The demise of communism triggered large flows of foreign direct investment into Eastern Europe. This article examines the impact of recent changes in the international environment-the transformation of world production systems and the rise of neoliberalism-on bargaining between multinational corporations and post-communist governments. It focuses on the Hungarian automobile industry, one of the region's largest recipients of FDI. The Hungarian case illustrates the ability of small, open, and geopolitically weak states to parlay shifts in the global environment into a bargaining asset. The ascent of lean production heightened pressure on auto MNCs to develop local supplier systems capable of fast delivery of components to East European subsidiaries. The pull of backward integration was particularly strong for Japanese producers, whose non-European status enabled Hungarian state authorities to secure commitments to raising domestic content. Transplanting Japanese-style production in Eastern Europe proved less vexing for European MNCs, whose status as EU-based companies freed them of local-content requirements and whose preexisting supplier networks obviated heavy investments in the Hungarian components industry. But while Western auto producers enjoyed highly favorable terms of entry into Eastern Europe, even they could not elude the paradoxical effects of global changes on MNC/host state relations. The very eastward extension of the European Union's nondiscriminatory rules that facilitated EU-based firms' entry into Hungary also permitted host state authorities to parry efforts by MNCs to obtain particularistic concessions after entry. The Hungarian case thus demonstrates that MNC/host state bargaining in the post-Cold War period hinges more on the global positions of multinationals than on the structural vulnerabilities of capital-importing states (per dependency theory) or the internal capacity of host states (per statist theories).

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The profound transformations that preceded the downfall of Communism originated in Poland and Hungary, but played out in strikingly different ways. Hungary led through economic reform, Poland through open political struggle. Analysis of these transformational variants yields important insights into systemic change, marketization, and democratization. This book shows how these changes were possible in authoritarian regimes as, over time, state and society became mutually vulnerable, neither fully able to dictate the terms of engagement. For Poland this meant principled confrontation; for Hungary, innovative accommodation. This book argues that different conceptual frameworks and strategies of persuasion account for these divergences in virtually identical institutional settings. Seleny traces the different political-institutional residues which, in both Hungary and Poland, now function as constraining or enabling legacies. In particular, she demonstrates that state socialist legacies account for salient differences between these two new capitalist democracies, and now condition their prospects in the European Union.

By focusing on the informal legacies that still shape the democracies of Central and Eastern Europe, we can attain a nuanced understanding of the region's postcommunist countries. In Poland, confrontational maximalism helps to generate governmental instability and poor policy continuity, while in Hungary there is now a question mark hanging over the future of the bounded flexibility that once reliably helped to center democratic politics. In the Czech Republic, instrumentalist attitudes and partisan-ideological differentiation jointly increase the chances of serious corruption and polarization, while in Slovakia the democratic system appears to lack an endogenous force capable of effectively confronting bigotry and discrimination.

Studies of democratic consolidation tend to highlight the same factors previously used to explain countries' transitional dynamics. Yet one cannot properly understand success or failure in democratic consolidation—much less discern significant qualitative differences among consolidated democracies—by focusing exclusively on formal institutions, modes of transition, incentive structures, or exogenous factors. Close inspection of two newly consolidated democracies—Poland and Hungary—shows that despite radically altered institutional arrangements, legal structures, and political-economic incentives, the most important determinants of the models of democracy emerging today derive from pretransition conceptual frames and informal political settlements. Specifically, the core conflicts between ruling elites and society in communist Poland and Hungary, as well as the patterns of political accommodation that evolved in the management of those conflicts, continue to structure the political agenda and order debate in both countries. In Poland overlapping ethical-ideological cleavages and failures of political accommodation under the ancien regime have resulted in a confrontational-pluralist model of democracy. In contrast, Hungary's compromise-corporatist model stems from early informal accommodation between the party-state and society that recast most conflicts as “economic” in nature. These long-standing conflicts and political patterns explain striking contemporary differences in social mobilization, party competition, and constitutional development. The article concludes with a discussion of how these models are likely to shape each country's prospects for sustained governability and increased democratic legitimacy.