4. The Socialist Period

Volokitina, Murashko, Noskova, and Pokivailova (2002) write that “Building its foreign policy, Moscow relied on the idea of spheres or zones of influence. Eastern Europe was in the sphere of special interests of the Soviet Union. … Moscow considered the Eastern European region mainly as a security belt of the Soviet state.” (pp. 28–29).

Also, illusions concerning the cooperation of the new socialist countries emerged when an international organization for trade and economic cooperation, Comecon (Council for Mutual Economic Assistance), was founded in the late 1940s. After the war, the economic cooperation between the Soviet Union and an individual small country in the Soviet orbit was provided mainly on a bilateral basis. The Soviet leadership was interested in the creation of such an organization, as Comecon, to have more leverage over the management of the economy of the emerging “world socialist system.” Orlik (2015). According to Nekipelov (2000, p. 275), in memoirs of Nikita Khrushchev, it is stated that economic aid to these countries served advertising purposes and aimed to demonstrate the infinite possibilities of the Soviet Union.

However, after these societies embraced the Soviet type of communism large number of intellectuals would potentially agree with the opinion of George Kennan (1979, p. 423): “The Austro-Hungarian Empire still looks better as a solution to the tangled problems of that part of the world than anything that has succeeded it.”

A stylized description of the socialist economy’s original model includes national (socialized) ownerships of means of production and collectivization in agriculture. Other features of this model were the concentration of decision making at higher levels of hierarchy, central plan oriented toward quantities as opposed to prices, and monopoly of foreign trade. Local and firm initiatives were suppressed, especially in the beginning of the socialist period. The inefficiency of these economies became a fundamental issue, symbolized by low technical sophistication, quality of the products, high consumption of energy, and growing pollution. According to the socialist ideology, the central planning system was to prevent the occurrence of inefficiencies. Except, possibly, of hard-core revolutionary communists, most felt a persistent need to reform the socialist economic model.

Such views were close to Kurt Rozsypal (1916–2013), the former first Deputy Head of the State Planning Committee, whom the government removed from his job as a reaction to the crisis of 1962. Rozsypal explained the low performance of the economy by domestic and external factors. Domestic factors included non-realistic plan figures and the inertia of old ways of thinking about a central plan, while as external factors, Rozsypal mentioned worsening of trade relations with China, the Berlin crisis of 1961, and adverse weather conditions.

Among the leading reform-oriented publications of that time consider Komenda et al. (1963), Komenda (1964), Kožušník (1964), Komenda and Kožušník (1964), and Komenda (1969). Richterková (2013) discusses the contribution of Kožušník to Czech economic thought. Also, already from the late 1950s, quality publications appear based on mathematical optimization, mathematical analysis, output-input analysis, and similar. Among them, we mention Habr (1959), Habr and Korda (1960), Korda (1960), Toms and Hájek (1965), Bouška, Skolka, and Tlustý (1965), Kýn and Pelikán (1965), Toms and Hájek (1967), Korda et al. (1967), Rychetník and Kýn (1968), Rychetník (1968), Toms (1968), Kýn, Sekerka and Hejl (1969), Habr and Vepřek (1972), and Walter and Lauber (1975). Walter (1981) and Habr (1981) provide illustrative thoughts about early development in economic modeling using mathematical techniques. In addition, in the middle of the 1960s, Rumler (1965) published an interesting book on Keynes. Besides, Kaplan (1966) provided an excellent description of the political events.

Čihák (1997), Doležalová (2018), Turnovec (2002), Havel, Klacek, Kosta, Šulc (1998), Šulc (2007), Klaus (1984). Biographical data follow Zdeněk Doskočil Biografický slovník českých zemí, (Biographical Dictionary of the Czech Lands) Praha 2017, pp. 670–671.

