Chris Harman

Thinking it through

Eastern Europe

(March 1997)

From Socialist Review, No.206, March 1997.
Copyright © Socialist Review.
Copied with thanks from the Socialist Review Archive at
Marked up by Einde O’Callaghan for the Marxists’ Internet Archive.

The street scenes could have been those of 1989. Huge demonstrations day after day. Not just in one country but three simultaneously. Continual speculation about whether governments would fall or order troops to open fire and therefore risk civil war.

That was the picture in the southern belt of eastern Europe last month. In Bulgaria, Albania and Serbia the pattern was very similar, and in each people told journalists they were inspired by the protests in the neighbouring states.

Yet, superficially, the issues behind the protests seemed very different to each other. In Serbia demonstrators saw themselves as fighting the unfinished business of 1989 – marching behind liberal and nationalist politicians against the rigging of elections by a ruling party in its 52nd year in power.

By contrast, in Bulgaria the issues were not primarily political but economic – a combination of slump and inflation that had driven the mass of people to near destitution. The government was in the hands of the successor party to the old Stalinists, and the anti-Communist opposition called for its removal. But it was a government that had emerged from ‘free’ elections, after a spell with the opposition in power and still controlling the presidency.

In Albania the issues were a mixture of the economic and the political – of the Bulgarian and Serbian factors. The pyramid based investment funds into which a sixth of the population had put their life savings collapsed and huge numbers of people were pushed into desperate poverty over night.

President Berisha’s government, generally believed to have rigged last May’s elections, was closely identified with those who ran the funds and tried to use armed police to drive protesters from the streets, leading to bitter fighting and near insurrection in parts of the country.

But there was one glaring difference with both Serbia and Bulgaria. Berisha’s Democratic Party is not descended from the old Stalinists but took office after they were driven from power in 1990 by the only sustained general strike anywhere in eastern Europe. Berisha modelled himself on Margaret Thatcher and appeared on the platform alongside her at the 1991 British Tory Party conference. And, until very recently, Western bodies treated Albania as one of the star economies of eastern Europe, claiming its massive privatisation programme had led to an ‘economic miracle’ with one of the highest growth rates in the world.

But the growth rates were inseparable from the pyramid funds, and these were bound to collapse. They work along the same lines as chain letters. People are persuaded to subscribe by the promise of huge interest rates, which are paid out of the subscriptions of those who join later. Sooner or later new people stop joining and there is no money left to pay back what most subscribers have paid in.

The scam is one of the oldest in the history of capitalism, and enjoyed a much publicised vogue – and collapse – in Romania, Russia and Serbia. At the same time Albania under Berisha was meant to be experiencing an economic miracle. In reality, Berisha was using the scam to bolster his position while relying on the same police and secret police who had kept Enver Hoxha’s Stalinists in power for half a century to establish a one party state of his own.

There is a simple reason the various western bodies failed to see this. Free market economists had a very simple explanation when the economies of eastern Europe went into tailspin in 1989-90 – it was all a fault of state intervention in the economies. Once this was removed through extensive privatisation and deregulation, rapid economic growth would follow. They were bewitched by the ‘miracle’ in Albania because it seemed to prove how right they were.

In fact the collapse of the miracle into conditions barely different to those in Serbia and Bulgaria should cast doubt on all their arguments, and on the conventional wisdom of much of the left as well as the right.

In Socialist Worker and Socialist Review we insisted in the late 1980s that you could only fully understand the upheavals throughout the old Eastern bloc if you broke with the conventional wisdom. What we were witnessing was not the failure of socialism, but of a particular stage in the development of capitalism – state capitalism.

This had arisen in the interwar years, leading to the belief that state intervention could prevent capitalism ever again experiencing devastating crises.

The eruptions of crises in both the west and the east in the 1970s and 1980s dealt a blow to these beliefs. Many of the former enthusiasts for state intervention now reverted to the free market views that had prevailed until the 1930s – ignoring the prolonged crisis of those years and claiming that ‘freeing markets’ would lead to rapid economic expansion.

We insisted, by contrast, that neither continued state capitalism nor ‘reforms’ in the direction of market capitalism could overcome repeated crises. Such crises, we predicted, would force the state capitalists to embrace market mechanisms but then, in turn, to resort to further lunges in the direction of state intervention in a futile attempt to ward off instability.

What is more, governments, whatever their ‘democratic’ rhetoric, would attempt authoritarian measures – and would face resistance from workers and students who still remembered the upheavals of 1989.

But such resistance could only be partially successful until a new generation of workers’ leaders emerged who understood that the official ‘socialists’ did not stand for socialism nor the official ‘democrats’ for democracy.

The danger, as in 1989, was that it would be derailed by ‘round table’ compromises with governments rather than by fighting for a completely different sort of society.

The coming together of the crises in Serbia, Bulgaria and Albania bears out our arguments.

Last updated on 21 December 2009