“We have got stuck half way in our transition from the planned and command economy to a normal market economy. We have created... a hybrid of the two systems,” declared former Russian president Boris Yeltsin a few years ago. What kind of capitalism have we created in Romania, and more generally in Eastern Europe? And how is it different from Western capitalism?

Like many countries of the region, Romania was marked by the rise of what Gil Eyal, Ivan Szelenyi and Eleanor R. Townsley have described in their co-written work on the subject as a "capitalism without capitalists." After the collapse of the communist regimes, we were forced to construct a classless capitalism without recourse to a class of owners and investors which could play the same role as the bourgeoisie did at the birth of capitalism. Of course, that is not to say that we did not have capitalists. They were soon popping up like mushrooms, as were the nouveaux riches. But they were not anything like the Western capitalists. In fact the two were as different as as chalk and cheese.

Our capitalism continues to be pre-modern

The emergence and development of capitalism was fueled by the bourgeoisie’s drive to legitimise economic and financial capital, and to render it equivalent to the social capital which was the unique preserve of the aristocracy. In feudalism, privileges and social standing acted as a magnet for capital. However in capitalism, the equation is reversed and money becomes the source of social position, privileges and power. In Eastern Europe, and in Romania in particular, our capitalists sought to obtain economic capital in exchange for social capital. Technocrats from the former regime, who were closely associated with the structures of state power, made use of their social networks to obtain factories, contracts and other assets which rapidly contributed to their emergence as indigenous capitalists.

The predominance of social capital, which was a specific feature of feudalism, was also a pronounced trait of East European communism, where political capital was simply a variant of social capital. From this point of view, our capitalism continues to be pre-modern, because it obeys feudal rules. Institutional logic has been and continues to be subordinate to relational logic, and institutions have become Kafkaesque organisations driven by favouritism.

Is Eastern European capitalism degenerate?

Another particularity of East European capitalism is the fact that it is not the result of organic development, but the outcome of a project — a quality that gives it a special kinship to communism further underscored by its use of utopian social engineering, which insists that a bright future can only be bought at the cost of a painful present.

In marked contrast to its equivalent in Western Europe, our version of capitalism was forged from the radical transformation of institutions that were reformed from the top down. But in the last decade, the promised Utopia appears to be increasingly remote and social ills engendered by efforts to construct a capitalist society have significantly contributed to a growing disenchantment with the market economy in Eastern Europe.

In Hungary, for example, confidence in capitalism declined from 80% in 1991 to 46% in 2009, in Bulgaria it fell from 73% to 53%, and in Lithuania from 76% to 50%. This rapid fall-off has transformed Eastern Europe into a region with an exceptionally low level of approval for the market economy. In 2007, before the economic crisis, the approval for the market economy stood at 56%, only one percent more than in Latin America (55%), far behind Africa (75%), Asia (72%), North America (70%) or Western European (69%).

Perhaps the key question that we should be asking is one of typology. Is Eastern European capitalism a degenerate form of an "authentic" ideology that exists elsewhere? Or is it simply one of many types of capitalism that have now come to the fore? Sociologists like Karl Marx and Max Weber believed that capitalism was solely focused on one goal. However, their theories did not take into account the global development of capitalism which occurred after their time.

The legitimate racket of the ruling class

Recent history shows that there are in fact a multitude of capitalisms situated in a range that extends from the Chinese model — which has no trouble co-existing with an authoritarian regime — to North American capitalism. Somewhere in between we have East European capitalism — a concept that lacks the refinement required to describe the complex phenomena it is supposed to represent: as though Russian, Romanian and Czech capitalism were all the same.

Finally, the accuracy of claims that capitalism is incompatible with a lack of freedom (the case of China) or with the dominance of social capital over economic capital (as in Romania) is far from proven. Capitalism does not necessarily result in a democracy, nor is it an infallible means to prosperity, and it can quite happily co-exist with clientelist and mafia style governments.

Perhaps the truth is that “capitalism” is simply a generic term for a particular form of economic system whose defining characteristic is not the supremacy of money or the triumph of institutionalism over favouritism, but what Al Capone simply described as "the legitimate racket of the ruling class."