Socialism - Nowhere to Go but Up: As the Smoke Begins to Clear in Eastern Europe

By Heller, Henry | Canadian Dimension, January-February 1993 | Go to article overview

Socialism - Nowhere to Go but Up: As the Smoke Begins to Clear in Eastern Europe


Heller, Henry, Canadian Dimension


The collapse of communism in Eastern Europe in 1989 set off an orgy of rejoicing among the elites of the capitalist West. The long struggle against the spectre of socialism (dating back to before 1917) appeared to have ended in an unconditional victory for capitalism. Global unification under US leadership with a new and unprecedented era of capitalist growth seemed a realistic prospect.

Socialists, even those who had long since given up on the Stalinist regimes of the East, seemed shaken and in despair. What alternatives could there be to a global market which could defeat any and all attempts at politically limiting or controlling its actions? Attempts to do so in Eastern Europe, Asia, and Latin America had ended in economic inefficiency, bureaucratic dictatorship, and exhausting military confrontation.

Three years later it is time to take a second look. What really has happened in Eastern Europe? What relationship do events there have with the global capitalist economy? If we have learned anything these last few years it is how unpredictable the future is. The most durable certainties have been thrown into question. On the other hand, the smoke has cleared enough in Eastern Europe to be able to gauge the outcome of the upheavals there. At the same time it is important to try to understand events there in conjunction with the unfolding economic crisis in the capitalist world.

Based on advice from Western economists and bankers, most Eastern European governments set of f on a crash course towards the privatization of their economies. Poland adopted the earliest and most extreme plan, followed by Czechoslovakia, then Hungary, and more slowly, Russia. Bulgaria, Romania and the Ukraine trailed behind. The German government introduced its own special instrument for harmonizing the economy of the ex-GDR with that of the Bundesrepublik; it was the Treuhandelschaft, a vast holding company whose objective was the privatization of some 12,000 East German state companies. These privatization programs were supposed to create both an indigenous middle class and an efficient labour market as rapidly as possible; privatizing ownership and rationalizing inefficient and unprofitable industries went hand in hand with ending job tenure and creating structural unemployment. The short-term costs in terms of declines in production and joblessness were regarded by these decision makers as acceptable. At the same time it was assumed that there would be substantial private and public capital investment from the West.

After three years, what has been the political and economic outcome of this effort? Widespread economic misery has been offset in part by the appearance of a stratum of merchants, retailers, and small scale entrepreneurs in these countries. But the efforts to privatize the main elements of the economy (large scale industry and agriculture) have either failed or are in doubt. The Polish scheme appears to have ended in a fiasco, with virtually no one wanting to buy the largely inefficient and unprofitable state enterprises. Attempts to dose plants in Poland have been met by sharp and widespread worker resistance, and most importantly, much of the Polish population has concluded that privatization may not be in their interest.

Attempts to privatize the Czechoslovak economy have led to the division of the country, the Slovaks having decided that a strong state is required to protect their aspirations toward political independence as well as their beleaguered economy. It remains to be seen whether Czech plans to privatize through voucher distribution will succeed, or whether the state will be forced by public opinion to intervene to save the thousands of firms likely to collapse under this plan of survival of the fittest.

Attempts by the Yeltsin government to follow the Czech path appear still-born; rampant inflation has rapidly destroyed the value of the vouchers being distributed. …

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