either urban realities or of communism, their parricidal off-spring.
The city liberated its citizens from the bondage of the feudal labour
contract. And it acted as the supreme guarantor of the rights of
private property. It relied on its trading and economic prowess to
obtain and secure political autonomy. John of Paris, arguably one of
the first capitalist cities (at least according to Braudel), wrote:
"(The individual) had a right to property which was not with impunity
to be interfered with by superior authority - because it was acquired
by (his) own efforts" (in Georges Duby, "The age of the Cathedrals: Art
and Society, 980-1420, Chicago, Chicago University Press, 1981).
Despite the fact that communism was an urban phenomenon (albeit with
rustic roots) - it abnegated these "bourgeoisie" values. Communal
ownership replaced individual property and servitude to the state
replaced individualism. In communism, feudalism was restored. Even
geographical mobility was severely curtailed, as was the case in
feudalism. The doctrine of the Communist party monopolized all modes of
thought and perception - very much as the church-condoned religious
strain did 700 years before.
Communism was characterized by tensions between party, state and the
economy - exactly as the medieval polity was plagued by conflicts
between church, king and merchants-bankers. Paradoxically, communism
was a faithful re-enactment of pre-capitalist history.
Communism should be well distinguished from Marxism. Still, it is
ironic that even Marx's "scientific materialism" has an equivalent in
the twilight times of feudalism. The eleventh and twelfth centuries
witnessed a concerted effort by medieval scholars to apply "scientific"
principles and human knowledge to the solution of social problems. The
historian R. W. Southern called this period "scientific humanism" (in
"Flesh and Stone" by Richard Sennett, London, Faber and Faber, 1994).
We mentioned John of Salisbury's "Policraticus". It was an effort to
map political functions and interactions into their human physiological
equivalents. The king, for instance, was the brain of the body politic.
Merchants and bankers were the insatiable stomach. But this apparently
simplistic analogy masked a schismatic debate. Should a person's
position in life be determined by his political affiliation and
"natural" place in the order of things - or should it be the result of
his capacities and their exercise (merit)? Do the ever changing
contents of the economic "stomach", its kaleidoscopic innovativeness,
its "permanent revolution" and its propensity to assume "irrational"
risks - adversely affect this natural order which, after all, is based
on tradition and routine? In short: is there an inherent
incompatibility between the order of the world (read: the church
doctrine) and meritocratic (democratic) capitalism? Could Thomas
Aquinas' "Summa Theologica" (the world as the body of Christ) be
reconciled with "Stadt Luft Macht Frei" ("city air liberates" - the
sign above the gates of the cities of the Hanseatic League)?
This is the eternal tension between the individual and the group.
Individualism and communism are not new to history and they have always
been in conflict. To compare the communist party to the church is a
well-worn clich. Both religions - the secular and the divine - were
threatened by the spirit of freedom and initiative embodied in urban
culture, commerce and finance. The order they sought to establish,
propagate and perpetuate conflicted with basic human drives and
desires. Communism was a throwback to the days before the ascent of the
urbane, capitalistic, sophisticated, incredulous, individualistic and
risqu West. it sought to substitute one kind of "scientific"
determinism (the body politic of Christ) by another (the body politic
of "the Proletariat"). It failed and when it unravelled, it revealed a
landscape of toxic devastation, frozen in time, an ossified natural
order bereft of content and adherents. The post-communist countries
have to pick up where it left them, centuries ago. It is not so much a
problem of lacking infrastructure as it is an issue of pathologized
minds, not so much a matter of the body as a dysfunction of the psyche.
The historian Walter Ullman says that John of Salisbury thought (850
years ago) that "the individual's standing within society... (should
be) based upon his office or his official function ... (the greater
this function was) the more scope it had, the weightier it was, the
more rights the individual had." (Walter Ullman, "The Individual and
Society in the Middle Ages", Baltimore, Johns Hopkins University Press,
1966). I cannot conceive of a member of the communist nomenklatura who
would not have adopted this formula wholeheartedly. If modern
capitalism can be described as "back to the future", communism was
surely "forward to the past'.
