Comments on the papers of Morawski and Sato
Hiroyuki Okada
Two papers presented in this session deal with Central andEast European countries from a common point of view. The view
point is that of the historical perspective of these countries fromthe 1980's until today, as you can readily see from the title of Prof
Sato's paper.
The issues they intend to analyse are the contemporarychange from a socialist system to a capitalist one, but bothspeakers emphasize the historical sequence of the process, whichstarted in the 1980's, continued through the downfall of the oldcommunist regimes in 1989-91, and now arrive at the latest stage
beginning in 1993-94. Both of the speakers claim the concept ofhistorical continuity is more decisive than that of discontinuity inunderstanding the situation of systemic change.
Prof Morawski claimes that the first period of the changebegan with the formation of the Solidarity labour movement in1980 in Poland, while Prof Sato starts his report from "the third
wave of economic reforms" within the socialist system in thisarea in general. The second period is the period of the collapse of
the old system and the breakdown of the Soviet Union. The third
period is on going. So far, the systemic change has been dealt
with by scholars, as a sort of methodological dichotomy todistinguish between the old socialist centrally planned economy,
and the newly emerging capitalist, free market, economy. Bothpapers challenge these discontinuity approaches, and the present
continuity hypotheses of systemic change in Poland and this area
in general (sometimes touching on the Russian course).
In brief, they say, in the first period there appeared a radical,
critical, movement against the system in Poland in particular,
and/or began a gradual small scale marketization and small
privatization in Hungary and Poland, followed soon by
Perestroika in the Soviet Union from 1985 onward. This is thestarting period of the change. The second period was that of the358

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collapse of the old system and of political revolution full of
optimism of becoming advanced capitalist countries, similar to
the West, in short time span. The third period is characterised bydisappointing difficulties and a return to power of the old rulingparties, renamed and reoriented as social democratic politicalentities, and, supported by the mass of the people.
This historical course was interpreted in the past in adichotomist way of thinking, or more precisely, by trichotomisit
explanations. Namely, in the first period the situations wereexplained by the concept of "market socialism", in that, themicro-economy would be better ruled by free market principles,
whereas the macro-economy must be ruled by planningprinciples, a sort of the former Blusian thinking. The second
overturn period, the old system repudiated totally from the standpoint of Neoclassical thinking, in that, all of the planning was theworst form of resource allocation, while the free market should
attain the best of the best, there must be no governmental
interventions at all, a sort of Hayekian thinking. However, after
the experience of hard difficulties, minus economic growth,
poverty, and inequalities, Central and East European people losttheir optimism of seeing their economies become like those of
the West immediately on the one hand, so, in CEE countries asocial democratic way of thinking has appeared, wheras in
Russia there has been a return to an authoritarian way of
thinking.
After the historical course of the development of thirteen or
fifiteen years, speakers here stress, we can and have to have aframework to analyse the systemic change as a whole in this area,
not by the method of dichotomy or trichotomy, but by single orconsistent hypothesis, and frame of reference. Prof Morawski andProf Sato each present an original and stimulating framework of
thinking to make sense of complex and twisted situations in thearea. I am honored to comment on these significant papers here.
As I see it, there is an essential difference between the two
papers. Prof Morawski deals with the historical continuity from aepistemological perspective, that is, from the viewpoint of aComments359

social psychologist in Poland. His socio-political framework, orparadigms, are: (i)a Democratic orientation in the first period; (ii)a Neo-liberal paradigm in the revolutional, shock-therapy period;(iii) a Conservative orientation in the present ongoing period.
He applies these three paradigms to the history of Poland,claiming that the Democratic orientation prevailed in the 80's,
when Solidarity flourished and challenged the legitimacy of theestablished Communist rule, and without this movement thesystems downfall in 1989 would not have occured. Thus the
Democratic orientation was the driving force of systemic change.
The revolutionary change gave the trade union and labour
movement governing power, but in order to transform the oldsystem to a market economy or a capitalist system, Democraticorientation has been replaced by a Liberal policy, whichemphasizes the individual, inequalities, and accepts
unemployment, poverty, and refuses governmental welfare
functions.
The idea of the worker, as "the salt of the earth" is refuted, inturn leading the elite to ascend to power. This period was short
lived. Because of the harsh difficulties (above all the heavy
unemployment), cut down the standard of living, the people
elected social democratic groups (the renamed old rulingpolitical parties), to power. The cycle is, in some sense, closed. A
Democratic orientation has returned as an element of thecorporatism in Polish style, a concession to privatization,marketization, and social protection, and the government. This isa Conservative orientation, which consisits of a tripartite
Democracy (trade union), Liberal (management), and theconservative government (renamed old political groups).
Contrary to this, Prof Sato analyses the historicalcontinuities from the viewpoint of a comparative systems
economist, and as an sincere observer, who has dealt with the
problems in his long academic career as an eminent specialist.
His research area in this paper is wider than Prof Morawski's, thatis, it covers almost all the CEE countries, sometimes
encompassing Russia. His argument is too sophisticated and360

