University of Chicago Press

The Market Transition Debate: Toward a Synthesis?

Author(s): Ivan Szelenyi and Eric Kostello
Source: American Journal of Sociology, Vol. 101, No. 4 (Jan., 1996), pp. 1082-1096
Published by: University of Chicago Press
Stable URL: http://www.jstor.org/stable/2782241
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The Market Transition Debate:

Toward a Synthesis?l
Ivan Szelenyiand Eric Kostello
UniversityofCalifornia,Los Angeles
THE THEORY OF MARKET TRANSITION
In his seminal 1989 article,"A Theoryof Market Transition,"Victor
Nee offereda new theoryof social inequalityand applied it to the study
of the problemof transitionfromstate socialistredistributive
economy
to marketcapitalism.Nee claimedthattheemergenceofmarketsin state
socialist redistributive
economies had unexpectedconsequences. The
mostprivilegedstratumor class ofstatesocialism,theredistributors,
lost
some of theirprivilege,while those at the bottomof the state socialist
hierarchy,the "directproducers,"benefited(forearlierformulations
see
Szelenyiand Konrad [1969], Szelenyi[1978], and Whyte[1984]). As a
result,inequality,as measuredby incomeor access to scarcegoods, was
reduced.Nee's theoryidentified
the mechanismsby whichmarketsgeneratedequalityunderredistributive
systems:ifwages are notadministrativelyset, but establishedby transactiverelations,then producersare
likelyto have morepower(marketpower);if marketsoperate,thenhuman capital is likelyto be rewardedmorewhilepoliticalloyaltyis likely
to matterless (marketincentive);if thereare marketsin a redistributive
becomesan alternativeavenue of socioeconomy,thenentrepreneurship
Nee 1989).
economicmobility(marketopportunity;
Data collectedin 1985 in ruralChina offeredsupportto the theoryof
markettransition.Between1977 and 1985 overallincomeinequalitiesin
China declined:the income gap betweenurban residentsand farmers
betweenpeasantsand cadres
shrank;the incomegap in the countryside
also narrowed.The declineofinequalityarguablywas theresultofderegulationof statepoliciesin agriculture.After1977, Chinese peasants receivedland, theirproductiontargetswereless strictly
regulatedby planners,and theywereallowedto bringtheirproduceto urbanmarkets.As
1 An earlierversionof this paper was presented
at the conference,
The Market
TransitionDebate: BetweenSocialismand Capitalism,heldat theCenterforSocial
forthe
Theoryand ComparativeHistoryat UCLA, May 22, 1995.We are grateful
participants
and RobertBrenner,RebeccaEmigh,John
comments
oftheconference
to Eric Kostello,
Logan, WilliamMason, and VictorNee. Directcorrespondence
of California,264 Haines Hall, Los Angeles,
Departmentof Sociology,University
California90095-1551.E-mail:kostello@nicco.sscnet.ucla.edu

? 1996byThe University
ofChicago.All rightsreserved.

0002-9602/96/10104-101
1$01.50

1082

AJS Volume 101 Number4 (January1996): 1082-96

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Symposium:Szelenyiand Kostello
and their
a resulttheyexpandedproduction,increasedtheirproductivity,
incomesand livingstandardsincreasedrapidly.
paper, "Social Inequalityin
In 1991 Nee publishedanotherinfluential
analyzedthe 1985
Reforming
StateSocialism."In thisarticleNee further
data and found that some cadres retainedtheirprivilegesdespite the
emergenceof markets.Nee did not believe, however,that these facts
contradicted
his initialtheory.The 1989 articledid notoffera periodization of marketreformsand so leftunexploredthe questionof whether
ofmarketscharacterizeonlycertainepochsof martheequalizingeffects
ofmarketization.
or
whether
theyare universalcharacteristics
ketreform
different
of
market
penetrationand
But here,Nee did distinguish
stages
In
the
idea
of
reform.
Nee's
view
sustained
cadre
partial
introduced
to thepartialcharacterofthereformin China
privilegeswas attributable
duringthe early 1990s. As reformprogresses-accordingto Nee's 1991
statement-cadreprivilegeswill be undermined.The implicationis that
theinequalitiesof statesocialismwill be overcome.
