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The hope that turned to dust

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'THE PEOPLE of Eastern Europe can now look forward to a future of freedom and prosperity.' That was the confident prediction of the Times at the end of 1989. The Berlin Wall had crashed down weeks earlier, symbolising an extraordinary year.
Issue 1671

‘THE PEOPLE of Eastern Europe can now look forward to a future of freedom and prosperity.’ That was the confident prediction of the Times at the end of 1989. The Berlin Wall had crashed down weeks earlier, symbolising an extraordinary year.

Throughout 1989 the Eastern European regimes, which had been established after the Second World War, came tumbling down. As each East European leader fell, the hopes of the millions they had ruled soared. The entire Western establishment told them their dreams for a better future would be fulfilled if only they embraced the free market. There was no reason East Germans could not ‘expect to match the living standards of their countrymen in the prosperous West’, according to the Telegraph. Margaret Thatcher said, ‘The new democracies of Eastern Europe can look forward to a prosperous future bolstered by a helping hand from the more established market economies.’

The same message thundered from other Western leaders, academics, journalists and commentators. There were wild predictions about the riches Western companies and governments would pour into the East and the returns they would make on the investments. That all seems like a callous hoax today.

The East European regimes and the USSR were already in or sliding into crisis in the years before 1989. But ten years of the market have turned that crisis into a catastrophe. The raw figures tell their own story. The East European economies suffered a 20 percent decline in output in the early years of the transition to the market.

The slump has been deepest in the former countries of the Russian Empire. They became independent in the two years following the collapse of the Berlin Wall. The Ukrainian economy is a third as big as it was in 1989. Russia’s economy has shrunk by half. Pro-market commentators in the West expected the states of Eastern Europe to fare better than Russia and the states which were officially part of the USSR. But the Bulgarian economy is less than half the size it was in 1987. Its gross domestic product (a measure of the total amount a country produces) fell from $28.4 billion then to $12.3 billion last year. The Romanian economy shrank by an average of 2.3 percent each year from 1988 to 1998. Hungary and the Czech Republic have experienced economic growth in recent years, but that has not made up for the damage done in the early 1990s. Both countries’ economies are 5 percent smaller than in 1989.

The economic dislocation has brought an immense social crisis in its wake. This has hit even Poland, whose economy has recorded significant net economic growth over the last decade. Official unemployment in Poland has risen from 6 to 10 percent. One in four people live in poverty and the teenage suicide rate has more than doubled.

EAST GERMANY was supposed to make the smoothest transition to a market economy. It joined West Germany in a single state a year after the Berlin Wall came down. Western leaders said that East Germans would quickly enjoy the living standards of the West because they shared the ‘language, culture and identity’ of West Germany – the most successful economy in Europe and the third biggest in the world. Yet unemployment in eastern Germany today stands at over 18 percent. The gap between eastern German and western German levels of unemployment has narrowed since the early 1990s. But that is because western Germany has been beset by economic crisis which has left about one in ten people unemployed.

Living standards in the east are only 70 percent of those in the west. Just as in the 1930s Nazi groups have tried to build on despair. But eastern Germany also shows a glimmer of hope for the mass of people across the former East European states. Workers there have looked to left wing ideas and have been part of the struggles workers across Germany have waged over the past five years against Thatcherite policies. There have also been strikes and protests by health workers, miners and shipyard workers in neighbouring Poland this year. These struggles point to an alternative to the failed state capitalist system of the past and the disaster of the free market.

THE SCALE of that disaster was graphically spelt out in a report by the United Nations’ UNICEF agency earlier this year. It concluded that 100 million children ‘were in danger from war, poverty, disease and other social blights’ in Eastern Europe. The UN agency has also noted ‘significant drops in life expectancy’ in Bulgaria and Romania. People are dying younger too in Armenia, Belarus, Latvia and Lithuania, states which broke away from the Russian Empire. Life expectancy for Russian men has fallen from 62 to 58 years since 1980.

‘What we are arguing’, said one of the report’s authors, ‘is that the transition to market economies in the region is the biggest killer we have seen in the 20th century, if you take out famine and wars. The sudden shock and what it did to the system has effectively meant that five million Russian men’s lives have been lost in the 1990s.’

One of the most enduring images from ten years ago is of the appalling network of state run orphanages in Romania, where children were kept in barbaric conditions. In the wake of the overthrow of the Ceausescu regime at Christmas 1989, aid agencies appealed desperately for funds to help orphans in Romania. Most of those orphanages are now gone, but life for thousands of street children in Romania is as desperate as ever. A BBC report earlier this year found hundreds of children living on the streets of the capital, Bucharest. As temperatures dropped to minus 20oC they were forced to sleep in sewers to keep warm.

The International Monetary Fund agreed a loan to the Romanian government a few weeks after the BBC news story. The IMF’s conditions were deeper cuts in social spending, more privatisation, and opening up the economy further to big business. That promises only to deepen the misery brought by ten years of market medicine.

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