In Chapter 5, I described how state socialism developed in the Soviet Union and later in East European societies. But it was not copied in the advanced capitalist countries. In the 1980's the slowing of economic growth and the unfulfilled expectations of the populations led to movements for economic reform. A successful reform was considered essential to meet the conditions and expectations of a more advanced modern society, though by the beginning of the 1980s economic reforms in the European state socialist societies had had little success. Proposals from the reformist economic and political intelligentsia (outlined in Chapter 5) shifted to calls for a deeper form of restructuring.

A major division arose between reformers. Some proposed a move to a market economy consequent on severe reductions in the role of economic planning but, crucially, they endorsed the continuing hegemony of the Communist party-state system. Other campaigners sought a move to a market system that would disband (or effectively curtail) not only central planning but also the hegemonic role of the Communist Party. Implicitly, their ideas moved to an acceptance of markets which, if they were to work as in the West, could only operate in the context of autonomous economic institutions (independent banks, corporations, stock exchanges). Market forces could not be introduced, they claimed, if politicians (and political institutions) prevented the market from operating. They contended that a market system was much more than a market economy, it was dependent on a corresponding socio-political infrastructure and institutions to make it work – just what neoliberal theory required (as described in Chapter 2). Their critics considered, correctly as it was to transpire, that such a course would lead to the restoration of capitalism.

Within system market-type reform was limited by the high levels of state ownership and extensive economic and political controls exercised by a hegemonic Communist Party that appeared immovable. A major impetus for transformation was to come from outside – from the example of neoliberal governments in the West, as well as external conditions for reform. Socialist reformers found political inspiration in the success of neoliberalisation in Western Europe, particularly from the policies pursued by Margaret Thatcher in Britain. She had privatised state-owned assets, severely weakened state management, defeated the militant trade unions, strengthened the market and diluted the welfare state.