In the two years after 1989, the coun tries of Central and Eastern Europe moved from economic stagnation to a depression about as deep as the Great
Depression. Total national output across Eastern Europe fell by about
25% during 1990 and 1991 and no real turn around is in sight in 1992. By comparison, in the four years between
1929 and 1933, gross national product fell by 29% in the USA and Canada and by slightly less in western Europe. Industrial output in eastern Europe is falling even faster than total output.
T masthead mirrored the confused situation in the former Soviet Czech Republic Union - now the Common- Attitude to economic reform wealth of Independent States (CIS) - where the economic and political crisis was and is deep. What happened in 1989 in Eastern Europe and what transpired in the CIS at the end of 1991 are, of course, linked. In a purely descriptive way, it might be said that after the failed August coup, the Soviet Union unequivocally entered the East European road, the difference being that, today, the countries of central and Eastern Europe have travelled further in the direction of the restoration of the capitalist economy. What can be said, then, about the events that have transpired since the 1989 changes swept across Eastern Europe? Briefly, if 1989 was the year of upsurge, and 1990 the year of sorting out power, then 1991 was the year of consolidation of the capitalist economic reform project and signaled the end, once and for all, of any notion of a
Stop (16.0%)
Recast (3.0%)
Maintain (21.0%)
Accelerate (34.0%)
Modify (26.0%)
Slovak Republic struggle for "democracy" against the for- Attitude to economic reform mer authoritarian system.
Addressing five key questions can help provide an understanding of the situation in eastern Europe today.
• What is the current economic situation two years after the so-called reform process began?
• What level of social resistance to this economic reform process is evident or can be expected?
• In what ways has the problem of the old state apparatus been tackled by the new anti-communist governments, and what is their own record on the question of democracy?
• Through what political stages has the * Peter Annear is the Moscow correspondent of the Australian socialist newspaper Green Left.
Stop (25.0%)
Recast (8.0%)
Maintain (4.0%)
Accelerate (26.0%)
Modify (37.0%)
15
Czechoslovakia 1991
Number of unemployed
March 30, 1992
EASTERN EUROPE
As a consequence, unemployment began a steady swift climb, at least doubling during 1991 in Bulgaria, Czechoslovakia, Hungary and Poland (where it has reached 13%). In Albania, unemployment rose to 30% during 1991. Already, about 7 million workers across eastern Europe are jobless, a number that will quickly double again. Inflation is also a major problem and, as in Poland, which is regarded as a model for the economic transition, has everywhere led to the implementation of rigid austerity policies. During 1992 Russia will experience hyper-inflation and has already negotiated for conditional IMF loans. Where inflation is not an uncontrollable problem, as in Czechoslovakia, that is true only because of a purposely induced recession. Additionally, in Poland, for example, real wages fell 30% in a year.
During 1991, therefore, both output and living standards in eastern Europe dropped dramatically. Mass social discontent has not yet broken out as a result of this economic decline mainly because unemployment is still relatively contained, due to the fact that many theoretically insolvent state enterprises are still operating. In the 1930s, political agitation in the west was less the product of falling incomes than of rising unemployment, which hit 30%.
However, the alarm bells are ringing. In December, the bulletin of the United Nations Commission for Europe said popular disappointment and frustration threatened to undermine support for the economic reforms in eastern Europe. It pointed to the sharp contrast between western recommendations to east Europeans to liberalize their economies as quickly as possible, as well as their earlier promises of the benefits of "democracy", and their present reluctance to remove import barriers to east European products. It urged the west to initiate a recovery program for eastern Europe similar to the US Marshall Plan which stimulated revival in western Europe in 1948-51. But 1991 was not 1951, and a new Marshall Plan is definitely not possible.
Another report in December by the Morgan Stanley merchant bank in the US said, "eastern Europe faces a new crisis because its reforms will lead to ominous rates of unemployment rather than economic growth next year [1992]". It said that the former Soviet Union faces at best a Bonapartist, at worst an anarchic [outcome]." (Financial Times, December 23, 1991) That was a very accurate comment. If there were presently a one-word description of the economies of the former Soviet Union it would be "anarchistic" -the lack of any real or accepted system as 16 such. By "Bonaparis" Morgan Stanley International Viewpoint # 225 •
600
500
400
300
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Janua February March May April meant the restoration would not convert the economy to authentic capitalism but that it would remain based on socialist forms of some type. The report said that it would take $100 billion a year, adding a dramatic 0.5% to western interest rates, to start to tackle the deep-rooted structural problems that affect all sections of the former Soviet economy. Incidentally, the message that Harvard monetarist economist and advisor to Boris Yeltsin's Russian government Jeffrey Sachs is giving to the west is also that it must find a way to finance the reconstruction of the Russian economy. Sachs previously advised the Bolivian government on economic reform and privatization and then was contracted by the Polish government as an advisor, not always with good results from a social point of view. The product of this financial burden on the west, of course, would be to further prolong the international recession. The report said calamity can be avoided only "if the west recognizes that [the current] laissez faire reform [program] will not produce minimal prosperity within a politically feasible time frame", the meaning of which is abundantly clear [emphasis added]. Unemployment, it said, will soon approach 20% on average.