Nee's 1989articlegenerateda livelyexchangeofviews amongscholars
of China (Bian and Logan 1995;Huang 1990; Lin 1995; Oi 1992; Walder
1992) and Eastern Europe (Stark 1986, 1992; Rona-Tas 1994); we refer
to this as the markettransitiondebate. While we pay special attention
to articlespublishedin thisissue, we also tryto summarizethe market
transitiondebate as it has unfoldedsince 1989. It is a debate that has
been, at times,acrimonious.We suggestthatat least one of the sources
about thedomain-the concretesocioofacrimonyis a lack ofspecificity
economicconjunctures-thatthe hypothesesare applicable to. In this
such conjunctures-we distinguishbetween
paper-in orderto identify
threetypesof marketpenetration;we hypothesizethat littledisagreementremainsamong the participantsonce theyspecifywhich type of
marketpenetrationtheirfindingsor hypothesesare derivedfromor applicable to.
MARKET TRANSITION CONTROVERSIES
Three main questionshave been at the centerof the markettransition
debate. First,what is the relationshipbetweenmarketsand inequality?
Second, do formeror currentcadresbenefitfrommarketreform?Third,
are theoriesof transitionteleological?The threepapers that constitute
the core of thissymposiumembodyone or moreof thesecontroversies.
Marketsand Inequality
Thereis substantialevidencethattheoveralldegreeofincomeinequality
did indeed declineslightlyfollowingthe introduction
of marketreform.
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AmericanJournalof Sociology
However, thereis also evidencethatit began to increasenot long after.
Data fromEasternEurope and China showa similarpattern:well before
marketeconomyis in place, inequalitywill be higherthan
a full-fledged
it was duringtheclassicalmodelofstatesocialistredistributive
economy.
In Hungaryinequalityfellafter1968 and reachedits lowestlevel sometimearoundtheearly1980s;it thenbegan to climbsoon after.In China,
thefirstfiveyearsor so of post-1977reformsproduceda slightdecrease
of inequalities,but since the mid-1980sChinese societyhas becoming
increasingly
inegalitarian.
The existenceof an early decline and later increase of inequalityis
acceptedby all sides in thedebate. Does theearlydeclineof inequalities
supportmarkettransitiontheory?Does the later increasinginequality
falsifyit? There is littleconsensusin answeringthese questions. The
controversy
then,is over,(1) thecause of theearlydip in inequalityand
(2) the pointat whichinequalitybeginsto increaseagain.
The initial decline of inequalities.-The cause of the initial, more
egalitariandistributionof income is far fromobvious. There are two
thechangeto new marketopportucompetinghypotheses.One attributes
nities;theotherto fairerstateredistributive
policies.Szelenyi(1978) and
Nee (1989) believedthatthe initialdeclineof inequalitywas a resultof
marketpenetration.In contrast,Bian and Logan (1995) suggestthat
post-1977egalitarianismin China was the resultof state redistribution
that soughtto buy politicalpeace formarketreformby increasingthe
lowestincomes.Later increasesin inequality-so theyargue-should be
attributedto marketpenetration.
Whydoes inequalityincreaselater?-The next disputedquestionis,
What is the turningpointin the trendof incomeinequalities?Is market
transitiontheorychallengedby the observedincreasein inequalityafter
the initialdecline?
The changein inequalityis not simplya functionof an increaseof the
marketswhichfirstappeared; rather,it is a functionof the appearance
of markets-such as marketsforlabor-where theydid not existbefore
and the appearance of new participants.Thus it is importantto have
clearlydefinedcriteriaabout the kind of marketpenetrationlikelyto
producespecificsocial outcomes.The evidenceat our disposal suggests
whenthesocialisteconthatmarketshave equalizingeffects
just briefly,
omyis stilldominant.As marketpenetrationcontinuesit becomesmore
likelythatmarketsexacerbateinequality.
We contendthatto understandthis U-shapedpattern,it is necessary
conditionsunderwhichmarketsinto specifypreciselythe institutional
creaseor decreaseinequality.The questionsare marketsforwhat?What
of those
are thepropertyrelationsthatset theparametersof functioning
markets?And, what are the class relations-who are the social actors
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Symposium:Szelenyiand Kostello
to affecteconomicoutcomesunderthegivenmarketconditions
struggling
and propertyrelations?It is not particularly
usefulto ask whethermarketsare egalitarianor inegalitarian.Marketsas such and redistribution
as such do not have inherentlyegalitarianor inegalitarianoutcomes.