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penetrating to give any concise comments in this session. In themain I agree with his analysis of the realities in the area, so I'drather ask him to add some detailed explanations. However, my
duty is not to ask, but to make clear some important issues here,
so I'd like to focus my attention on his concept of the"Post-socialist mixed economy" from a comparative
economic systemic approach.
Prof Sato defines the present economic situation in CEE
countries as "Post socialist mixed economy", which is not an
Anglo-American type of capitalism but is rather similar to thetype of corporate and managerial capitalism with some active
governmental interventions, as in Germany or in Japan. He
intends to say, at least there is no tendency at all in CEE market
economies towards a type of private ownership-orientatedcapitalism. Thus, systemic transformation, aiming for a puremarket economy, and started in 1989-91 is based upon
discontinuity in itself, but at the same time, there are strong forcesof continuity at work resisting individual ownership, the rules ofmarket competition, antagonism between economic winners andlosers and inequality between rich and poor. Needless to say, theelements of both continuity and discontinuity are important inany historical process, but concerning this problem his emphasislies in the continuity elements, I think.
There are two tools with which he analyses his continuity
framework. The first is the "ownership relation", which does notclearly distinguish either state or private ownership, but has
much complicated forms such as official fund ownership,
holding company ownership, cooperative, and the foreign capitalownership and so on (there are also many mixed or crossownership in-between these). The second tool is the concept of"coordination mode" in economic systems, among whichmarket coordination mode is only one of them, so that of "statemode", "network mode", "hierarchies mode", are also to beconsidered. Therefore, the conventional alternative, i.e., either
central planning or the free market, is rejected.
Here we need not resummarize Sato's paper, it is not only

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impossible for me but uncalled for, you can easily see what the
paper intends to say. The Neoclassical textbook type oftransititon, the sort of which was recommended and pushed by
IMF advisers in the shock-therapy period, is demonstrated bythese analytical tools as simply being false.
The period of "the third wave of economic reforms" has its
peculiar meaning in systemic change, he insisted, because sincethen small-scale privatization and micro-markets in parallel withmacro-planning had appeared, and even in the big-bang
revolutionary period, i.e., in the second period, the state heldstill a substantial share of ownership in big enterprises, whilethe vertical, directive, decision making has been abolished andemerged a market type of horizontal network.
The post-socialist economy is not a pure capitalist economy
based on individual private ownership with free market without
govenment interventions. It is a "mixed economy" in many
contexts. Prof Sato elaborately illustrates the realities of CEE
economies, and their historical courses by the use of theseanalytical tools. I support his diagnosis and recipe, firmly based
upon the Japanese, non Anglo-American, historical course ofsocio-economic development.
On Prof Morawski's paper(l)Discontinity not continuity: Problems of equality, job security,and social ethics; Alternation in social roles of the labouringmass and the elite in systemic change.
Prof Morawski appreciates the current social democraticelement in tripartist compromise, but how long will this tripartist
stability continue? If the resistance from the trade unions or thelabour movement against the transformation of the system isstrong enough there should be a substantial delay in systemictransition. In respect to economic growth, Poland is theforerunner among CEE countries at this moment, but her rate ofunemployment is one of the highest. Such a situation is quite362

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understandable in capitalist economies.
Capitalist systems and Socialist systems both have their own
advantages and disadvantages. Capitalist societies have politicalpluralism and liberty, economic prosperity and a preponderanceof durable goods, and innovation and efficiency, but it has tosurvive vital worldwide competition with possible bankruptcies
and high rates of unemployment. Risktaking and inequality areits fondamental laws. Socialism is just the opposite. Socialist
societies were governed by unendurable political dictatorships,
their economies were directed from above by bureaucracy, andwere inefficient and stagnant, but still there was job security,
pensions, low rates of housing and cheap public transport, andofficially recognized ethics of equality. Members of society areprotected by the visible hand of patriarchical state, for better orfor worse.
Man could not fabricate one optimal society made of acollection of the advantageous parts of each system. Capitalism
without severe competition and unemployment is impossible,
while socialism with a high rate of innovation and prosperity
does not exist. The ideal socialism, a perfect planning, exists onlyin party propaganda, just as the ideal market, and a perfectcompetition, finds itself only in textbooks of micro-economics.
Already a systemic choice has been made in Poland. It is an
irreversible process. The social value of equality, job security,and ethics must be respected, I quite agree, but we confront realdifficulties in the course of the transformation from a socialist
society to a capitalist society. We should also recognize thedisadvatageous sides and specific values of socialist societies.
The government must give a decisive priority to the industrial
policy and growth policy to overcome present day economic
ditsress in CEE countries, even at the cost of social insurance andequality policy. (Prof Csaba's insightful paper presented at the
symposium must be refered.)
The same is to be claimed about the problem of thealternation of the social roles of both the labouring masses andthe elite during transition. Prof Morawski believes in workers'

