Is life better under communism? On the economic crisis in post-Soviet states

Never waste a good economic crisis.

The problem is that the Right has been making hay in the latest one, especially in Eastern Europe. Faced with the vestiges of public assets – public transport, medecine, education and so on – the Right has aggressively offered the spurious claim that these are the source of ‘sovereign debt’ and has been jumping in to turn these dreadfully unprofitable ventures into sources of profit. And what better way than to force the sale of those public assets to your cronies in organised crime the business world. But it turns out to be the latest phase in a consistent assault of over two decades.

As Rossen Vassilev points out in ‘The Tragic Failure of “Post-Communism” in Eastern Europe‘ (1o March 2011):

In Romania:

Romania is mired in a severe recession and its battered economy is expected to decline by at least 2% in 2010, after contracting by 7.1% the previous year. Instead of trying to assist the unemployed and the socially weak, the Bucharest government, which is reportedly riddled with corruption, cronyism and nepotism, has slashed public-sector pay by one-quarter and trimmed all social expenditures, including heating subsidies for the poor as well as unemployment, maternity, and disability benefits. At the same time, the national sales tax was hiked from 19% to 24%, as the authorities are striving to hold the national deficit down to 6.8% in order to meet the stringent fiscal requirements of the European Union (EU), which Rumania had joined in January 2007.

In the Czech Republic:

20,000 hospital doctors were quitting their jobs en masse to protest the decision of Prime Minister Petr Necas’s cabinet to cut all public expenditures, including healthcare spending, by at least 10% in order to keep the country’s troubled finances afloat. These mass resignations were part of the “Thanks, We Are Leaving” campaign launched by disgruntled physicians across the country aimed at putting pressure on the Prague authorities to increase their low wages and provide better working conditions for all medical workers. Confronted with the worst healthcare crisis in the ex-Communist country’s history which was endangering the lives of many patients, the Czech government threatened to impose a state of emergency which would force doctors either to get back to work or face harsh legal and financial penalties.

In Latvia:

Latvia’s conservative government borrowed heavily from the EU and IMF on punishing repayment terms that have imposed such harsh austerity policies that the Latvian economy shrank by 25% (neighboring Estonia and Lithuania have experienced an equally steep economic decline) and unemployment, currently running at 22%, is still rising. With well over a tenth of its population now working abroad, Latvia’s guest-workers send home whatever they can spare to help their destitute families survive. Latvian children (what few of them there are as the Baltic country’s marriage and birth rates are plunging) have been thus “left orphaned behind,” prompting social scientists to wonder how this small nation of 2.3 million people can survive demographically. These are the results of post-Communist austerity budgets that have cut ordinary people off at the knees while international creditors and local bankers are bailed out.

In Bulgaria:

Official statistics show that both the annual gross national product (GNP) and the per capita income of the population have plummeted, the social-safety net has disintegrated, and even the physical survival of many impoverished Bulgarians is in peril. The immediate effects of market-oriented “reforms” have been the destruction of Bulgaria’s industry and agriculture, unemployment, inflation, flagrant inequality of incomes, crushing poverty, and even malnutrition. Organized crime and endemic corruption in the form of nepotism and cronyism, graft on the job, embezzlement, bribe-taking, influence-peddling, smuggling, protection rackets, illegal gambling, prostitution and pornography rings have exacted a heavy toll on post-Communist living standards and livelihoods. Another unfortunate effect is the widespread neglect of the economic and social rights of ordinary Bulgarians, for many of whom the 8-hour work day is now only a memory.

Right across ex-Soviet countries the story is the same:

Sharp government cutbacks in social welfare, education, healthcare, public transportation, and other basic social-infrastructure spending threaten to undermine economic security, long-term development, and political stability across the ex-Soviet bloc countries, young people are emigrating in droves to better their lives rather than suffer in an economy without any employment opportunities. The citizens of the ex-Communist nations now have to pay out of their own pockets for all previously free, government-provided medical services even though they also have to pay income, real-estate, and sales taxes—something they did not have to do under the Communist regimes. There is also the monetization and/or privatization of the previously free educational services, especially in higher education and the new private schools, colleges, and universities where students have to pay for their training, including many fees that each student must pay for taking entrance exams and other mandatory tests required at every level of schooling. Government subsidies for everything from healthcare, education, and legal representation to housing, energy, and public transportation are disappearing in the scramble to slash social spending and trim budget deficits, making it even harder for ordinary people to survive in their daily struggle for existence.

Who has gained from all this?

A new breed of rapacious and ruthless plutocrats with insatiable appetites for wealth and power has pillaged—through an unjust and corrupt process of privatization—the assets of the formerly state-owned economy.

In other words, capitalism as usual.

The upshot:

Nearly all of these twenty-eight Eurasian countries have experienced a long-term economic decline of catastrophic proportions (only Poland has thus far surpassed its Communist-era GDP). Grave economic setbacks, deep-rooted corruption, and widespread popular frustration with the hardships and deprivations of the seemingly endless post-Communist transition are undermining the prestige of the new authorities and even the population’s belief in Western-style democracy and market-based capitalism.

So is communism really better than this? As a 68-year old retired Romanian mechanic said:

I regret the demise of Communism—not for me, but when I see how much my children and grandchildren struggle. We had safe jobs and decent salaries under Communism. We had enough to eat and we had yearly vacations with our children.

In another time and in the same place, Lenin and the communists turned an economic crisis in a very different direction.