Political repercussions have already followed from this unexpected economic crisis. Apart from the splintering of parties, the reason the Polish parliament could not produce a stable government following the October elections was the division over economic policy between former prime Minister Jan Krzystoff Bielecki, a hard line laissez faire monetarist supported by Polish president Lech Walesa, and
### July September November
June August October prime minister designate Jan Olszewski from the Christian democratic Centre Alliance party (formerly Walesa's party, now opposed by him which is afraid the economic decline will cause "political instability" and which therefore hoped to reverse the present recession with Keynesian-style growth policies while purging the apparatus of former Communists. A similar pattern is evident in the national and political divisions within the Czech
Some governments in the region, and most notably the finance minister Vaclav Klaus in Czechoslovakia, are predicting the depression will bottom out in 1992 and growth will come in 1993. To put the best light on it, this is a case of unfounded optimism; in reality it is conscious deception. The crisis may well bottom out in some places, but there will be no quick turnaround. Unless the east European governments retreat to a policy of supporting state industries and inflating their economies, they have only two possible avenues for growth: joining the EC and successful privatization, both of which have a gestation period of about ten years at least, and both of which are anyway unlikely ever to produce the desired
Poland, Czechoslovakia and Hungary have agreed to full trade liberalization with the EC by 1999. But given the weakness of the central European economies in the face of unfettered competition from industrialized Western Europe, freer trade is unlikely to produce widespread economic benefits. A lop-sided distinction was anyway made in the agreements between on the one hand steel, coal, textiles and
Janı Febru:MarcApril May June Jul:Au SepterOctNoveDecerJantFebru:MarctApril May June Jul Au September
Real income
March 30, 1992 agriculture, which are regarded by the EC as "sensitive products" and in which trade limitations will therefore remain, and on the other general industrial goods, where the EC holds a big advantage and where a specific timetable for the elimination of trade barriers has already been set. Such an agreement is a recipe for underdevelopment in eastern Europe.
On average, wage rates in the east are about one-tenth of what they are in the west. At high income levels this disparity will begin to narrow, but for the overwhelming majority of the people it will remain about the same — or it will widen. The experts - like the prominent rightwing Hungarian economist Janos Kornai — all insist that preserving low-wage economies is the fundamental requirement of any success in the bid to renter the world market. Kornai warns that potential wage rises are the Achilles heel of the reform process. Moreover, while in none of the east European countries is the total value of state-owned property very large by western standards, in no case are domestic savings nearly sufficient to buy out state property. Additionally, foreign capital is proving very selective in just what assets and industries it will buy, taking only the cream.
Some regions will be much worse affected than others. In place of the Iron Curtain, a new economic border running much closer to the old, pre-war divide between the semi-periphery and the real periphery of industrial Europe will emerge - splitting the modest wellbeing of Prague from the hopeless poverty of Bucharest. To the west of this new border, east Germany, some parts of Poland, the Czech Lands, Slovenia and the western parts of Hungary may gain access to EC-Europe as tiny partners. But the agrarian regions of Hungary, Poland, Slovakia, Rumania, Bulgaria, Albania, and what used to be Yugoslavia will lie over the horizon, making the lands to the east of the Oder-Neisse and Budapest to industrial Europe what Latin America is to the USA.
It is now clear that as a result of the so-called reforms these formerly agrarian countries will again find themselves economically about where they were at the turn of the century. In Hungary, Poland, Rumania and Bulgaria, economic development for a hundred years was dependent on the highly industrialized regions of western Europe, which dominated the east politically and established economic relations of a colonial type. If you read current IMF projections for the east, you will see that relations of a colonial type are just what they again, more or less openly, propose. This is true for example in plans drawn up by the IMF and other international bodies for restructuring the former Soviet economy. There are many plans for developing the former USSR's raw material reserves but none for manufacturing industry. By contrast, the postwar "socialist" economic development on the Stalinist model proved to be a unique and partially successful catching-up strategy of industrialization and national development, limited though it was by the enforced isolation of the cold war and by bureaucratic methods (see Komlosy and Hofbauer, unpublished paper on eastern Europe, Vienna 1991).
