The origins of neoliberalism in late ‘socialist’ Hungary: The case of the Financial Research Institute and ‘Turnabout and Reform’

Abstract

This article contributes to ongoing debates in the transformatology literature, as well as the wider literature on the global neoliberal revolution, on the origins of neoliberalism in Soviet-style economies. Within these debates, the transition to a (free) market economy and liberal democracy in Hungary and elsewhere in the former Soviet bloc has commonly been perceived as an exogenous process, dating to the annus mirabilis of 1989. This article challenges this consensus. Through a case study of the Financial Research Institute ( Pénzügykutatási Intézet), the official research institute of the Ministry of Finance, and a programme of radical economic reform, known as ‘Turnabout and Reform’ ( Fordulat és Reform), published in 1987 by a group of experts at the institute, the article demonstrates that in the case of Hungary, neoliberalism was not simply an ‘imported project’, which arrived ‘from the West’ on the eve of the formal transition in 1989–1990. Rather, it is argued that it emerged organically in Hungarian society in the 1980s, as a response by domestic economic and political elites to the deepening crisis of the Kádár regime. Hence, the essential aim of the ‘neoliberal turn’ was to reconfigure the Hungarian economy in line with the exigencies of the capitalist world economy, while ensuring that the political transition went as smoothly as possible. As such, while obviously a repudiation of past policy, policymakers in Budapest pursued the similar objectives as central planners under ‘actually existing socialism’.