Issue 237 of SOCIALIST REVIEW Published January 2000 Copyright © Socialist Review

Thinking it through

Do you believe in miracles?

The promise of peace and prosperity in eastern Europe has failed to materialise. Chris Harman explains why

How fitting that the 1990s should end with protests against the world order embodied in the World Trade Organisation. A month before, the proponents of that order had attempted to celebrate the tenth anniversary of the fall of the Berlin Wall. Even grovelling media hacks were compelled to acknowledge the air of disillusionment at the official commemoration of the birth of the 'New World Order' and the 'End of History'.

The reasons for disillusionment are easy enough to see. The peoples of eastern Europe and the former USSR were promised after 1989 a new era of prosperity and peace if the market was allowed to guide their economies. Instead, they suffered the direct opposite.

The recent book Market Failure (Pluto, £13.99) by two left social democrat economists, Laszlo Andor and Martin Summers, provides a very useful overview of the scale of the economic disaster. In 1997 the economies of Russia, Ukraine, Bulgaria, Romania, Georgia, Armenia, Albania and Serbia were all around half the size they had been ten years earlier. This means incredible levels of hardship for the vast majority. According to a Unicef report published in 1994, between 1989 and 1993 the death rate rose by 9 percent in Romania, by 12 percent in Bulgaria and by a staggering 32 percent in Russia (the equivalent of an extra half million fatalities per year).

Agriculture was one area where Stalinism's economic record was notoriously poor. But the spread of the market made the situation worse, not better. Andor and Summers' book records that food output in 1993 was down on that of 1989 by 13.7 percent in Poland, 19.7 percent in Russia, 23 percent in the Czech Republic and 47 percent in Hungary.

Several years ago Tony Cliff described the 1990s as, in some ways, like 'the 1930s in slow motion'. In terms of people's living standards, conditions in much of eastern Europe and the former USSR have deteriorated even more than they did in the west in the 1930s.

The only economies to have grown according to official measurements since 1989 have been Poland and Slovenia. Here the growth came after years of stagnation or contraction, so their 'success' amounts, at most, to getting back to where they were in the mid-1970s.

So bad are conditions generally, that the very parties that were driven from power by the mass protests of the late 1980s have been able to return to office through elections in several countries. This has not, however, led to any abandonment of pro-market policies. For instance, as Andor and Summers tell, 'The Hungarian Socialist Party found itself presiding over the imposition of fees for higher education', imposed 'charges for dental and medical care' and sold 'the monopoly, regional electricity and gas supplies into private foreign hands'. They suggest it was because 'most of the higher echelons of these parties were former apparatchiks... In the 1980s they had looked to Gorbachev and Moscow for parental guidance; now they sought the same emotional satisfactions in Brussels and Washington.'

There are still sections of the western and Third World left nostalgic for the years before. In fact, it was precisely because the system presided over by Brezhnev and then by Gorbachev was already in deep desperate crisis that it fell apart so easily in the years 1989-91. The key figures who ran industry and the state suddenly saw they had to move very quickly if they were not to be overwhelmed by movements from below.

Embracing the market was the easiest option for them. It enabled them to keep their privileged class positions while adopting an ideology which seemed capable, as Stalinism no longer was, of getting them out of the crisis. So today most of the 'anti-Communist' rulers in the former USSR used to be in the politburo of the C0mmunist Party of the Soviet Union--Yeltsin in Russia, Aluyev in Azerbaijan, Nazarbayev in Kazakhstan and Shevarnadze in Georgia.

Andor and Summers brilliantly demolish the intellectual pretensions of old Stalinists who embraced the ideology of the market with unthinking fervour. But they lack the theoretical framework to understand either why crisis erupted in the late 1980s, or what the real alternatives are today. They refer to the old order as 'socialist' or at least 'actually existing socialism' and see it as swept away in 1989 by a new system, 'capitalism'. This is to fail to recognise that the characteristic feature of capitalism through much of the 20th century was the growing merger of control over the state and control over capital. Already in 1916 Lenin and Bukharin told how market capitalism was changing into 'state capitalism'. The Stalinism that arose out of the isolation and degeneration of revolutionary Russia was one extreme of a continuum of increased state capitalist organisation of economies right across the world, from South Korea and Taiwan to Egypt and India. It was not some different and exceptional form of organisation.

For some three or four decades such state capitalisms displayed more economic dynamism than the economies that remained predominantly market-based. The glory days came to an end in the 1970s. The most successful capitals were now those with access to resources and technical innovation organised on a multinational rather than national scale.

But the fact that capitalism-with-the-state was no longer as effective as in the past did not mean that capitalism-without-the-state was going to be effective. In fact, the decline in growth rates and the re-emergence of crises were a feature of all the more industrialised economies after the mid-1970s.

As some of us pointed out before 1989, the inevitable effects of simply abandoning state control over the economies of old Eastern bloc was bound to be disastrous. Each economy was dominated by large industrial concerns that would be free to use the monopoly position domestically to raise prices while reducing output. The only way to avoid these things was by replacing bureaucratic control of the economy by workers' control and democratic planning.

But an unholy alliance of former nomenklaturists, intellectual dissidents, the western media and the local mafia persuaded the mass of people that switching from state capitalism to market capitalism would produce a miracle. In doing so they prevented political reform turning into social revolution. Those who actually took to the streets and tore down the wall in 1989 are now paying the price, as are the innumerable victims of war and civil war across the Balkans, the Caucasus and the southern belt of the former USSR.

Hopefully some will get inspiration from the protests in Seattle. There is a world system to fight, not just the bureaucrats who used to preside over one part of it.

Between 1989 and 1993 the death rate in Russia rose by 32 percent

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