Why Socialism Failed

Why socialism failed: Toward a theory of system breakdown - Causes of disintegration of East European state socialism
IVAN SZELENYI and BALAZS SZELENYI
University of California, Los Angeles

In 1942 Schumpeter wrote Capitalism, Socialism and Democracy. The book was written in the shadows of the Great Depression and was inspiredby the hopes of an allied victory.Of centralimportanceto the bookthen was to constructthe vision, and write of the needs, of the era. post-fascistpost-warreconstruction In the work,in the light of the of the second half of the twentiethcentury,Schumpeter developments asked two poignant questions and gave two debatable answers:"Can capitalismsurvive?No"2and "Cansocialismwork?Of course it can." Capitalism, Socialism and Democracy, in our mind, is a companionvolume of Mannheim's Man and Society in the Age of Reconstruction3 and Karl Polanyi's The Great Transformation.4 Schumpeter, Mannheim, and Polanyisharedone common belief and one common interest:each one of them believed that with the Great Depression and the Second World War laissez-fairecapitalismhad came to its end, and all three were interestedin workingon blue-printsfor post-warreconstruction
ofWestern societies.5 Reconstruction - all three agreed - has to be

innovativeand has to have a new base of departure: can neither be it as we used to know it nor can it be totalitarianism rightof capitalism or left-wingversions.Each in his own way foreshadowedsomewing welfarestate of the thing that eventuallybecame the social-democratic 1950s-1970s and that proved to be by allobjectivemeasuresthe most successfulepoch of capitalism.
Can socialism work? Schumpeter revisited: Our point of departure In light of the world-historic events of 1989-1990, one has to submit Schumpeter's predictions that laissez-faire capitalism would fall and that his version of socialism would work to critical scrutiny. This is
Theory and Society 23: 211-231, 1994. ? 1994 KluwerAcademic Publishers. Printed'inthe Netherlands.

212 exactlyour purpose in this article.However,insteadof conductingthis inquiryfrom our real or assumed wisdom gained in 1989-1990, we He wantto buildupon Schumpeter. claimedin the chapter"Cansocialism work?"to offer a survey "of problems that bear upon the conditions in which socialistorder may be expected to be an economic success."6He justifies this venture by pointing outthat: "Love and hate
have ... blurred the serious work on the question..." and as a non-

Marxistand non-believerhe thinkshe is well posed to come up with an objectiveanalysis. Our intentionis to applythe Schumpeterian analysisto the reconstruction of eventsin Centraland EasternEurope duringthe 1980s, leading We to the fall of communism. intend to do this without"loveand hate," but in light ofthe development of the last decade, by reformulating Schumpeter's question.The purpose of our analysisis not to explore "Cansocialismwork?"but insteadto scrutinize"Whysocialismfailed." Although at first glance this may sound like a radicaldeparturefrom Schumpeter'sreasoning, it is not. We do not reject Schumpeter;we adopt his methodology to the analysis of our own realities. When hisSchumpeteransweredin affirmative own questionhe meant:socialism maywork.In the same spirit,when we pose the question"Whydid socialismfail?"we do not accept the assumptionso commontodaythat it had to fail, because it did not work.The main thrustof this articleis that the breakdownof socialist system was not inevitable,under different historicconjuncturessocialism mighthave survived.The breakdown cannot be takenfor granted,it needs rigorousanalysis,and can felt only be successfulif it is done without"loveand hate."Schumpeter In it necessaryto state that he did not "advocatesocialism." this article we neither advocate socialism nor capitalism. Our fundamental assumptionis that both capitalismand socialism are historical proThere is no iron ducts, unique, not universal"institutional patterns."7 law that...