Nor will privatization necessarily be effective. As one Hungarian researcher (Istvan Csillag) has pointed out, there is
EASTERN EUROPE no causal relationship between privatization and economic efficiency. And there is no innate reason why a combination of various forms of property ownership — which could include private small industry, collectives, workers' self-management or state ownership of big industries - could not produce as good or better economic results.
In this regard it is important to understand that the depression in eastern Europe is not the product of the failure of the former "socialist" economies. Nor is it just the side-effect of the market reforms. The economic theoreticians themselves make it clear that the depression is actually the practical means for reintroducing capitalist relations. In The Road to a Free Economy (a program for the market reform in Hungary written in 1989), Kornai reserves for the depression the label of "creative destruction", meaning that the depression destroys large parts of the state-enterprise sector in order to clear economic territory for the budding of new private enterprise. In Czechoslovakia, for example, which until 1989 had a stagnant but viable economy with a diversified industrial base and a relatively efficient agricultural sector, finance minister Vaclav Klaus says openly that he expects one-half of state enterprises to go bankrupt — that is, he intends to bankrupt them as a result of his economic policies.
Privatization does not have a strong economic justification and should more correctly be seen primarily as a process of social restructuring, creating a new layer of property owners who may one day become real capitalists. However, creating new classes, as Kornai wrote, is an "organic process" and despite all attempts to force the pace, it will take time — decades probably — for people to learn to be capitalists and to accumulate capi-
Economic Indicators 1990-91
180
170
160
150
140
130
120
110 -
100
90
80
70
60
Consumer prices
Czechoslovakia
In the mean time, a more immediate process is being organized. The previous "socialist" economies were characterized by extreme income leveling, to which was attached both positive and negative features. While it avoided the social stratification that characterizes capitalist societies, this leveling was also one of the important causes of economic stagnation due to the concomitant absence of social and political incentives. The end product was a sort of universal apathy. The establishment of real popular democracy could address the problem, but rather than that the reform process aims to create instead individual monetary incentives. And the first step in this direction is to replace social leveling with wide income disparities. vil the top of the income table, the 1 7
----- photo credits and running heads -----
INDEX Jan 1991 = 100
I ODUndecideaKDH
KDH GreensAbstain HZDS
International Viewpoint # 225 • March 30, 1992
EASTERN EUROPE right to earn high incomes has been restored and small privatization is giving valuable property and business opportunities to a new breed of entrepreneurs, mostly ex-apparatchiks and other corrupt elements. When right-wingers in Czechoslovakia started to complain that those buying assets in the government auctions must have got their money corruptly as bureaucrats under the old system, Klaus replied that if they pursued that line of reasoning to the point of action they would destroy the reform process. They suddenly went silent.
At the bottom of the income table, stringent wage restraints apply. In Poland, stiff tax penalties apply to firms granting unauthorized wage rises. In Czechoslovakia, wages are set by the government, which still controls 95% of the economy and recently refused to honor an agreement with the unions for the indexation of the minimum wage when inflation went to 50% over six months. The social welfare provisions which were the heart of the old social system are being destroyed. There is no job security, and unemployment benefits are being pared back. And inflation destroys the purchasing power of fixed low incomes.
For all the governments of the region, national economic management has by and large been reduced to the task of controlling runaway inflation while the property and income changes are carried out. As it is being implemented, the economic reform is inherently very inflationary. There are incidental reasons for this such as price liberalization, and "monetary overhang". . But the fundamental reason for inflation is that the conscious destruction of state enterprises cripples the supply of goods at a time when demand is running ahead. Instead of solving the problem by stimulating state as well as private industry, the montarist governments of the transition process simply restrict credit, raise interest rates and bring on the recession. Those major areas that get scant attention in terms of government policy include measures to curb unemployment, the maintenance of living standards, and the preservation of social welfare, all of which are assessed only politically as a consideration of how far people can be pushed before they will eventually
One academic commentator has observed: "If the decline in production and national incomes continues and budget cuts increase in severity, the momentum and support for economic reform could dissipate. The communist and other parties, as well as the trade unions, could provide a major challenge to the new governments. Since the transition to markets, unlike the introduction of central planning, is undertaken in a democratic system, the social aspects need to be gıven particular attention if the transition is to succeed." ( Jan Svejnar). In a successful transition, however, the "democratic system" itself would prove to be an illusion. Elements of social resistance
As the Polish elections indicate, the base of public support for the reform process is becoming increasingly narrow, and concerns about the economic situation are growing. In Poland, six out of every ten voters stayed away from the October polls because, more or less consciously, they did not want to lend their support to any of the political forces contesting the elections. Of those who voted, as many voted for the Democratic Left - based on the old Communist Party - as voted for the major new right party, the Democratic Union of Mazowiecki, Kuron and Michnik (virtually Solidarity's non-Catholic, non-trade union leadership).
