TheMarketForIdeas

The process of institutional transformation from the socialist, command economy to the capitalist, market economy can be understood theoretically and historically, as a priority, like a process of intellectual transformation. Romania in the 1990s, perhaps to a greater extent than any other country in the ex-communist bloc[1], was the theatre of a transition at the level of politico-economic institutions which was little-announced and stated by a convergent, consensual idealistic transition. The reasons would implacably be about both the awareness and the consciousness of the people of that time. Evolutions were about the game of meanings and interests[2]. The shift from the Marxist-Leninist economic way of thinking and taking action to a new perspective (in which the old “dialectical contradictions” were disagreed and denounced) was to be a delicate exercise for intellectual elites throughout the ex-communist Europe, with visible consequences on political behaviours, unequally oriented towards reform within and between states, as well as on overall economic performances[3]. The situation was complicated by the fact that the Western economic science did not offer clear prescriptions either. And there were also active ideological traditional fronts.

The Romanian market of ideas about the transition to a market economy and political democracy had a fragile beginning. It was being built on the remains of isolation, through dogmatic lenses and documentary deficiencies, from both global epistemic communities and the reformist factions in the socialist space. As its continuation, there was the demoni(ti)zation of capitalism (and implicitly of the market) and the association of (economic and political) liberalism with pre-communist national history episodes that were tendentiously presented and truncated, elements that made the transition itself become unstable, even unclear. Central and East European transformations followed the “neoliberal revolution”[4] that began in the 1980s in the Anglo-Saxon world; at this time, the Western left, bluntly repudiating Soviet inspirational economic models, exploited the fixed idea of the fallible nature of free markets, apostolizing varied degrees of interventionism in the name of modern and anti-neocolonialism. Ideas such as deregulation, decentralization, liberalization and privatization – the essence of the post-socialist system transformation – were waiting for their legitimacy and legalization in a still unsettled climate of ideas. 

Diasporic unlockings

The economic schools of thought that were engaged in a dialogue about the societal organizational “system” mostly conducive to “peace and prosperity” – comparing ideal or real institutional configurations, intelligence and incentive architectures – were also concerned with the analytical “systema” supporting their precepts, predictions and prescriptions. This bivalence mainly belonged to the leaders. Obviously, the capitalist world would be more “epistemic” than the more “dogmatic”, socialist one. In the post-war world of an intellectual “cold peace” in economic science (with neoclassicism that seemed to be willing to reconcile both the “plan” and the “market”, advising them alike), overlapping with the geopolitical “cold war”, the Romanian economic epistemic community was accumulating ruptures: one, of the economists in the country from the capitalist foreign countries; the other, of the Romanian diaspora in the “free world” from socialist origins. At that time, the walls became bridges late and sporadically.

Still moving are the personal and professional stories of the great Romanian economists in the post-war diaspora, settled in the Euro-American capitalist world, whose contribution to the understanding of economic systems was undergoing a threefold loyalty: towards the canons of science, towards the adoption societies, as well as towards the historically overshadowed origin, but not forgotten by them. Nicholas Georgescu-Roegen and Anghel Rugină, especially, but also Nicholas Spulber, Tiberiu Schatteles or Florin Aftalion, to name just a few economists from the rich Romanian cultural diaspora, distinguished themselves by interrogating both the institutional foundations of the economy, as well as the meta-theoretical ones of economics. Considered iconic or iconoclasts, according to the exegetes’ understanding or tastes, diaspora economists were candidates for the pillars of the future Romanian free market of economic ideas.

Nicholas Georgescu-Roegen is equally well-known and unrecognized in the economists’ world community for the initiative of building a paradigm of “extraordinary science” (in the Kuhnian sense) as a reaction to the neoclassical “science” and its “anomalies” (in the Lakatosian sense), whose mechanistic and arithmomorphic reductionism he denounced. Sometime before finalizing the revolutionary book The Entropy Law (1971), the scholar had published a condensed and effective article in the reputed magazine Econometrica, entitled “Mathematical Proofs of the Breakdown of Capitalism” (1960). On the one hand, the text concerned the residual Marxism in the global academic environment, whose postulates on the “inadequacy of the accumulation process in the capitalist system” (its central contradiction and the cause of its inevitable collapse) sought to survive in its combination with mathematics. On the other hand, he targeted mathematization itself.

The Romanian scholar not only identified Bauer and Sweezey’s “translation” mistakes of the Marxist problem into mathematical language (which offered the correct solution, but beside the point), thus giving a surviving idea chance to the capitalist economy, but sent a serious message to the economists exaggerating the expressiveness of mathematics regarding its ability to capture the social: “... Ervin Schrödinger expressed the thought that the difficulty of analyzing the process of life does not reside in the complication of mathematics, but in the fact that the process is too complicated for mathematics. This remark applies admirably also to the problem of the future of capitalism. For capitalism, like all other economic systems that preceded it and that will be produced by the continuous evolution of human society, is a form of life. Some aspects of its functioning lend themselves perfectly to mathematical analysis. Yet, when we come to the problem of its evolution, of its mutation into another form, mathematics proves to be too rigid and hence too simple a tool for handling it. Mathematical proofs of future evolutionary changes in any domain should, therefore, be viewed with skepticism, even if […], they are logically irreproachable” (1960, p. 243).