Their social outcomesdependon the broadermacroinstitutional
settings
in whichtheyare embedded.
Cadres and Markets
One of the most sensationalissues in the markettransitiondebate is
whethercurrentor former
cadresbenefitor lose fromreforms.
It is clearly
related,but not identical,to the more generalquestion of changes in
overallinequality.Sometimesit is a questionofabsolutereturnsto cadre
status, especiallywhen thereis negativegrowth,but typicallyit is a
about relativegains.
controversy
Accordingto Nee's critics,markettransitiontheoryclaims that, as
marketpenetrationcontinues(and theyunderstandthisprocessas a linear, evolutionaryprocess)"directproducers"benefit,cadres and former
cadres lose out, and returnon human capital becomes more and more
importantto explain who will obtain higherincome. Researchersover
the past few years have presentedevidencethat formercadres are the
main winnersof markettransition
(Hankiss 1990; Staniszkis1991; Szalai
1990; Szelenyiand Szelenyi1990; R6na-Tas 1994); thatthereis positive
associationbetweencadre position,cadre connections,and highincomes
(Bian and Logan 1995); and, finally,that returnto human capital is
negativelyrelatedto the degreeof marketpenetrationas measuredby
differential
dynamicsof economicgrowthin different
regions,but that
economicgrowthdoes not change the differences
in incomesforparty
membersand nonmembers(Xie and Hannum, in thisissue). However,
in his analysisincludedhere,Nee findsthatformercadresdo not benefit
fromcadre statuswiththe establishment
of marketswhen otherfactors
are controlledfor.We argue below thatthesedifferences
stemfromdisas well as how to account
agreementaboutthetypeofmarketpenetration
forthe affectsof growth.
Is MarketTransitionTheoryTeleological?
This controversy
is probablytheleastclearlyarticulatedinthemarkettransitiondebate,butit is potentially
an importantmetatheoretical
difference
betweenmarkettransition
theoryand itscritics.The veryidea oftransition
was challengedbyDavid Stark(1992). Starkrejectedthenotionoftransitionas teleological,since it assumesthatpostsocialistsocietiesare progressingtowardsa well definedend-some clear,or ideal, typeof market
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AmericanJournalof Sociology
theorymeasuresthedegreeof"success"oftransicapitalism.A transition
concreteEast European or Chinese economieswith
tion by contrasting
puremodelsofmarketcapitalism.Those who subscribeto such ideas believeit is possibleto "buildcapitalismbydesign."Instead,Starksuggests
thatsocioeconomicchangeunderpostsocialismshouldbe understoodas a
a processof readjustingexistinginstitutransformation,
path-dependent
tionsto thechangingsocioeconomicenvironment.
The question of whetherto assume evolutionaryor involutionary
or late socialistsocioecoof postcommunist
(Huang 1990) characteristics
issue, not testableby the means of
nomic change is a metatheoretical
empiricalsocial science. Even withoutStark's work on recombinant
formsin Hungaryincludedhere,we wouldprefernotto use an evolutionary frameworkbecause it precludesmakingdiscoveriesabout possibly
new social phenomenaand reducesall such variationonto a singlescale
withsocialismat one end and capitalismat the other.If it is indeed the
case thatthesocialistsocietieswill becomeor alreadyhave becomecapitalistit should be an achievementof the theoryand empiricalresearch,
not an assumption.
Because of the limitationsof space, in the concludingsectionwe presentour hypothesesabout the social implicationsof marketpenetration
of redistributive
economies,and we focusour attentionon the question
ofthedegreeofinequalitiesand explorewho benefitsfrommoremarkets
and underwhat conditions.The schemewe presentbelow is informed,
or teleology.Since
however,by the debate about evolution/involution,
we are stilldoubtfulabout theempiricalaccuracyofteleologicalassumptions (see Szelenyi 1988, 1990), we do not writehere about stages but
about typesof marketpenetration.
DYNAMICS OF INEQUALITY CREATED BY MARKETS: SOCIAL
IMPLICATIONS OF THREE TYPES OF MARKET PENETRATION
Do marketscreateequalityor inequality?And, do cadres,directproducWe beers, or ordinaryworkersbenefitfromincreasingmarketization?
lieve thesequestionsare too vague to be useful.
The questionswe shouldpose are, Whichtypesofmarketsand market
on inequalities?Under
are likelyto have compensatory
effects
penetration
willcertainsocialactorsbe thewinnersorlosers?What
whatcircumstances
ofmarketsand redistribution?