In response to this narrowing base of support, many of the rightist parties have turned openly to witch-hunting and purges. Centre Alliance called for purging 40,000 former Communists from government posts and the Congress for an Independent Poland demanded that the nine members of the Military Council for National Salvation responsible for the implementation of martial law be put on trial. Interestingly, General Jaruzelski's public defence of the martial law period during which he was the country's leader was that without it there would have been a Soviet invasion. And in opinion polls in December, 50% of repondents said they now believed Jaruzelski had been right to introduce martial law while only 19% thought the generals should be brought to trial.
Czechoslovakia watched the Polish elections very closely, understanding it was the curtain call for its own elections in June. Here also the right wing parties are weak and divided and the Communist party still has a significant electoral base. Either as reform communists in the Czech republic or as social democrats in Slovakia, the former Communist party could win up to 12% of the vote. The right is divided, between the extreme monetarists who dominate in the Czech republic under Klaus' leadership and the more moderate supporters of greater govern-
Czechoslovakia
Support for major parties November 1991
24
22
20
18
16
14
12
10
ODS ICSSD REPUHSD-SMS ZS
18
KSCM CSL
OH
SDL
DS
GreerUndecided
SNSODU-VP CoexistAbstain ment ıntervention ot a Keynesıan type coloured by nationalist sentiments in Slo vakia, where social democratic and Christian democratic parties are strongest. The division will make it very difficult to form a calition across the two republics and the new parlament could be deadlocked as it is in Poland.
Through the extremist Lustrace law an anti-communist purge has already begun in Czechoslovakia, with several clear aims: to sideline the Communist party as much as possible prior to the elections; to discredit the right's liberal opponents, who were forced to object to the blatantly undemocratic clauses of the law, as being "soft on communism"; to make this and not the economy the main question of the election campaign; and actually to purge the state enterprises and ministry bureaucracies.
Even though there is less obvious public discontent in Czechoslovakia, opi-
Czechoslovakia
Public response to policies 1991
March 30, 1992
100
90
80
70
60
50
40
30
20
10
Foreign pol Culture Domestic pol nion polls reveal a growing disillusionwith social and economic policy. The polls record very high (70-90%) dissatisfaction with regard to standards of living, the economy and social policy. In every case dissatisfaction is greater in Slovakia than in the Czech lands. Unemployment is the single biggest concern in both republics. A significant minority (20% of people in the Czech lands and 33% in Slovakia) want the economic reform either stopped or changed. 45% of the people in the Czech lands and 54% in Slovakia do not agree with the Lustrace anti-communist law.
Liberals rather than monetarists are commonly the most popular politicians in the country. Vaclav Havel is federally most popular, though less so in Slovakia than in the Czech lands, followed by foreign minister Jiri Dienstbier, a liberal, and then social democrat and former Obroda member Valtr Komarek, a prominent economist and opponent of Klaus's reform. Komarek is one of the very few leading politicians who are equally popular in the Czech lands and in Slovakia. Klaus comes in sixth at about 50% sup-
Other signs of social discontent and opposition to the capitalist reform program of the governments of eastern Europe have been evident. There have been persistent strikes in Poland, including, on the eve of the election at parliament house, a miner's demonstration that Walesa threatened to repress. In Hungary the 1991 transport blockade was a water shed and the government's attempt to tame the unions last year by registering union membership failed. In Czechoslo-
Social pol Economy Std of living vakia, most response has come so far from farmers, when in November about 20,000 rallied in Wenceslas Square. Though they are quite conservative, the Czechoslovak unions are now also beginning to make noises of discontent. In the former Soviet Union, the unions may play an even more decisive role, both because of the depth of the economic crisis and because of superior leadership. The Moscow Federation of Trade Unions, with five million members and a conscious political leadership, is the most advanced of all the union organizations in the region. Through the Party of Labor, where it is allied with leaders of the Socialist Party including Boris Kagarlitsky, former Communist Party members such as Alexander Buzgalin, and leaders of an anarchist federation (KAS-KOR), the Federation will play an increasingly important political role.
