamentary debates, public proclamations and the minutes from tripartite bargaining that the social dangers of unemployment were diffused by reframing employment goals in terms of the income opportunities of entrepreneurship.

This focus is evident in union-supported policies which made it easy to lay-off workers but required high severance packages and encouraged state relief to take the form of entrepreneurial starter loans. My argument is bolstered by those exceptional cases which prove the rule: unemployment was a high-profile and politically contentious issue only in industrial factory towns.

In such places jobs had been relatively high-paying and workers relied less on supplementary work arrangements. Plant closures therefore left workers more starkly without other opportunities, and made the town a poor place for entrepreneurship. As the Labor Minister told me in , "we need to distinguish real unemployment like that in these places, from other kinds.

Political Economy of Dual Transformations Market Reform and Democratization in Hungary

Chapter six explores other examples where governments have reinvented the concept of unemployment. It briefly reviews the experience of turn-of-the-century Britain and Ghent, Bolshevik Russia, mid-century America, and contemporary Holland. In all these cases I show how the government redefined unemployment as part of an attempt to reshape the prevailing character of employment and take credit or escape blame for these accomplishments.

In Britain the writings of Beveridge and government commissions at the turn of the century show that social policies recognizing the "unemployed" were initially aimed at eradicating the habits of casual day laborers who were viewed as abusing public aid in order to avoid steady work. The original Soviet "eradication of unemployment" did not occur and was not proclaimed as a primary aim of socialism until when it was an almost accidental by-product of the orgnabor system to combat casual labor by more directly placing workers into jobs.

The orgnabor system was never comprehensively implemented but it established a system in which there was no room for unemployment as the prototypical socialist means for allocating labor. In the "Ghent system" which sprung up through much of continental Europe only union members could count as unemployed. This was the result of a political trade-off in which municipal governments wary of revolutionary discontent gave trade unions full responsibility for administering subsidized job relief.

In America the now ubiquitous labor force concept for examining unemployment was originally created as a way to sort out the core workers returning from World War II from the many women, elderly and others who had entered formal employment as part of the exceptional circumstances of war-time mobilization.

The government also felt confident about their new Keynesian tools of demand management and desired indicators of their anticipated proficiency. Finally, I point to recent changes in Dutch unemployment policies. Although the statistical measurement of unemployment in Holland has not undergone revision, the jobless rate has been phased out as a trigger for macroeconomic policy and replaced by an index of the working-age population's overall participation rate in the labor force. The use of these dependency ratios in Holland signaled the government's embrace of new goals for part-time work, a policy shift which took credit for trends that were already under way.

Holland represents another example of a politically savvy government changing the political meaning of unemployment by shifting the prototype of desired employment. In chapter seven the theory developed in the second chapter is shown to illuminate cross-national comparisons during a single time period. Conceiving of unemployment politics in terms of employment differences helps explain why unemployment is more important in some European countries than others. I use Eurobarometer polling data to construct a rough proxy for the political salience of unemployment.

Rather than attempt to systematically compare the various legacies of previous employment politics in all twelve countries, the chapter focuses only on how political evaluations are influenced by prevailing employment norms. The data indicate that the political importance of unemployment depends more on the characteristics of employment than on the duration of joblessness or the generosity of benefits. High unemployment more readily becomes acceptable in places like Spain and Greece as opposed to countries such as Germany and France because employment less closely resembles the industrial prototype against which unemployment was originally conceived and constructed.

That is, the political salience of unemployment is greater when the employed are more likely to be full-time industrial breadwinners. Unemployment is less politically important where jobs-holders are more commonly self-employed, outside of industry, and fail to secure a livelihood. I speculate that it will be increasingly important to see unemployment as politically constructed because the industrial forms of employment on which unemployment was patterned are rapidly receding. Post-industrialism will not simply impose its technological imperatives on the superstructure of unemployment politics.

Future concepts of unemployment will be open to divergent possibilities. They will depend, for instance, on whether in the future institutionalized recognition of employment will be expanded to include the care of children and the elderly, or community service and traineeships; or alternately, whether all employees will be viewed as self-employed contractors. According to the theory I have developed, the traditional social democratic protection of declining industries and employment standards may be politically self-defeating.