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invariably as "the salt of the earth". This ethic spread throughout
the nation in the first democratic period, but it was negated in thesecond liberal period, and now recovers its respectable positionin this conservative social democratic period. His proposition
assumes that the Polish course confirms continuity ofmass-democracy. But, in every revolution the roles of social
classes alter fundamentaly; in fact in many cases, the roles
are completely reversed. Polish Solidarity is a typical case of
discontinuity, not of continuity. In the first period Solidarity, thefirst mass protest movement in a socialisit societies, resisted
heroically against the Communist ruling system, foretelling thecrises of world socialism. A similar destructive role was playedby the Siberian coal miner's strike in 1989. However, the bearers
of productive power and productive relations in the newly
emerging capitalist systems are not the trade unions or theworkers, On the contrary, the bearers are capitalists, investors,
managers, and the able policy makers in government. The
participation of workers in the workplace is really important incontemporary hightech production systems, but their role isquite different from the role, that was once performed by
Solidarity workers.
(2)The reasons for the succss of the East Asian economies are notcorporatism, but: export-oriented growth policies led byauthoritarian governments; the disregard of workers social
security; the shop-floor worker's capability to gear his skill tointernational competition.
Poland in the mid 1990's understandably selected a non
Anglo-American style of capitalist development. But, if the
speaker imagines that, this choice could be made from theexample of successful East Asian economic development(including that of China), one must observe the real conditions inthat area have been quite different from those established bypresent day Polish corporatism.
I need to mention that, in the 1960s-70s, ANIES (Asian364

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newly industrializing economies) were led by an export-oriented
growth policy directed by authoritarian governments. This
course brought about succses in this area, while many Latin
American countries and others, supported by populist
movements (including a few CEE countries), striving for theimport-substitute policies, fell into heavy international debt.
Next, concerning China's economic success after 1979,
when economic reforms were introduced, and it began to open
up to the world market, Sachs and Woo concluded theconditions of its success were based mainly upon the absence ofthe need to take care of social insurance, job security, minimum
wages and so on in rural districts, where about 70% of the people
live. The spectacular Chinese economic growth should havebeen impossible if a normal, advanced level of social welfare had
been required. So, the state-owned enterprises, whichconventionally provide job securities and other facilities to theiremployees, fell into severe difficulties when faced withcompetition from non state-owned enterprises and foreigncompanies.
Lastly, workers are not in themselves "the salt of the earth",
I should stress, but in East Asia workers have the capability to get
new skills, learn newly borrowed technology efficiently, andadapt flexibly to the on- and off-the-job training required. The
basic cause of the Asian nations' economic success was the highutility /price ratio in labour, i.e., the skill /wage ratio. This type ofworker is not the same as those in Solidarity.
On Prof Sato's paper(l)Theoretical issues on the Post socialist mixed economy incomparison with the Anglo-American type, the West
European type of capitalism (mixed economy), and East Asianvariants. Is the CEE economy a parallel one? The historicalstages of capitalist economies: the proto-type in 19th century;
the managerial, corporate type in the 20th century, revised,with Keyensian policies and social democracy.

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Prof Sato argues, that the standard Neoclassical approach,the Miesesian dichotomic approach (in which it is only possible
to choose between a system based on private ownership with amarket - market economy, and a system based on state
ownership with bureaucratic coordination - central planning), is
wrong for the purposes of giving a rigorous description of CEE
economies. I agree, the standard Neoclassical theory is very
simple, and in many cases has nothing to do with economic
realities, above all, with the subject of systemic transition.
Still I have one point to say, that the CEE type of mixed
economy is in a sort of chaos, and has almost nothing in common
with contemporary West European and Japanese mature
capitalist economies. The CEE type is not a parallel with them,but, say a pseudo type of mixed economy. To be sure, this CEEtype is not that of Anglo-American capitalism, but this doesn'tmean it is similar to the European or Japanese systems.
In my point of view, there are three types of capitalist
system: the British type, based on individual ownership withprimitive industrial relations; the American type, based on
corporate ownership with modern industrial relations (theexclusive right of management is balanced by the right of tradeunions' to collective bargaining), and the German and/orJapanese type based on corporate ownership with harmonious
industrial relations (participatory corporate governance). The firstis a proto-type of the capitalism in 19th century, the second andthe third both are modernized developed types in the 20th
century. Thus, to set a category of an Anglo-American type is, inthis sense, misleading. The CEE type is much far distant from theAmerican type, than is from the Btritish type. The German orJapanese type is the most sophisticated one, emboding thehistorical elements of capitalist development over the past
hundred years or more. These modern capitalist production
systems combine the factors of prodution, i.e., capital(investment), management, modern technology, skilled workers(human capital), and trained workers, effectively.
Briefly speaking, the American Taylorist principle of the366Comments