This increasing discontent and opposition has caused many political leaders to turn to authoritarian rhetoric, the best known example of which is Walesa in Poland. The danger of authoritarianism is very real and the likelihood of suppression of union and democratic rights is great. But the threat should be kept in
Certainly, capitalism cannot be reintroduced by democratic means, to think so is an illusion. Walesa in Poland. Antall in Hungary, Klaus or Havel in Czechoslovakia, Milosevic in Serbia are all possible candidates for a turn to authoritarian, nonparliamentary, one-person rule. However, right now such an outcome could be achieved only by consent, and the likelihood of militaristic dictatorships in any of
EASTERN EUROPE these countries is currently less likely precisely because the state apparatus is still weak. The Yugoslav army, for example, which might have been regarded as the most likely candidate for a coup in eastern Europe, revealed in combat its great weaknesses and divisions
Equally, there is no evidence yet to suggest that attacks on wages, jobs, social welfare, unions and left parties will immediately lead to a working class rebellion. There are still many problems, both objective and subjective, to overcome before workers will feel fully confident to go into battle. No doubt, however, there will soon be many more localized battles and an increasing number of skirmishes that will pave the way for bigger battles in the future. Already, serious unrest has surfaced in Russia, for
The authoritarian challenge
In Czechoslovakia, the right, which is in a small minority in the government, has skillfully used the parliament to carry its reactionary proposals. But this could change. In Poland, for example, in the wake of the elections left forces began to consider the need to defend the parliament as an instrument of elementary and partial democracy against attempts to bypass it in an authoritarian manner, principally by the presidential office. Walesa has repeatedly said he wants parliament to assign him executive powers. In Moscow, Yeltsin has already achieved that, of cour-
Defence of democracy and the obvious failures of the economic reform, especially rapidly rising unemployment, are the two key questions on which the pro-capitalist right is weakest. In fact, the right seems more aware of its own weaknesses than do its opponents.
The ruling pro-capitalist parties are generally small in membership and have a very limited social base made up of those who can directly benefit from the capitalist reforms. Without any possibility of directly expanding their base of support in the short term, these governments have turned towards a strengthening of the state apparatus for repressive purposes.
Referring to protests that had occurred prior to the elections, Walesa said on
"More such demonstrations are planned in the future to coincide — not by accident but with the result of purposeful actions — with the inauguration of the new parliament. This cannot be allowed. We must guarantee legal order. If this order is threatened, the authorities will take all necessary steps" (Polish News Bulletin). Walesa has made this sort of comment over and over again, and insists that those associated with the old 19
Czechoslovakia
Popularity of politicians November 1991
March 30, 1992
EASTERN EUROPE system have no right to democratic participation in the new one.
Like Lustrace in Czechoslovakia, deCommunization is the greatest threat to democratic practices in Poland. It is championed not only by Walesa but by Centre Alliance and the KPN among others. Something similar is occurring in Hungary, where the Antall government is tightening its grip on executive power. This was signalled in the middle of 1991 by the much publicized case of the MDF. government leader who instructed the press organizations that talk of democracy suited the purposes of removing the Communist Party well but had a less certain place in building the new structures now. The government has tightened controls on the media, an act of virtual state censor-
80 70 60 50 40 30 20 10 ship.
Accordingly, "Now that the world has no scruples any more about Hungary — now that no one casts doubts on the com- Calfa Buresova Weiss Mikloska Sladek |Knazko mitment of the Hungarian Democratic Klaus Dubcek MecialRytchetsDobrovsk Kucerak LangcCarnogursky Forum and the government to liberalism, democracy, freedom of the press, human rights, and a free market economy - I am convinced that it is possible to bring about radical changes in the bias and mentality of Hungarian Radio and Television" - Imre Konya, head of the MDF parliamentary faction. MDF ideologue Istvan Csurka called for putting "an end to the age of impotence".
Bolstering shaky regimes in order to drive through capitalist reforms is not the only and not the most important object of de-Communization and curtailment of democracy. More important is the attempt to break down the old state apparatus and to construct a new one. Hundreds of thousands of people will lose their jobs in Czechoslovakia as a result of Lustrace, not just former officials and government workers but also managers of state enterprises. In one such case, the managing director of the famous Pilsner Brewing factory at Plzen lost his job because he was a former member of the peoples' militia. In this way, much of the old (ruling) bureaucracy may soon be removed.
