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We review two conflicting arguments concerning meritocracy in modern societies. One argument, ‘meritocracy as functional imperative’ (MFI), derives from the American liberal tradition and sees the development of meritocracy, and especially of education-based meritocracy, as essential to the technological and economic dynamism of such societies. The other argument, ‘market versus meritocracy’ (MVM), derives from the European liberal tradition and sees meritocracy of any kind as in various respects incompatible with the principles of a free-market economy and liberal democracy. The transition that has occurred in several of the societies of the former Soviet bloc from state socialism, under which education-based meritocracy was relatively highly developed, to liberal capitalism provides a ‘natural experiment’ that allows for the empirical testing of the two arguments. We focus on changes in the relations between social class origins, educational attainment, and class destinations in the case of Hungary, for which extensive and high-quality survey data are available. In general, our findings do not support expectations under the MFI argument but are consistent with expectations under the MVM argument. [ABSTRACT FROM PUBLISHER]