Whatare
aretheinstitutional
arrangements
theclass capacitiesof actorswho are thelikelywinnersor losers?Posing
testableresearchhypotheses.We presthesequestionsfostersempirically
ofmarketpenetration
and attemptto identify
as concretely
enta typology
as possibletheactorsin each typeofeconomicsubsystem.
We distinguishthreetypesof marketpenetration:(a) local marketsin
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Symposium:Szelenyiand Kostello
redistributively
integratedeconomies,(b) socialistmixedeconomiesthat
featurethe coexistenceof marketand redistributive
systemunder the
hegemonyof redistribution,
and (c) capitalist-oriented
economieswith
thestatedaim oftheestablishment
ofmarketcapitalismand theelimination of state socialism.Below we elaboratewhat these typesare, how
marketsin each typeeffectinequalities,and who the social actors are
who gain or lose in each type.Again,we are notsuggesting
thatthetypes
we presentcan be arrangedin somenecessaryevolutionary
sequence,and
we do not assume thatprogressfromone stage to the nextis inevitable,
necessary,or desirable.
We distinguish
thethreetypesof marketpenetrationby describingthe
institutional
characteristics
of each type.We pay particularattentionto
in place in each type.
the kind and combinationof marketinstitutions
In table 1 we offerhypothesesabout thecharacteristics
ofthreedifferent
in different
marketinstitutions
socialistand postcommunist
countries.
Marketreformsusuallybeginwithpettycommodity
markets:producers
are allowed to sell productsor servicesin places wherepricesare regulated by supplyand demand. Such commodification
of consumergoods
and servicescan go a long way, while allocationof factorsof production-labor and capital-remain redistributive.
The greaterthe proportion of deregulatedprices(pricesset by the mechanismsof supply and
demand),the morehighlydevelopedcommoditymarketsare. In Marx's
terms,labormarketsexistwhen actorsare legallyfreeto sell theirlabor
powerand are also compelledto do so by virtueof theirseparationfrom
the means of subsistence.The morethe price of labor is set by supply
and demand, the more developed the labor marketis. Capital market
refersto theallocationof capitalgoods. In a socialistredistributive
economy,surplusis typically
firstappropriatedthenallocatedbycentralplanners throughbudgetarymeans. Reductionin the proportionof stateregulatedinvestmentis an indicatorof the makingof capital markets.
In capitalmarketscompetitive
investorsallocatecapitalgoodsin expectationsof higherreturnson theircapital investments.Following Polanyi
(1957) we call an economymarketintegrated,or capitalist,when labor
and capital marketsare the dominantallocative mechanisms.If labor
and capital are primarilyredistributively
allocated,commoditymarkets
onlyconstitutewhat Polanyicalled local markets.
Local Marketsin Redistributively
IntegratedEconomies
Local marketsin redistributively
integratedeconomiescan be observed
in Hungaryand Poland fromthemid-1960suntilaround 1980 and, with
some differences
fromthe East European cases, in China between1977
and the mid-1980s.The emergentlocal marketswere usually forfood
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Symposium:Szelenyiand Kostello
and servicesand were peripheralto the economicsystem.They were
highlyinsecure;activityin such marketsoftenborderedon theillegal,so
that participationwas risky.Productionrequiredlittleskill and very
rarelyany credentials.The typicalactorsin such marketswere peasants
and peasant-workers.
Thus, the producersin thesemarketswere those
unskilledor semiskilledindustrialworkerswho in Eastern Europe had
been forcedout of full-timepeasant existenceand had to take urban
industrialjobs but who remainedin theirrural residencesclose to the
sitesofagriculturalproduction.Underthesecircumstances
local markets
werelikelyto have equalizingeffects
(Szelenyiand Konrad 1969;Szelenyi
1978). Actorswho producedforlocal markets,while rarelyat the very
bottomof the society,were usuallyfairlylow in the social hierarchy.
These factsare consistentwithmostof the expectationsof Nee's 1989
markettransitiontheory:directproducersunderthe conditionsof local
marketsin redistributive
economydo indeed have some "marketpowers" and certain"marketopportunities."Under the conditionsof local
marketstheexpectationof markettransitiontheorythat"redistributors"
were likelyto experiencea change in relativefortunesalso seems to be
true.Indeed, cadressoon becameveryresentful
as theysaw actorsin the
secondeconomy,especiallythosewithlow levelsofeducation,sometimes
earninghigherincomesthan local cadres themselves.