Transition in Context
By: Dr. Sam Vaknin
Also published by United Press International (UPI)
Also Read
Lessons in Transition
Is Transition Possible?
The Rip van Winkle Institutions
The Author of this Article is a Racist
The Eureka Connection
Women in Transition:
From Post Feminism to Past Femininity
Axes to Grind - The Taxonomy of Political Conflict
The Solow Paradox
Forward to the Past - Capitalism in Post-Communist Europe
Leapfrogging Transition - Technology and Post Communism
Contracting for Transition
Women in Transition
The Kleptocracies of the East
The Washington Consensus - I. The IMF
The implosion of communism was often presented - not least by Francis
Fukuyama in his celebrated "The end of History" - as the
incontrovertible victory of economic liberalism over Marxism. In truth,
the battle raged for seven decades between two strands of socialism.
Social democracy was conceived in the 19th century as a benign
alternative to the revolutionary belligerence of Marx and Engels. It
sparred with communism - the virulent and authoritarian species of
socialism that Marxism has mutated into. European history between
1946-1989 was not a clash of diametrically opposed ideologies - but an
internecine war between two competing interpretations of the same
doctrine.
Both contestants boasted a single market - the European Union and
COMECON, respectively. In both the state was heavily involved in the
economy and owned a sizable chunk of the means of production, though in
the Soviet Union and its satellites, the state was the economy.
Both sported well-developed, entrenched and all-pervasive welfarism.
Both east and west were stiflingly bureaucratic, statist, profoundly
illiberal and comprehensively regulated. Crucially, the west was
economically successful and democratic while Russia evolved into a
paranoid nightmare of inefficiency and gloom. Hence its demise.
When communism crumbled, all of Europe - east and west - experienced a
protracted and agonizing transition. Privatization, deregulation,
competition and liberalization swept across both parts of the
continent. The irony is that central and east Europe's adaptation was
more farfetched and alacritous than the west's.
The tax burden - a measure of the state's immersion in the economy -
still equals more than two fifths of gross domestic product in all
members of the European Union. The countries in transition - from
Russia to Bulgaria and from Estonia to Hungary - are way more
economically liberal today than France, Germany and even Britain - let
alone the nations of Scandinavia.
An increasingly united Europe has opted for "capitalism with a human
face" - the democratic isotope of socialism (sometimes with a touch
of corporatism). But it now faces the challenge of the Anglo-Saxon
variety of the free market. Nowhere is this ideological altercation
more evident than in the countries formerly behind the iron curtain.
Long before Enron and World.com, the tech bubble and Wall Street's
accounting frauds and pernicious conflicts of interest - transition has
exposed the raw and vulnerable nerves running through the foundations
of Anglo-Saxon capitalism. Eastern Europe is a monument to the folly of
unmitigated and unbridled freemarketry.
Transition has given economists a rare chance to study capitalism and
economic policies from scratch. What's more important - free markets,
institutions, education, democracy, or capital? Central and east Europe
became a giant lab in which to peruse policies pertaining to
criminality, private property ownership, entrepreneurship,
privatization, income distribution, employment, inflation and social
welfare.
Superficially, the debate revolved around the scientific rigor and
usefulness - or lack thereof - of the "Washington Consensus". Opposing
monetary and fiscal policies, free trade versus protectionism, capital
controls and convertibility - these occupied the minds and writings of
all manner of economic and development "experts" in the first decade
after the fall of the Berlin Wall.
Yet, deep underneath, transition - perhaps because it was so thoroughly
botched - taught us unforgettable lessons about markets and the way
they work, namely that "objective", "mechanical" capitalism is a mirage.
Perhaps the most important moral is that, like all other economic
processes - transition is, mostly, in the mind. Successful capitalism
requires education and experience. The blind in east Europe were led by
the one-eyed. Capitalism was presented - especially by Western
protagonists of "shock therapy" - as a deus ex machina, a panacea,
guaranteed to transport the region's derelict economies and destitute
people to the kitschy glamour of the tacky soap operas that flooded
their television screens.
