In preparation for his dissertation, Arato conducted preliminary research at the Hungarian Academy of Sciences in the spring of 1970 under the guidance of Budapest School scholars Ágnes Heller, György Markus, and Mihály Vajda.
Phase three was (III) marked by a turn to a post-Marxist emphasis on civil society as a moral and analytical category meant to further the project of democratization in both the East and West.
[3] Arato's emphasis on social praxis and the concomitant categories of subjectivity, culture and alienation was displayed in his dissertation on the early 20th-century Marxian philosophy of György Lukács.
[10] Arato's praxis theory and Western Marxism in general privileged the active, democratic participation of groups and individuals in their supposedly collective self-determination, and they criticized orthodox communist parties with their claims to know the true interests of the working class and to be able to make the proper decisions for them in a form of “substitutionalism.” In contrast to the control of the communist state with its enforced passivity of working classes, “true socialism,” said Western Marxists, should be democracy – democracy extended from the political sphere to the economy and indeed to all social institutions.
As Hungarian critics Gyorgy Bence and Janos Kis noted, this rebirth of Marxian philosophy in the East “sidestepped the problem of basic class antagonism” intrinsic to the socialist dictatorships of Eastern Europe.
One after another, Arato examined neo-Marxist analyses of state socialism written by such authors as Herbert Marcuse, Cornelius Castoriadis, Rudolf Bahro, Habermas, and Iván Szelényi.
He recognized, however, that the theoretical tools offered by Marx himself – that is, historical materialism – were often used by state socialist societies to veil their politically based class inequalities, not expose them.
[13] Further, Arato argued that Marxian writers were typically trapped by the problematic of Marx's philosophy of history, which could only conceive of two possible modern industrialized social formations – either capitalism or a progressive socialist society.
He and intellectuals in Eastern Europe criticized Marx's advocacy of a radical democratic reunification of state and society in a supposedly collective free social order.
It resulted either in the loss of independent freedom of civil society under the embracing control of the party-state or else it saw regression in economic rationality as the community or state subjected the economy to their traditional norms and political calculations.
The goal—Arato argued for Eastern Europe, but soon extended this model to the West—should be the protection and indeed the strengthening of civil society and its democratization and institution building separate from the strategic instrumental logics and power hierarchies of the state and capitalist economy.
However, the relevance and vitality of the category of civil society for the West became an object for vigorous dispute at Telos, most especially by Paul Piccone, the journal's pugnacious editor.
Piccone elaborated his own perspective under the rubric of “artificial negativity,” a theory that failed to see any autonomous cultural dynamics in the current U.S. civil society outside of the state's manipulation and control of a supposedly atomized, narcissistic population of consumers.
[28] By "post sovereignty," Arato meant that the creation of the constitution abandoned the mythology that it was being issued by the people themselves as ultimate sovereign authority, speaking directly in an unmediated form.
Such a mythology, Arato said, often had authoritarian consequences, resulting in a leader or party claiming to represent the people without needing any special limits or rights to ensure that the populace could actually have a voice in political decision making.
Such a process, besides remedying past deficiencies, would also address the conundrum of political legitimacy outlined by thinkers such as Jacques Derrida and Giorgio Agamben, who noted that democracies always contained an undemocratic, illegitimate, arbitrary, even violent moment in their founding.