In brief,undertheconditionsoflocal markets,mostof the predictions
of markettransitiontheoryseem to be accurate. Only the hypothesis
concerning
higherreturnto humancapitalseemsto be incorrect-though
as Xie and Hannum pointout above, thishypothesisis internallyinconsistentanyway.It is implausibleto argue thatreturnsto human capital
increaseat the same timethatthe degreeof inequalitydeclines.Indeed
theinitialdeclineof inequalitywas followedwitha declineon returnof
human capital. As table 2 shows, Nee (1989) and Szelenyi(1978, 1983)
offeredhypotheses
thatwerederivedfromeconomiesin whichlocal markets were expanding,but the allocationof labor and capital remained
primarilyredistributively
regulated.
SocialistMixed Economies
In Eastern Europe between 1980 and 1989 and in China after1985 a
new typeof marketpenetration
emerged.The crucialchangeof circumstanceswas thatprivateeconomicactivitiesbecame legal (or nearlyso).
Under the conditionsof the socialistmixed economy(Stark and Nee
1989; Szelenyi1988)a new, moreheterogeneous
set of actorsenteredthe
marketplace.As marketcompetitionbegan to play a greaterrole and
risksdecreased,betterqualifiedpeopleenteredbusinessactivities-those
withmoreto lose but also moreto gain. Some of the earlypioneers,the
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Symposium:Szelenyiand Kostello
least educatedand sociallymostmarginal,were pushed aside or wiped
out altogether.
Some cadresalso orientedto markets.In particular,some membersof
fractionof the cadre elitebegan to build bridgesto the
the technocratic
new privateeconomy(Manchinand Szelenyi1987).They "comemergent
modified"theirbureaucraticprivileges.For example,some earlycapital
new real estatemarkets.
accumulationwas possiblein theemergent
Thus, in a socialistmixedeconomy,the marketis farfroma simple,
compensatorymechanism.Even though some relativelyuneducated,
low-incomegroups can still benefitfromthe secondarymarketsof a
redistributive
economy,a socialistmixed economycan
still-dominantly
more accuratelybe describedas a dual systemof inequality(Szelenyi
1988; Walder 1995).
evidentin the papers of Nee and Xie
There is additionalcontroversy
and Hannumovereconomicgrowthin thistypeofeconomy.It is unclear
gains
how to separatethe effectsof growthwhen measuringdifferential
are implemented.In thisdiscussion,Xie and Hannum use
afterreforms
economicgrowthas a proxyforreform,whichmeans thattheirfindings
ofreforms
about theeffects
thatare successful
about reforms
are findings
at producinggrowth.Thus, as theypointout, theyare not able to draw
conclusionsabout the relationshipof incomeinequalityto the intention
to reform,althoughan advantageis thattheirresultsare not limitedto
"market"reforms.Still, theyare not able to resolve whetheracts or
of reformare moreimportantto differential
incomegains.
effects
While Nee's paper is criticalof thisapproach, we believe he may be
in a similarposition.Nee uses theloggednumberof "marketdependent"
firmsas an indicatorofthelevelofmarketization,
and thusofreform.(He
combinesprivatewithcooperativefirms-a convenient,but teleological
action. In addition,he does not explainwhyhe does not normalizethis
variable, and thatlack of normalizationcalls into questionthe validity
of the resultsthat depend on it.)2 This measure (productionmarket),
however,is surelyrelatedto economicgrowthsincereformspreciselyare
thatwerenotpossiblewhenonly
able to bringabout formsofenterprises
local marketswere allowed. When startingfroma verylow level, the
difference
betweengrowthand theabsolutelevel is likelyto be minimal.
Nee attemptsto controlforgrowthitselfby usingthe level of industrial
output,but it is unclearwhygrowthin industrialoutputwas not used.
2 As does the factthatan aggregate
version(community
income)of the dependent
sideoftheequation(thisprobvariable(householdincome)appearson theright-hand
lemcropsup againin themodelfordeterminants
ofnonfarm
job, whichuses "labor
market"as a contextual
variable).Withoutreassurance
thatthepossibility
of correitis necessary
latederrorsbetweenthemicroand macrolevelshas beeninvestigated,
to withhold
judgmenton theusefulness
oftheresults.