Karel Kouba (1927–2013) studied at the 1950s at Vysoká škola hospodářskych věd and in 1957 obtained a doctorate (candidate of economic sciences) in political economy. His publications at the beginning of his career included Kouba (1964). From 1964 he worked at the Economic Institute of the Czechoslovak Academy of Sciences, where his leading publications included Kouba (1966), Kouba et al. (1968), and Kouba et al. (1968). In 1969, Kouba became a Director of the Economic Institute. However, as the political atmosphere completely changed, he resigned. From the early 1970s till 1988, he was forced by the regime to accept a low administrative job at a large Prague factory. Even if he was not allowed by the authorities to participate in the education and research, he remained a research economist working after the working hours. He participated in seminars at private apartments. However, with Josef Goldmann, he has published in Hungary in Acta Oeconomica and a Czechoslovak mathematical economic journal, Matematicko-ekonomický obzor. From 1988 he was re-admitted back to the Academy of Sciences. He became a professor in 1990, and from 1991 till 1993 was a Director of the Institute of Economic Studies at Charles University in Prague. Bauer (2005) provides a review of his life and research.

In this time period also other valuable work emerged, some with ideological undertones but still within the professional knowledge of the discipline. Among them we mention Nachtigal (1973), Toms (1976), Klacek and Nešporová (1980), Kotulan (1981, 1982), Dyba and Kupka (1983, 1984), Toms and Mejstřík (1986), Janáček, Klacek and Vintrová (1983), Tříska and Klaus (1988), Klusoň (1988), Dědek (1989), Janáček et al. (1990). In that period in Slovakia Laščiak et al. (1985), Laščiak et al. (1990), among others.

Kornai (1993), Árvay and Hegedűs (1994), Nyers (1984), Nyitrai (1983), Maltsik (2002), Friss (1995).

Why a son of the upper social class joined the illegal Communist Party remains a mystery to which, in the case of Péter, Borsányi (1994, p. 42) provides some explanation. He also adds that fortunately, the system was corrupt, and wives of prisoners from better-off families visited the family of the officer in charge, and gifts improved the prison conditions.

Lindbeck (2007), Roland (2008), Chikán (2006), Hámori (2012).

Chikán (2006, p. 203) quotes the study of István János Tóth from 2004 who showed that in the 1980s, based on the data in the Social Science Citation Index, Kornai was the most cited economist from socialist countries followed—in a certain distance—by Brus, Šik, and others. Besides, Baron and Hannan (1994) show that in the sociology journals in the early 1990s, Kornai was the most cited economist. Even Yang (2010) heavily cited Kornai in discussion on religious awakening in China under Communist rule, which appeared in a Companion to the Sociology of Religion.

However, further research has shown that soft budget constraint also appears under the capitalist economic system. Dewatripont and Maskin (1995) formalized the soft budget constraint as a commitment problem within contract theory. A principal will not favor refinancing the project if the project’s return is lower than expected. Nevertheless, a principal still might end up refinancing it as he/she considers the initial costs as sunk costs, and only the project’s return is considered in the final decision whether to bail out the firm or not.

Dobb (1966), Roberts (1971), Kowalik (2008), Neuberger (1973), Sadler (1977), Szymczak (1995a), Szymczak (1995b).

Sebastiani (1994), Vaggi and Groenewegen (2003), Czarny (2014), and Sawyer (2008).

Tugan-Baranovsky (1865–1919) graduated from Kharkiv University in 1888. His master thesis for Moscow University was on industrial cycles in Great Britain, and his doctoral dissertation on The Russian Factory, Past and Present (Russkaya fabrika v proshlom i nastoyashchem). His major contribution was Osnovy politicheskoi ekonomii (Foundations of Political Economy) (1917), which went through many editions and attempted to synthesize the Marxist labor theory of value and subjective value theory. His academic career was mainly in the University of St. Petersburg. The Minister of Education vetoed his election to the chair of political economy in 1913, he was re-elected in 1917. However, he did not accept this appointment, returned to Ukraine, where he became dean of the Faculty of Law of Kyiv, and for a short period Minister of Finance. Nove (1987). For a review of his work in Central Europe, in the interwar period, see Heller (1945).

In Kalecki the idea of the insufficiency of investments had its origin in underconsumption due to the poverty of the masses. New investments would affect the productive capacity more than the demand, which made the investments useless in an effort to create full-employment demand. Sebastiani (1994, pp. 15–16).