1979 and the Collapse of Omnipotent Rationalism

In a provocative new book, “Strange Rebels: 1979 and the Birth of the 21st Century,” veteran foreign correspondent Christian Caryl argues that our century began in 1979. This was the year, for instance, when Margaret Thatcher won the general election in the UK and launched her bold agenda of privatization and de-regulation. The following year, the same political principles prevailed in the United States with Ronald Reagan’s landslide presidential victory. It was also in 1979 that Deng Xiaoping, China’s new leader, began to liberalize the Chinese economy after three decades of Maoist collectivism; collective farms were dismantled and the peasants enjoyed increased freedom to manage their land and sell their products on the market. At the same time, the Chinese economy was opened up to foreign capital by means of special economic zones.

Other important changes took take place in 1979 as well. John Paul II, who had been elected pope the preceding year, began his worldwide pastoral visits, which would serve to lend Catholicism a more open and modern image. One of his first trips was to his native Poland and dramatically showed that religion remained important for people long living under communist rule. In Iran, an Islamic revolution led by Ayatollah Khomeini overthrew the rule of the Shah, who had led one of the most secular regimes in the Middle East. In Afghanistan, Soviet troops came to the help of a socialist government, which had been facing an Islamist insurgency since it had seized power the previous year. The prolonged and costly war would be one of the main reasons for the collapse of the Soviet empire a decade later.

Caryl interprets these events as the victorious return of the dual factors of market and religion to the world stage, two forces that had long been suppressed by an arrogant rationalism. Beginning in 1979, the strong beliefs in central planning and secular perfectionism that had enjoyed significant currency for years were challenged when the chaotic, even destructive forces of market chance and religious fervor returned “with a vengeance,” writes Caryl. “The forces unleashed in 1979 marked the beginning of the end of the great socialist utopias that had dominated so much of the 20th century.”

Does Caryl’s thesis apply to Hungary?

In this country, the year 1979 does not bring to mind any particularly dramatic memory. But if one looks closely, one finds that this year witnessed two key economic turning points that indicated the collapse of omnipotent rationalism in Hungary as well. First, 1979 was the first year in more than two decades in which the average real wage fell — this decline would continue until the democratic transition and beyond (see here and here). It was also the year in which the accumulation rate (the proportion of investments as compared to consumption in the GDP) foundered: after a rapid increase, the figure plateaued at a record high of 38% in 1978. Starting in 1979, however, the rate of accumulation gradually plummeted by half to hover around 19% by 1990—it would remain between 18% and 23% over the next two decades (see here, here, and especially here).

These profound economic changes in Hungary correspond to the historical development described by Caryl on the global scene. Before 1979, the communist government in Hungary had aimed at catching up with the West via a society-wide, centrally planned modernization effort. In order to achieve this, they had withdrawn resources from consumption and social services and had invested everything they could in the productive economy. Unlike Stalin, however, Hungary’s communist leaders did not dare sacrifice existing living standards, so they instead raised foreign credit to simultaneously finance a modest improvement in living conditions.

Obviously, this model of development proved unsustainable, and it was in 1979 that this hyper-rational, scientifically socialist agenda began to unravel. Although less noisily than the United Kingdom, China, or Iran, Hungary made its own move away from 20th century rationalism in the momentous year of 1979.

This essay first appeared on 18 July 2013 on Paprika Politik, the blog of Common Sense Society, Budapest.