Structural reasons of learning from and surpassing the Hungarian reform model in China Dr. Maria Csanádi Institute of Economics Hungarian Academy of Sciences

Sporadic comments from yesterday Divergence of transformations in post-socialist countries Mistaken top reformist leadership causing the dissolution of the system Gorbachev making a political mistake Collusion of western and dissident forces Party-to party relations, should be separated from state-to state relations System change is an issue of political decison if the system is not suitable Is China developing a capitalist system, or is a developing socialist system M. Csanádi 2

Transitologist discussions Origin: should they be intoduced from above or should the spread from below Speed: Should they be introduced gradually or simultaneously as a shock-therapy Sequence: should economic or political reforms come first? Political conditions: are reforms more efficient if introduced in an authoritarian or in a democratic political regime M. Csanádi 3

4 Theoretical questions Can these reforms be put on common grounds no matter which party-states we compare? Are these reforms indeed alternatives? Do the kind and sequence and timing of reforms depend solely on strategic choice? If yes, than why did the EE countries choose the “wrong alternative”? To what extent and why Hungarian style reforms could be implemented in China from mid 1980s? What was the reason why Chinese reforms deviated from the Hungarian from the early 1990s? In what way did this cause the differences in the transformation process?

M. Csanádi 5 Institutional instead of historical approach IPS model explains the structure and dynamics of operation and transformation of party-states in general, Points to the structural background of their different operation and transformation Answers to the above theoretical an strategic questions

Structural background of self- similarities Case-studies in Hungary over the decision-making process – dependency and interest promotion among party-state and economic decision-makers Power network with different bargaining capacities of participating actors Self-similarities (time, space, aggregation)  Main elements  Main connecting and operating principles  How does it reproduce itself  What are the main traps of self-reproduction leading to transformation M. Csanádi 6

The simplified network Shortcuts missing

Structural background of differences (time, space, aggregation) Different dependencies within the network within and accross party and state hierarchies Different administrative levels of resource extraction and distribution Different resource attracting and resisting capacities to intervention of actors (level of integration into the network) Bring about differences in the distribution of power of the network: Different instruments of resource extraction and distribution (forced extraction, reforms within the network reforms outside the network) Pattern-dependent ways of operation and paths of transformation M. Csanádi 8

System transformation The party-state network is retreating as a social system from monopolized sub-spheres, and The sub-spheres of a new social system are emerging Retreating party-state network Emerging new system

Differences among patterns in transformation Transformation is pattern-dependent  different sequence  different speed  different conditions the political conditions of economic transformation the economic conditions of political transformation

M. Csanádi 11 Transformation of self-exploiting pattern (e.g. Romania): Speed- Abrupt collapse of the net attached to all subfields Sequence - Overlapping transformatio ns Conditions – uncertain political outcome longlasting and deep economic crisis

M. Csanádi 12 Transformation of self-disintegrating pattern Retreat of the net Emergent field first Sequence - Political transformation is first Speed – retreat and emergence is gradual Conditions - political transformation under economic crisis economic transformation under democratic regime

Retreat of the net Emergent field Sequence - economic transformation is first Speed - retreat and emergence is gradual Conditions – economic transformation under authoritarian regime, macroeconomic growth Nature of system transformation in China (the self-withdrawing pattern)

Theoretical conclusion Different patterns should not be confunded Not all patterns implement reforms Speed, origin, sequence, political conditions of reform and transformation is not an issue of choice  Patterns determine the main character of reforms: either within the network, or external to it.  Patterns determine the sequence speed and conditions of transformation  Neither pattern-conforming reforms, nor pattern- conforming transformations are alternative choices They are instead characteristic of structural (pattern) constraints. Room for manouvere of economic policy is within these constraints M. Csanádi 14

Conclusions on Chinese and Hungarian reforms What China learned from Hungary was the gradual decentralizing reforms within the network, however it proved to be insufficient Deviation of the Chinese system occurred due to pattern constraints: the need of further sources through reforms leaping out of the network Escalating reforms external to the network were politically rational determined macroeconomic growth and economic transformation first and thereby political stability in China Keeping, moreover escalating reforms within the net in Hungary was also due to pattern constraints Escalating decentralizing reforms and resource distribution within the net was politically rational, but brought about recession and political delegitimation – and thereby political transformation first and economic transformation second Pattern constraints did not allow transformation by learning M. Csanádi 15

Reflection to sporadic issues of yesterday Patterns explain the divergence of transformations Pattern-conforming transformation rather than mistaken top strategies Gorbachev’s mistake: not considering pattern constriants, trying to counter the pattern sequence Collusion of western and dissident forces: made a lot of mistakes confunding patterns Party-and state relations cannot be separated in such an intertwined, politically monopolized network System change is not an issue of political decison if the system is not suitable China is a transforming communist system with pattern characteristics (economic transformation first) M. Csanádi 16