One of the great mistakes of grand theory in the social sciences has been to neglect the dogged persistence of different forms of capitalism—a mistake made by structural functionalists, modernization theorists, and Marxists, to name just a few examples. For a while, following the collapse of communism and the fall of the Berlin Wall, scholars made the same mistake when envisioning the transformation of socialist political economies. In part this was because the forces of globalization had been unleashed recently, and many believed they would lead to a convergence in how capitalist societies were organized and operated. National differences would be blotted out and, in some cases, people argued that the nation-state itself would wither away as foot loose capital trampled national borders in a frantic effort to seek ever more profitable locations for doing business. Besnik Pula's Globalization Under and After Socialism lays such nonsense to rest. In doing so, his detailed, well-researched, historical and comparative analysis of seven central and east European political economies (Hungary, Poland, Czechoslovakia, Slovenia, Albania, Romania, and Bulgaria) also provides several additional insights.
Pula's empirical argument is complex and comes in stages. In brief, the history of economic policy reform in central and east European socialist countries after the Second World War, combined with the rising tide of economic globalization and especially the availability of foreign direct investment, established political-economic legacies that shaped—but did not wholly determine—the structure of the post-socialist economies after the fall of the Berlin Wall and disintegration of the Soviet Union. By the dawn of the twenty-first century, some countries like Hungary and Slovakia had become “assembly platforms” (4) for transnational corporations (TNC); some like the Czech Republic and Slovenia had become “intermediate producers” (5); and some like Poland, Romania, and Bulgaria were a combination of both. Assembly platforms served as downstream sites for the low-cost, low-skilled assembly of foreign inputs for TNCs. This often involved deskilling the domestic labor force, undermining domestic technological development and innovation, and imposing the TNC's managerial model on the domestic company, which had little decision-making autonomy. Intermediate producers contributed much more value-added to the products being exported than did firms serving as assembly platforms. Domestic firms enjoyed more managerial control, more technological competence, and greater capacities for innovation, and were less a subsidiary appendage to the TNC than a cooperative partner capable of producing on its own for the export market.
According to Pula, two important things were largely responsible for these divergent outcomes. First was what he calls proto-globalization: the gradual decentralization of economic decision making to the enterprise or sector levels, and an opening of socialist economies to international trade, first within the Soviet bloc and then to the west. This provided an opportunity for foreign direct investment (FDI) to seep into the socialist economies and establish through joint ventures all sorts of cooperative ties, cultural familiarity, and technological and managerial exchanges that led to the formation of transnational production chains. These were powerful institutional legacies that helped shape post-socialist economic reforms. Second was policy reform. After 1989, some countries embraced shock therapy—rapid privatization and economic liberalization—to attract as much FDI as they could. Other countries were more cautious and intent on protecting and supporting domestic industries. Crucially, however, countries that had already established denser ties and more transnational organizational capital—that is, more cultural, technical, and organizational familiarity—with TNCs during the proto-globalization era were more likely, all else being equal, to get the most FDI until the turn of the century. Up until then policy mattered but institutional legacies mattered more.
Ironically, countries whose governments pursued inward-looking reforms after 1989, such as privatization emphasizing domestic rather than foreign ownership and state support directed at local firms rather than TNCs, saw more long-run gains from globalization as a result of becoming intermediate producers. In contrast, countries whose governments pursued outward-looking reforms, such as encouraging foreign ownership during privatization, low corporate taxes, and greater economic liberalization of labor and capital markets, saw fewer long-term globalization gains as a result of becoming assembly platforms. Pula shows that by the second decade of the twenty-first century, these were the post-socialist countries that had fallen farthest behind in terms of their economic development. Put differently, over the long haul those pursuing globalization the hardest were the biggest losers because they became too dependent on TNC capital, technology, and skills.
The historical and comparative arguments in this book are very detailed and bolstered by a variety of data tables, graphs, and occasionally regression analyses. The book is thus a dense read, especially if the reader is not already familiar with the cases and the post-war history of the region. Yet there are several lessons that should interest even those social scientists not particularly well-versed in post-socialist transformations. The first has already been mentioned: the paradox that those countries most eager to embrace globalization were not necessarily the ones most likely to benefit from it.
Second, the book provides more evidence that the time-worn controversy about the relative importance of structure versus agency in determining social change is a false debate. In all the post-socialist cases, neither force alone can adequately explain the outcomes. Both structure (the institutional legacies of proto-globalization) and agency (the policy decisions of political elites) mattered in determining whether countries became assembly platforms, intermediate producers, or some combination of the two. What I found missing was much discussion of the forces pushing economic policymaking in either an inward- or outward-looking direction. In all fairness, this is not a book about economic policymaking per se, rather it is a book about the effect that transnational organizations—TNCs—had on the fate of national political economies. It surprised me that virtually no mention was made of other transnational organizations, notably the International Monetary Fund, that influenced the willingness of governments to liberalize their economies and embrace FDI or not.
Third, Pula also shows that the early debates about globalization as well as post-socialist transformations were terribly misguided in predicting some sort of convergent outcome where countries would gradually become more and more homogeneous in terms of their political-economic structures and practices. This will provide little comfort to advocates of world polity theory who seem to see convergence and homogenization wherever they look. But it will be welcomed by practitioners of comparative political economy, such as the Varieties of Capitalism school.
The fourth lesson is one about the general trajectory of historical change, which should appeal to advocates of historical institutionalism, the main analytic perspective upon which the book is based. Pula shows that the best way to characterize these events is as a process of “punctuated evolution.” Incremental economic change, moving from de-Stalinization during the 1950s and 1960s to the gradual opening of trade with the west in the 1970s and then on to further economic developments, were interrupted periodically by dramatic events and exogenous shocks that shifted countries’ evolutionary paths. One was the 1970s oil crisis and with it the sudden flood of petrodollars into international capital markets that enabled socialist countries to begin borrowing heavily in hard currency markets to overhaul their economies and engage with TNCs. Another, of course, was the revolutionary collapse of the socialist regimes themselves, which opened the door to a rapid influx of FDI into these countries. More important for historical institutionalists, however, is the book's revelation about the fate of path-dependent institutional legacies. Not only does Pula show that these legacies are not so powerful as to completely determine outcomes—remember that both structure and agency matter—but that the causal effect of these legacies diminished over time. While proto-globalization created certain kinds of openings for socialist countries to western capital, once the channels had been exposed and then the old regimes fell apart, those legacies gradually became less influential and policy decisions carried more weight.
Of course, this does not rule out the possibility that new legacies will emerge and have significant effects going forward. This is an issue that immediately comes to mind considering current political events in post-socialist countries. I would have appreciated at least some discussion at the end of the book about the rise of right-wing nationalism in some of these countries. Poland and Hungary stand out, although some of the others have experienced this trend too. Hungary is one of the main exemplars that Pula uses to describe the assembly platform types. Poland is a primary example of the combined type. I wonder if by developing assembly platforms—which are based largely on low-cost production by less-skilled workers and rooted in relatively neoliberal economic policy regimes—new legacies were established in these countries that sowed the seeds for subsequent nationalist revolts, particularly since these countries’ comparative advantage in the global economy has slowly been lost to other parts of the world, notably China and other east-Asian developing countries where labor costs are even lower than in post-socialist Europe. My point is that legacies come and go. What this means for the futures of post-socialist eastern and western European countries is well worth considering, particularly for those worrying about how to contain the dangerous political currents that have developed there and that could hobble further economic development.