In Czechoslovakia, the popular militias have been disbanded. This happened quickly, for example, at the big VSZ steelworks in eastern Slovakia. The militias may have amounted to very little, rotted as they were by the decay of the Communist party itself, but they were bodies of armed workers located inside factories. Now they don't exist, and only the federal army bears arms. Proposals for reforming the armed forces include ending the practice of a conscript army - which could be thought of as training and arming the general population - and replacing it 20 with a much smaller professional standing International Viewpoint # 225
Havel Komarek Miller | Pithart DienstbierDlouhy force. Such a force would serve a particular purpose. Furthermore, the former secret police, the STB, was not totally disbanded - even though contact with the STB has been the pretext for rubbing out of public life many individuals, including leftist opponents of the former regime and other dissidents — but taken over, purged of its Communist Party directors and renamed and now serves the new government as a secret service, the FIS. In these ways a new state apparatus is being created. Stages of the political process
In the last two years political events have passed through similar identifiable stages in many of the east European coun tries, though here only Czechoslovakia will be cited by way of example; understanding these stages can help to ascertain what politically come next, though nothing is automatic and the eventual outcome of events will depend almost entirely on what political forces step forward to grasp the nettle.
The first stage could be called plebiscitary in distinction to the more common label of a "revolutionary" period of overturn of the old regimes. In Czechoslovakia this first stage lasted from the events of 1989 to the federal elections of June 1990 and was characterized by the leading role of the Civic Forum. In this phase there was no open contest between the various political forces within the movement of opposition to the former regime, political parties had in general not yet formed, and every group from the non-Communist left Alternative and reformists in the Communist Party to Havel and to Klaus were in a common front. This gave the movement a rather broad, popular and somewhat democratic character. But there was no real discussion of alternatives, of programs or of proposals for a new state setup (Ivan Svitak).
Even on the left many people looked very benignly towards the activities of the Civic Forum government, not recognizing the underlying pro-capitalist direction it was taking under the guise of a democratic political reform. Talk of democratic revolution was common at this stage, but in the absence of a pro-socialist program, that democracy could inevitably become only reactionary bourgeois and at best weak parliamentary democracy. The masses soon disappeared from the streets into passive support for the government's reform program.
Even during the elections, parties did not come forward offering alternatives but mostly stood on the Civic Forum ticket, and the party political differentiation followed the June election. So the election was simply a sort of referendum against the Communist Party. Leftists now identify the illusions associated with that period of support for the Civic Forum government and its policy of "return to Europe", "return to the first republic" (of 1918-1938). But at the time the rightist direction of the government was not clear and people did not vote for a return to capitalism but for the new democratic regime. Expectations were very high.
The June elections opened a second stage in which the Civic Forum leadership adopted the course of capitalist reform
EASTERN EUROPE
1. Kornai, Janos - The Road to a Free Economy, Shifting From A
Socialist System, The Example of Hungary, W. W. Norton & Com-
March 30, 1992 that had not been in its program and for which it had no mandate. In this period, using the institution of the new parliament, the right increasingly gained the upper hand, culminating in the election of
Cited references:
pany, New York 1990.
2. Hofbauer, Hannes and Komlosy, Andrea - Restructuring Eas-
Klaus as leader of the Civic Forum at the tern Europe, unpublished paper, Vienna, 1991.
end of the year. Soon after, the Forum
3. Csillag, Istan - The Role of the State in the Property Reform split into monetarist and liberal wings.
and Privatization, Financial Research Corporation, Budapest,
The continual slide to the right to a more
1991, to be published by the Central European University, Prague.
aggressive pro-capitalist policy was repre-
4. Svejnar, Jan — Microeconomic Issues in the Transition to a sented by several pieces of legislation
Market Economy, CERGE (The Centre for Economic Research and passed through parliament, including,
Graduate Education), Charles University, Prague, Working Paper importantly, laws related to the privatization of the state-owned economy.
5. Polish News Bulletin of the British and American Embassies,
1991 constitutes a third stage characte-
Warsaw, October 28, 1991, number 203-91.
rized by political differentiation, party
6. Professor Ivan Svitak, Charles University, Prague. Interview formation and the preparation for new elections in June 1992. It is also characterized by the consolidation of the rightist project into a hardened program for the most rapid possible capitalist restoration, highlighted in the political sphere by the adoption of the anti-communist Lustrace law and led by the Klaus party, the Civic
Democratic Party (ODS). The outcome of three questions now dominating the political agenda will determine whether the
Havel style of liberal reform will survive, whether the hard right will triumph, or whether the left will establish some kind of influence over the future course of
• Czech-Slovak relations and the character of the state: First it must be recognized that the national sentiments of the
Slovaks are just and progressive while at the same time there is not widespread support for independence as the solution to national concerns. But behind the apparent national conflict the question is really whether the right will triumph in Slovakia, where it is actually very weak. The right thought it would solve the problem by replacing the nationalist former Slovak premier (Vladimir Meciar), but it seems the problem has only deepened. The kernel of the dispute is what the economic character of the future republic will be.