high-wage high-efficiency linkage is backed up by a Fordist
production regime, a hierarchically divided organization,
management skills, and institutionalized R & D. Japanese
high-wage high-efficiency linkage is backed up by managerial
participation on the side of the employee, e,g. TQC, total
products quality control movement, and so on. Without theseprinciples, there are no American or Japanese types of capitalism.
A chaotic CEE capitalism at this moment can't comparewith either the American or German/Japanese systems. If one
wishes to compare them, we must start first confirm, how thecapitalism in the CEE and the advanced capitalism in the 20th
century are essentially different from each other. [I have alreadymentioned the differences between the CEE type and the East
Asian.]In reference to the concept of mixed economy, I have somewords to add, in short, on the topic of hysteresis in 20th century
capitalism, on Keynesian macro regulatory policy in general,and the social democratic movement in Western Europe, both ofwhich transformed a classical primitive, laisser-faire capitalism (aBritish type) to a mixed economy. CEE economies are rather,
Post socialist chaotic, pseudo, coarse, mixed economies or to
use the reporter's expression "inferior" mixed economies. They
do not belong to the German or Japanese type, but quite
altogether another. Maybe just the opposite.
(2)Another aspect of continuity, but also refer to the 1970s andonward; CEE countries in international relations, above all,
CEE in the international division of labour in the age ofglobalization and structural adjustment. Historical,
geographical, and geopolitical continuity.
This paper discusses continuity and discontinuity insystemic change only from a regional perspective. By itself this isindeed the correct method. However I believe the collapse andbreakdown of the socialist world system, accompanied by theend of the Cold War, is a phenomenon in the history of the world,

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just in the same way as that of the Cold War, the Russisan
Revolution, the liquidation of the imperialist colonial system, andthe expansion of the socialist system westward, eastward andsouthward. Systemic transition in CEE countries is the part of thiscollapse, and this collapse was in turn one of the most serious
results of globalization, which accelerated from the '70s onward
in the extreme. From this pont of view, CEE countries are goingto return to their proper place in the world order, which they used
to occupy in the inter-war period. Prof Sato's paper is full of
instructive propositions, so this point of view is, as it were, anadditinal order after a delicious main dish. There are many
continuities. I only intend to mention the dynamic andasymerical nature of internatinal division of labour, in which thesocialist system was defeated at last, and to which CEE
economies are going to pertain.
In the 1950s international trade was governed, roughly
speaking, by a vertical division of labour in a sort of classicalRicardian type, i,e., advanced capitalist economies (ACE) export
manufactured goods and import primary products from thedeveloping countries (DC). At that time, socialist economies (SE)were closed, striving to achieve quantitative targets of heavy
industries. The ranking order of economic power andperformances was approximately;
ACE≧SE>DC.
In the '60s emerged newly industrializing economies(NIES), and a new international division of labour in
manufactured goods appeared, between capital intensive goods
and labour intensive goods. This type of international trade is
explained by the neoclassical Heckscher-Ohlin theorem.
Socialist economies remained in a closed situation, andcontinued to strive for an increase of producers goods, while aserious shortage of durables was keenly recognized. Theinternational economic ranking was follows:368