The work of Anghel Rugină exhibits another obvious methodological-epistemological and normative-applicative bivalence. The professor wanted to cause “the third revolution in economic thinking”, prolonging and overcoming both Marx and Keynes. The way was to be paved by a new methodologic monism, initially linking social sciences, then the latter with natural ones. The American economist of Romanian origin would resonate with the Mitteleuropean and ideologically medial vision on economy, of an ordo-liberal orientation, supporting the principled compromise (so often “compromised” in the political practice) between individual freedom and social equity. In his book American Capitalism at a Crossroads (1976), he made a resounding indictment to the economic policies of three contemporary US presidents. In the post-1989 Romania, his ideas about transition or monetary stability would be perceived as exotic.

The domain of comparative economic systems depicts Nicholas Spulber, a French professor of Romanian origin, established in 1954 in the US, in Bloomington, Indiana (the future fiefdom of the new American institutionalism), as one of the most solid scholars of the last century. A well-known Sovietologist and expert in developmental patterns in the Eastern European socialist camp, Professor Spulber expressed some trenchant insights about the illusions of socialism’s scientificism, and dismissing it from the claim of being a great “system” to the position of a simple “myth”. He criticized the inaccuracy of the Romanian socialist industrialization (the Soviet copy of the Soviet Union, without resource coverage), as well as the inter-war Manoilescian theses about industrial protectionism and productivity (ignoring the historical accumulation of capital and the market absorption). Spulber was a minimal-state supporter and a free-trade advocate, marginalized (marginalizing) attitudes in the local transition.

A remarkable pioneer of the Romanian analytical economy, Tiberiu Schatteles resorted to the mathematical technical language, managing to encrypt and camouflage the documentations and conclusions to the obsolete ideological filters of the communist censorship; an illustrative article is “Critical Observations on an Economic Picture of the Capitalist Economy” (1957). He excelled in mathematical economy after his emigration to Canada, keeping his passion for the economics-philosophy dialogue. Florin Aftalion, a classical liberal and member of the Mont Pèlerin Society, had solid contributions in his French exile, in a no less precise and profound literal-discourse register. The author of an economic critique of the causes of the French Revolution (The French Revolution: An Economic Interpretation, 1990), found in the 17th and 18th century “war economy” of the country, the professor had previously shaken the already sedentary left sensitivities of the French society in Socialisme et économie (1985).

The Romanian economists who worked abroad were connected to both the Methodenstreit and institutional and policy debates. Their intellectual choices reflected both the “free world” worries – which did not lack taboos and servitudes, otherwise human even in the high spheres of science –, as well as their own, looking back towards their native country. One aspect strikes, though, if not frustrates, retrospectively. The limited and late acceptance of their works in the early Romanian transition (critical years, in which public opinion on reforms took shape) replaced the discovery of what capitalism, market economy, liberalism mean with often sterile exercises of inventing the “wheel”. Understanding economic systems (and the intellectual systema they stem from) remains a vital exercise of civic culture. Even the centuries-old history of united Romania alone wholly illustrates the eternal value of this lesson.

[1] Historiographical and sociological deviations concerning the real or fictive “Romanian exceptionalism” are found in the “dialogue” started by Lucian Boia (De ce este România altfel?, Humanitas, 2012) – preceded by his several other works – with the authors from the volume coordinated by Vintilă Mihăilescu (De ce este România astfel? Avatarurile excepționalismului românesc, Polirom, 2017).

[2] For a concise conceptual approach regarding ideologies, institutions and extraction of revenues in dysfunctional capitalism (“crony capitalism”), see Paul Dragoş Aligică and Vlad Tarko (Crony capitalism: rent seeking, institutions and ideology, Kyklos 62 (2), 2014); documented illustrations of the Romanian case in Tom Gallagher’s book (Furtul unei națiuni. România de la comunism încoace, Humanitas, 2004).

[3] A quarter of a century after the beginning of post-socialist system transformations, international economic organizations actively accompanying the process published retrospective studies (International Monetary Fund: 25 years of transition: post-communist Europe and the IMF, 2014; European Commission: 25 years after the fall of the Iron Curtain. The state of integration of East and West in the European Union, 2014; EBRD, 25 years of the EBRD: The people’s view on transition, 2016). An interesting exercise would be to compare ex post (actual) evaluations with ex ante recommendations in order to see the process of the mutual discovery of the phenomena associated with transformations by both counsellors and the counselled ones.

[4] Although the term “neoliberalism” (mainly used pejoratively) insinuates “laissez faire radicalism”, it is, in fact, a diluted form of the nineteenth century “classical liberalism”. It appeared as a reaction to the confiscation by the modern left of the term “liberal”. Other labels for neoliberalism: Economic Rationalism, Monetarism, Thatcherism, Reaganomics, Neoconservatism, Managerialism, Contractualism, Washington Consensus, Market Fundamentalism.