(ht tp)

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18 thoughts on “Is life better under communism? On the economic crisis in post-Soviet states

  1. I stand profoundly perplexed. How is it possible that capitalism can have such a disastrous performance as far as the efficient allocation of resources is concerned? Planning is deficient, free market is efficient. That’s what I was taught by the Bible-textbook of the 20th century, Paul Samuelson’s “Economics” (don’t ask me which edition, not even Chuck Norris can count the number of its editions).

    So I think it’s time the Left goes back to the vital issue of planning the economy AND it’s time it discusses institutional measures and practices which would democratically control the planning process. This is the major issue for any serious Marxist political strategy. It’s time the Left begins proposing recipes for the cookshops of the future, both in broad lines and in terms of national differentia-specifica. Radio-active free-market stupidity must be challenged not only in terms of critique, but also in terms of an ECONOMIC counter-proposal. Plan, produce, allocate and democratically control, that is, transitional issues. This is the order of the day. If there’s going to be another day at all.

    PS: And because we are greedy, culturewise, we also want, among other things, more of planned “Andrei Rublev” productions (minus the idiotic censorship process of course) and demand the relegation of free-enterprise Spielbergism to the dustbin of history.

  2. Back in the first edition Samuelson was cheerfully negative about the performance of a planned economy “Our mixed free enterprise system … with all its faults, has given the world a century of progress such as an actual socialized order–might find it impossible to equal” (1948, page 604).

    In 1961 (fifth edition) he was beginning to be worried by the fact the Soviet Union out-pacing the US. Economists “seem to agree that her recent growth rates have been considerably greater than ours as a percentage per year,” (1961, page 829).

    By 1989 he finally admitted that “the Soviet economy is proof that, contrary to what many skeptics had earlier believed, a socialist command economy can function and even thrive” (13th edition, page 837)

    Ironically Gorbachev had dismantled the central planning system two years earlier. This created enormous problems but the Soviet economy was still a going concern when Yeltsin took over at the end of 1990.

  3. Re the planned economy, its one of those perpetual items of propaganda that a planned economy, if not communism as such, was and is hopelessly bureaucratic and inefficient. By contrast, I have found that in Lenin’s work, bureaucracy is certainly not a feature of the soviets; on the contrary, they worked hard at overcoming the entrenched bureaucracy of the tsarist system. Further, it is gradually becoming recognised by war historians that one the key reasons the USSR recovered so rapidly from Hitler’s attack was precisely because of a planned economy, because it provided a highly efficient mode of focusing economic production and motivating people (apart from the fact that Stalin, for all his many faults, was a brilliant war leader). Further still, one the great laments in those countries of Eastern Europe in which I have spent some time is the way capitalism and then acceptance into the EU brought with a heap of inefficient bureaucracy, supposedly to stamp out ‘corruption’. Now, nearly everything you do requires endless paperwork. Finally, on an anecdotal level, one would expect that bureaucracy would be worst in China, with its 1.4 billion people and communist party firmly in control. I have found that there is far more red tape in places like Australia or the USA than ever you will find in China.

    1. I agree.

      Commenting on the first post ‘Thaw’ census Alec Nove observed that, compared with Britain and the US, there were surprising few typists in the Soviet Union. He also noted that the Byely dom (the the Moscow city government building) was no bigger than Wandsworth town Hall (merely one of 32 London boroughs).

      I wouldn’t go so far as to say that all problems are problems of words and that all we need to do to solve them is access to the OED, however confusion over words does complicate issues.

      In this case the word is ‘bureaucracy’.

      For a lot of people it’s just a pejorative term, a way of expressing disapproval. It’s the mirror of ‘democracy’ which, today, is the most general form of political approbation in the English language.
      Just as ‘good’ and ‘bad’ tells you more about the user than the thing referred to, so statements with ‘democratic’ and ‘bureaucratic’ in them contain no information about the subject.

      It wasn’t like that for Lenin or Stalin: for them the tsarist bureaucracy was a very concrete entity.

      I’m afraid that Trotsky, whom you admire so much, was responsible for a lot of the current confusion.

  4. I have found that there is far more red tape in places like Australia or the USA than ever you will find in China. Exactly. Do you know it can take years – sometimes as long as a decade – to get a man executed in the USA? China? 60 days. 50 if you have the Party official with failing kidneys on hand.

    1. I’m no Trot. As Lunacharsky observes in his ‘Revolutionary Portraits’, while Trotsky was the second great leader of the revolution, he was a little too prickly and aware of his own brilliance.

  5. Having lived in Asia, Europe and the US, I can safely say that the most extensive, and intrusive, bureaucracy possibly to be encountered is the American ‘free enterprise’ health system. Every clinic has a row of clerks to ‘process’ your insurance information’ when you enter. You get your treatment (x-ray, lab work, minor anaesthesia, a little out-patient surgery), and then the separate bills come cascading in from each of these: radiologist, lab company, anaesthetist, and the surgeon. Each bill, itemised to the last detail, will say you don’t have to pay just yet because they are still working out with your insurer who has to pay what. When this is resolved, you get a bill from your insurance company stating that your co-pay amounts to such and such, then you get bills from the others saying you owe them such and such because this or that item was not covered by your insurance. You send off the payments, then you get a final statement from each entity saying you owe them ‘zero’.

    But wait, you’re convinced that the insurer, and not you, should pay the vastly inflated price for the felt-tip pen used by the surgeon to put an X on the knee that needed to have fluid drained from it. You phone the insurer to say so, and after being given the run-around on the automated phone system, you finally speak to someone who says you will receive in the mail another set of forms to fill in so they can reconsider the expense you’ve queried. The whole rigmarole begins again. They rip you off, and they really make you work for the rip-off to succeed. Viva ‘free enterprise’!

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