• The problem of the economy: While the situation is not absolutely disastrous, it is much worse than the government expected, and the threat of strikes by miners, appearing for the first time in late
1991, increased their fears. For the first time too, people began to think about alternatives to the economic reform. For example, the Social Democrats, though they have internal differences over policy, started to publicly attack the position of the right.
Who will politically exploit the situation of the deteriorating economic situation is hard to say, but certainly the far right, represented by the extremist right wing Republican party, will, and the left will have to run hard if it is not to be sidelined.
No. 1, July 1991.
with the author, December 1991.
• Electoral regulations: New laws are to be enacted concerning the election of republican and federal governments, though whether this will be done before June 1992 is a moot point. Certainly the right will push for regulations that virtually disqualify former and present Communists, the social democrats and the left from parliamentary representation. A recent amendment to the criminal code outlawing the propagation of communism along with fascism is a sign of the times. By these and other means the right will attempt to prevent the left from using public facilities like television for the presentation of their electoral campaign while propaganda against the left will be intense.
The right is understandably very uncertain about the outcome of the elections. Klaus' social base is among those who believe in capitalism and want to start their own business, but that is not such a great number.
Workers who depend on their small wage, are confronted by the falling value of money and face the uncertainty of unemployment are not natural supporters of the Klaus project.
In all the countries of eastern Europe, though each has its own particular history, it is possible to identify these stages of political evolution, beginning with a plebiscitary vote against the old system followed by moves towards capitalist restoration and the opening of the process of party political differentiation. The importance of this is that so far the right has been able to steal a march and still holds the political initiative.
But the tide could turn. If trends towards the emergence of a social democratic opposition in Czechoslovakia deepen, the next political stage could possibly see the beginnings of a fightback.
The State of the Left
It goes without saying that this new situation creates a difficult environment for the left. Today, many east European leftists are looking for ways to restore the socialist project while scrupulously avoiding any intimation that a return to the old bureaucratic system in any form is proposed. The prevailing conditions make it very difficult to agitate for socialist alternatives to the current reform project, even though a democratic form of socialism" is the only real alternative to what is happening. To be more accurate, what is posed is a move to a society transitional towards democratic socialism in place of what is currently a transition away from democracy and socialism. Understandably the question of formal democracy rates very high on the agenda in this struggle.
The Polish elections were very instructive from the point of view of left tactics. Leave aside for the moment the big abstention rate and the fact that as a result of the elections it has been impossible to form a government. A very significant outcome of the elections was the vote for the Democratic Left Alliance (based on the former PUWP-Communist party in coalition with smaller organizations) running on a quite left social democratic platform. It won 60 seats, topped only by Mazowiecki's party with 63.
Until the elections, the hope remained among some left-wing former dissident circles that a left current could rise out of the wreckage of the Solidarity movement. This was particularly the case for two prominent opponents of the former regime, Karol Modzelewski (famous for coauthoring the open letter in the 1960s with Jacek Kuron, now a liberal rightist) and Joseph Pinior, who spent time in prison as a dissident.
Modzelewski was the key figure in the Labour Solidarity group, whose election ticket was supported by the Socialist and Political Centre, in which Pinior is prominent. The Labour Solidarity leaders were score of only 2%. It represented in fact 21 very disappointed with their election
• # 225 International Viewpoint
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International Viewpoint # 225 • March 30, 1992
EASTERN EUROPE the final attempt to draw the left out of the Solidarity movement, a tactic which has suffered a "historic defeat" according to Pinior. Consequently, the election showed that the left had to rapidly change course if it was to survive. It had to break with the old dissident attitude and take up a new fight against the current regime.
However, the vote for the Democratic Left was a good sign for the whole left as it indicated a certain base of support for socialist alternatives (in the broad sense). This residual support for socialist policies is a feature worrying the new regimes in eastern Europe. Some at least on the Polish left drew the conclusion from the results that it was necessary to look for broader alliances of all the forces opposed to the capitalist reform, including the remaining elements of the former Communist parties, in support of the parliament (in the circumstances the only institution representing any form of democratic government) and against the antidemocratic rightist campaign of McCarthyism and "de-Communization". The fact is, as a result of the election, most of the left political landscape will be occupied by the Democratic Left. And as the impossibility of introducing the market economy becomes more apparent, the DL may move further to the left.