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AmericanJournalof Sociology
In China, growthhas beenpositiveand thecontroversy
has been about
who has a higherrate of returnfromdifferent
activities.In Eastern
Europe growthhas been low or negativeand the questionof who has
suffereda worse drop arises. We are unsurehow to solve the problem
of the relationshipbetweengrowthand inequalityin eitherof thesetwo
cases. The effectof growthneeds to be controlledfor,but reformsare
indeedimplemented
verymuchwiththegoal ofspurringgrowthin previouslystagnanteconomies.The highgrowthratesthatoccur in all three
sectorsof China's economyindicateclearlythat growthis not simplya
functionof how muchof the economyis officially
marketoriented.
Both fortheoreticaland empiricalreasonsit is vitalnot to conflatethe
measuresof economicgrowthwiththe typeof marketpenetration.This
is particularlyimportantin analyzingeconomicchange in China today.
China's economicgrowthis stillin the extensivestage of development,
and its largepopulationresourcesmayenable an extensivegrowthstrategy to be carriedon fora long periodof time.It is not that surprising,
therefore,that Xie and Hannum find underdevelopedlabor markets
(and, consequently,low returnon human capital) in rapidlygrowing
areas of China. This findingis consistentwiththehistorically
observable
capacity of socialistmixed economiesto grow under the conditionof
extensivedevelopment.
We believe that mostof the recentliteratureon markettransitionin
China accuratelydescribesthecharacteristics
ofsocialistmixedeconomies
(see table 2). Walder(1992, 1995),Oi (1992), Bian and Logan (1995), and
Lin (1995) capturethe coexistenceof marketand redistributive
mechanismsand theresultingdualityof thesystemof social inequalities.If we
interpretNee's conceptof partial reformthis way, Nee's contributions
(1991,in thisissue;see also Nee and Peng 1994)can also be read as demonstratingthedualityofinequalitiesunderhybridpropertyformsand in an
economicsystemwherebothmarketsand redistribution
operate.
If Nee's theoryofpartialreformimpliesthatfurther
reform-and thus
theascendanceofmarketsto thedominantmechanismin allocatinglabor
and capital-leads to gains by directproducersand losses (even if only
relative)by cadresor former
cadres,thenit is likelyto be wrong.Empirical
EasternEuropeseemsto suggestthatextrapevidencefrompostcommunist
olatingtrendsfromlocal marketsor fromsocialistmixedeconomiesinto
economiesis likelyto be inaccurateand even misleading.
capitalist-oriented
Economies
Capitalist-Oriented
After1989in EasternEurope a verydifferent
typeofmarketpenetration
took place, one that does not appear in China. The unique featureof
East European developmentafter1989 is that it does not simplyallow
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Symposium:Szelenyiand Kostello
or encouragethe growthof new privatesector. In all East European
countries,the privatizationof the public became statepolicyafter1989.
In China the public sectoris maintained.Stark'sworkin Hungarycontinuesto undermineany assumptionsthat thesechangeswill automaticallybringabout a market-coordinated
society.Starkalso demonstrates
thatWalder's(1994) distinctionbetweenpropertyreformand privatizationholds as muchforHungaryas it does forChina. However, without
assumingthatthenew capitalistorientationwill bringabout capitalism,
we contendthatit qualitativelychangesthedynamicsofmarketpenetrationin postcommunist
societies.
How privatizationplays out depends to a significantdegree on the
social and political
class capacitiesof actorsinvolvedin postcommunist
fractionofthenomenstruggles.In Hungaryand Poland thetechnocratic
klaturahas been quite powerfuland has succeededin establishingclose
tieswiththeemergentnew postcommunist
politicalelite.Hankiss (1990)
notedas earlyas 1988 thatspontaneousprivatizationis a strategyof the
cadre eliteto establishitselfas thenew grandbourgeoisie(see also Staniszkis 1991). He provedto be mostlycorrect(Rona-Tas 1994). We would
onlyadd that,in orderto understandthisprocessprecisely,we need to
make a distinctionbetween the old and new elite of communismbetweenthebureaucracyand thetechnocracy.Whileit is quite truethat
the commandpositionsof the new corporatesectorin Poland and Hungaryare held almostexclusivelyby the membersof the old technocratic
elite(about 90% of themanagersofthe3,000 or so largestfirmsin these
countriescome fromformermanagement)it is also true that the old
bureaucraticelitelost big. About halfof thosewho managed the largest
firmsin 1988 in Hungaryand Poland were by 1993 out of elitepositions
(Szelenyiand Szelenyi1995).