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ACE>SE>NIES≧LDC (i.e. less developed countries).
Developing economies were beginning to split.
In the 1970s-80s, the contemporary globalization spread.
Foreign investment, especially by the multi-natoinal enterprises,
grew tremendously and so-called intra-industry trade increased.
East Asian countries, including coastal China, were transformed
into the manufacturing bases for the whole world.
Export-oriented policy succeeded, but import substituting
policy was frustrated. A horizontal international division oflabour developed (a kind of intra-industry trade), above all, inthe machine, electric, and elecrtronic industries. This
international trade is explained by Leontiev, Kojima, Krugamn
and so on, in a revised neo-classical theory of international trade.
The division of labour between technology intensive goods andcapital intensive goods flourished.
Even the socialist economies couldn't resist thesetendencies, so they opened foreign economic relations just a bit,and they become, say, semi-open economies, which relates to"the third wave of economic reforms". In this international
environment, socialist economies took each their own course:
China successfully entered into the growing East Asian andPacific division of labour, and was herself interwoven into thearea, CEE countries accumulated international debt because of
their import substituting policy, just as Latin American nations
did. The Soviet Union at first got a large sum of convertible
currencies by exporting oil and other resouces, but this earlyadvantage transformed itself in the second half of the 1970s into a
disadvantage to the Soviet Union. Now the ranking order
becomes as follows;
ACE>NIES≧SE>LDC.
The Soviet model of closed industrialization has been
defeated all over the world. To introduce the market is actually toopen each economy to the world market. If "the third wave ofComments369

economic reforms" had to have a reality, then the opening policy
must have to be pursued. So, Perestroika resulted in the systems
collapse. In the 1990s the order should be;
ACE≧NIES>･･･FSE (former socialist economies) ･･･≧LDC.

But now a new international division of labour is emerging,in relation to the competitiveness of exporting manufactured
goods, whatever these kinds are (namely, technology intensive,
capital intensive, or labour intensive). East Asian countries haveso much power, that even the most advanced economies losttheir comparative advantage in manufactured goods except for
hightech sophisticated goods. They are making efforts to get a
comparative advantage in the service sectors, above all, in thefinancial sectors, and R & D sectors. This means thatde-industrialization is proceeding in both the most advanced
economies and in the least developed countries. The defeated
CEE economies have to enter into this international system of thedivision of labour. What should their position in the world
market, the real competitive market be?
There is a constant tendency to lower the ranking ofsocialist, and post-socialist countries (SE, FSE, except China) ininternational economic relations. This is the most serious
problems of continuity in respect to the countries of this region,
whether socialist or capitalist. (For information on the vicious
circle of the peripheral CEE, see, Prof Berend's excellent paper
presented at this symposium.)
During the inter-war period the CEE countries wereseverely affected by the world depression, especially sufferingfrom the agrarian crises, and Nazi-Germany's expansion
eastward. History will not repeat itself again, but the EU
becoming an exporter of agricultural products on the one hand,and East Asian countries are exporting manufactured goods on
the other.
CEE countries exist geopoliticaly in-between the economic
super power Germany in the West, and the military super power,370

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Russia, in the East. How will the situation change?
Wallerstein asserted that Eastern Europe was supressed by
the active Western cities and competitive handicraft
manufacturing in the 16th and 17th centuries, and was forced to
become the corn (agrarian products) supplying base for Western
Europe. In this meaning "Eastern Europe" is a historical concept
on the periphery of Western Europe.
How can the CEE countries overcome this gloomy
continuity by their own efforts?

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Appendix: A formula

CEEs in Continuity; The decline tendency of their ranking
in the world economy. International economic relations andsystemic collapse and transformation - Dynamic aspects of theworld economy, 1950s to 1990s
1|

1950s: International division of labour

Vertical, Ricardo type

ACE,

manufactured goods

SE,

closed industrialization, heavy industries; inter-systems rivalryDC,

primary products

Ranking: ACE≧SE>DC.

↓2|

1960s: IDL,
Horizontal and Vertical, Heckscher-Ohlin type
ACE,
manufactured; capital intensive goods
SE,
closed; heavy industry oriented, shortage of durable goods
NICS, manufactured; labour intensive goods LDC, primary
goods; DC split
Ranking: ACE≧SE>NICS≧LDC.

↓
3|

1970s-80s: IDL, Horizontal, Foreign direct investment led,
Intra-industry trade
Leontiev-Kojima-Krugman type
ACE, manufactured; technology intensive goods
NIES, manufactured; capital, labour intensive goods
SE, semi-opened; China, primary products →labour intensive goods"3rd wave" CEE, import substituting policy, debt accumulatedSU, oil and raw materials
LDC,
de-industrialization
Ranking: ACE>NIES≧SE>LDC.

↓
4

1990s: IDL,
Re-integration of the world economy, SE defeated
ACE,
Service, Finance, hightech manufactured (de-industrialization)
NIES+, manufactured; capital, labour intensive, and low level hightech
FSE,
opened; China, foreign investment led, export led, industrialization
CEE, FSU, minus growth, de-industrialization
LDC,

de-industiralization, importing foods

R a n k i n g : A C E ≧N I E S > ･ ･ ･ F S E ･ ･ ･ ≧L D C .