The situation in Czechoslovakia shows many similarities. Reading the Polish results caretully, the right immediately drew the conclusion that it was necessary to drive through de-Communization rapidly before the June elections in order to marginalize the left, to cut across support for the Czech Communist Party and the Party of the Democratic Left in Slovakia and to limit the influence of the liberal and social democratic parties. The Czechoslovak left faces the additional problem of the much more ubiquitous antiCommunist sentiments among the population as a result of the bitter disappoint-
At one point it was possible to think that a significant left oppositional current could emerge out of the broad Civic Forum movement. Perhaps the greatest hopes focussed on the Left Alternative group which was subsequently expelled from the Forum. Some commentators say there are a million votes to be garnered for an apt left campaign. But Left Alternative has not so far capitalized on these possibilities.
It has proved very difficult for the left to devise a programme of opposition to the new regime, mainly because it has been tied in various ways to the post-1989 democratic reform process, a process which has now been captured well and truly by the right. 22
Meanwhile, the deteriorating economic situation has created an opening for social democracy — particularly left social democracy. The Czechoslovak Social Democracy has chosen Valtr Komarek to head its election campaign. Komarek is a prominent economist with popular support. He was deputy premier for six months after 1989. He joined the Social Democracy early in 1991 as one of a group of former 1968 reform Communists organized in the Obroda group, which dissolved in the process. This group is now called the Social Democratic Orien-
Komarek is probably the most prominent opponent of the Klaus reform and articulates the only evident economic alternative, a sort of Keynesian reform emphasizing welfare over privatization. His programme is for wage indexation, measures to alleviate unemployment and improvements in social welfare, policies that are far from complete but which in effect would stop the privatization strategy in its tracks and alleviate a lot of hardship. If the Komarek campaign gets going in 1992 it could clearly attract a lot of sympathy. Talk of socialism is anathema to the population of Czechoslovakia, but social democracy, which has a strong pre-war tradition, still has prestige.
The Czech Communist Party (KSCM) has not officially reformed, but it no longer represents simply the politics of the old regime either. Rather, it tends to represent that section of the former leadership that helped get rid of the former
For example, the party's president, Jiri Svoboda, was an initial signatory to Civic Forum (though he was subsequently expelled). It is possible to discern three currents within the party, which is not politically unified. The leadership of the party, including Svoboda, could be described as reform Communists and identify with the ideas of self-management. There is also a social democratic current called the Democratic Left, which has threatened to split from the party because of its unwillingness to break officially with Stalinism. And there is a current of unreformed Stalinists, mostly older member of
It is not necessary to imagine that either left social democracy or reform Communism will provide the answers to the postCommunist political crisis. However, these developments do indicate a possible opening for a reconstitution of the left built on cooperation, formal or de facto, between the different currents that oppose the monetarist, rightist reform project. Saying no to the current reform is a good starting point for further discussions about strategies and programmes for some sort of socialist solution. In this way the left would at least have a milieu to work in, a project, a sense of direction and a chance to start building something new. But it is still early days and, realistically, nothing much will develop in Czechoslovakia until after the June elections.
From stagnation to collapse
Once the "socialist" economies entered the period of stagnation in the 1960s and 1970s from which they could not emerge given the prevailing conditions, the collapse of the Stalinist experiment was certain. Once the bureaucratized economies collapsed, the Stalinist political system could not survive either. The various attempts at economic reform - all of them in the absence of real democracy — succeeded only in paving the way for capitalist restoration. Market reform went farthest in Hungary under the old regime, which converted state industries into stock companies and called in the IMF as
In Poland the economic crisis led to the emergence of Solidarity, to martial law and to IMF-inspired economic restructuring. In Czechoslovakia, the stagnation of the 1960s was the motive force for the Dubcek reform process and was later the main cause of the collapse of the unreformed Stalinist system created by Husak.
Clearly, the Stalinist Communist parties were not parties at all in any real sense of the word. They did not have a political life, an understanding of processes or a programmatic attitude. They were merely the shell within which the bureaucratic administrative system stumbled along Even so, the Communist party structures reaching throughout society proved to be all that was holding the state and economic administration together. These parties were little more than huge employment agencies on the one hand and avenues for a top career on the other. This was very obvious in Czechoslovakia. There, when the party ran out of answers and a big part of its own leadership wanted it out of power, it simply collapsed overnight.
It is too soon to draw rigid conclusions about the fate of the former Soviet bloc. A historically unprecedented process has just begun, the outcome of which cannot be predicted. The most important thing is to follow events dispassionately, without illusions, to understand the objective course of developments and act where possible. While it is necessary to soberly accept the fact that the project of capitalist restoration in eastern Europe and the former USSR has no immediate rival, nothing is inevitable; both sides are weak and the outcome will be decided only in struggle. Even Jeffrey Sachs admits that the restoration of capitalism is not inevitable and might still be reversed. *