Can we concludethat,in capitalist-oriented
economies,marketsare a
major sourceof new inequalitiesand theformercadres are the winners?
For thefirstpartofthepropositiontheansweris yes. Inequalityis growing rapidlyand generatedprimarilyby markets.Those still relianton
mechanismrapidlylose ground.
the redistributive
The answer to the second part of the propositionis more complex.
First of all, it is simplyuntruethat the cadre elite convertedtheirold
privilegesintonew ones. As we pointedout before,a substantialfraction
oftheold eliteare losersbyanymeasure.Furthermore,
whenwe consider
who the winnersare we need a morecomplextheory.
Hanley (1995) pointedout that in capitalist-oriented
economiesthere
is evidenceof the formationof not one, but two new classes in the top
or middleofthesocial hierarchy:a new corporatebourgeoisieand a new
pettybourgeoisie.Hanley also presentsrobustdata to show that the
recruitment
process into these two classes is quite different.The new
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AmericanJournalof Sociology
corporatebourgeoisieis likelyto come primarilyfromthe technocratic
fractionof theold nomenklatura;
thenew pettybourgeoisieon the other
hand is more likelyto be recruitedfromthe formermiddle and lower
middleclass.
In short,the big winnersof marketpenetrationin capitalistoriented
economiesare membersof the formertechnocraticelite; descendantsof
middleclass also benefit,as do thosewho enteredthe
the precommunist
secondeconomyduringlate socialism.The biglosersare thebureaucratic
fractionof the cadre elite, the poor, and most workers.Workerswho
wereemployedin thosesectorsoftheeconomythatwerethemostheavily
subsidized by the redistributive
mechanisms(e.g., the highlyskilled
workersin heavy industries)are certainlylosers. Some workers,those
with marketableskills in the restructuring
postcommunisteconomies,
on the labor market.
can benefitfromthe increasingcompetitiveness
CONCLUSIONS
Afterdistinguishing
the different
typesof marketpenetration,littledisagreementremainsamong the participantsof the markettransitiondebate. First, all participantsare likelyto agree that marketshave an
equalizingeffectonlyas long as marketsare thosewe definedabove as
local. As marketspenetratethe economymore deeply, theybecame a
major sourceof social inequality.Second, all participantsseem to agree
that"directproducers,"in particularordinarypeople, benefitfrommarundertheconditionsoflocal markets.Whencapitalaccuketpenetration
mulationbecomespossiblein socialistmixedeconomies,cadres, former
elitesbeginto enterintoand gain
cadres,and membersofprecommunist
frommarkettransactions.Thus a dual systemof inequalityemerges.
Third, thereis littledisagreement
concerningthe social consequencesof
in EasternEurope after1989: researchers
transformation
postcommunist
fractionof the cadre eliteis the main
tendto agreethatthetechnocratic
of
this
transformation.
It
uses thepolicyof privatizationas a
beneficiary
mechanismof "primitiveaccumulation"of capital. It convertspublic
intoitsown privatewealth,even thoughtherecan be ambiguity
property
in the newlyemergentformsof privateproperty.Other playersof the
economicsystem-in particularthosewho investedin markettransactionsin earliertimes-are pushedout of (or marginalizedin) the newly
emergentmarkets.
To what extentcontemporary
Eastern Europe is the futureof China
remainsunclear.This is a question,however,beyondthescope ofempirical social research.At thispointwe suggestthefollowing:ifthecommubeforea new bourgeoisiehas a firmgrip
niststatebeginsto disintegrate
on the commandpositionsof the new economy,it is likelythatthe Chi1094

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Symposium:Szelenyiand Kostello
nese communistelite will not behave differently
fromits East Euroit will tryto grab as muchfromthe public good as it
pean counterparts:
can.
to change positionsin social spaces, to
The window of opportunity
counteracteffectsof inequality,is a narrowone. It is limitedto the time
As a new social ordersettles,it is likelythat those
of transformations.
who are on the top will findthemselvesable to maintainthat position,
and thoseat the bottomwill end up on stayingthereas well. Change is
theruleof social orders,be theycommutheexceptionand reproduction
nistor capitalist.

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