Bedazzled by the alleged omnipotence and omniscience of the "invisible
hand", no one predicted the utter meltdown that ensued: the mass
unemployment, the ubiquitous poverty, the glaring abyss between new
rich and always poor, or the skyrocketing prices even as income
plummeted. Nor were the good parts of the new economic regime
understood or explained: private property, personal profit, incentives.
The dangers of transition were flippantly ignored and the peoples of
central and eastern Europe were treated as mere guinea pigs by eager
Western economists on fat retainers. Crime was allowed to hijack
important parts of the post-communist economic agenda, such as the
privatization of state assets. Kleptocracies subsumed the newborn
states. Social safety nets crumbled.
In their vainglorious attempt to pose as accurate and, thus,
"respectable", scientists, economists refused to admit that capitalism
is not merely a compendium of algorithms and formulas - but mainly a
state of mind. It is an all-encompassing, holistic, worldview, a set of
values, a code of conduct, a list of goals, aspirations, fantasies and
preferences and a catalog of moral do's and don'ts. This is where
transition, micromanaged by these "experts" failed.
The mere exposure to free markets was supposed to unleash innovation
and entrepreneurship in the long-oppressed populations of east Europe.
When this recipe bombed, the West tried to engender a stable,
share-holding, business-owning, middle class by financing small size
enterprises.
It then proceeded to strengthen and transform indigenous institutions.
None of it worked. Transition had no grassroots support and its
prescriptive - and painful - nature caused wide resentment and
obstruction.
The process of transition informed us that markets, left to their own
devices, unregulated and unharnessed, yield market failures, anomies,
crime and the misallocation of economic resources. The invisible hand
must be firmly clasped and guided by functioning and impartial
institutions, an ingrained culture of entrepreneurship and fair play,
classes of stakeholders, checks and balances and good governance on all
levels.
Wealth, behavioral standards, initiative, risk seeking - do not always
"trickle down". To get rid of central planning - more central planning
is required. The state must counteract numerous market failures ,
provide some public goods, establish and run institutions, tutor
everyone, baby-sit venture capitalists, enhance innovation, enforce
laws and standards, maintain safety, attract foreign investment, cope
with unemployment and, at times, establish and operate markets for
goods and services. This omnipresence runs against the grain of
Anglo-Saxon liberalism.
Moreover, such an expanded role of the state sits uncomfortably with
complete political liberty. That capitalism is inextricably linked to
democracy is a well-meaning fallacy - or a convenient pretext for
geopolitical power grabs. East Europe's transition stalled partly due
to political anarchy. China's transition, by comparison, is spectacular
- inflated figures notwithstanding - because it chose a gradual
approach to liberalization: first economic, then political.
Last but not least, pure, "American", capitalism and pure Marxism have
more in common than either would care to admit. Both are utopian. Both
are materialistic. Both are doctrinaire. Both believe that "it's a
jungle out there". Both seek social mobility through control of the
means of production. Both claim to be egalitarian forms of social
engineering and are civilizing, millennial, universal, missionary
pseudo-religions.
The denizens of the nether regions of central and eastern Europe have
been the victims of successive economic utopias. They fear and suspect
ideological purity. They have been conditioned by the authoritarian
breed of socialism they endured, really little more than an overblown
conspiracy theory, a persecutory delusion which invariably led to
Stalinesque paranoid backlashes. Indeed, Stalin was more representative
of communism than any other leader before or after him.
The Economist summed this semipternal mass hysteria neatly thus:
"The core idea that economic structure determines everything has been
especially pernicious ... The idea that ... rights have a deeper moral
underpinning is an illusion. Morality itself is an illusion., just
another weapon of the ruling class. As Gyorgy Lukasc put it, 'Communist
ethics makes it the highest duty to act wickedly ... This is the
greatest sacrifice revolution asks from us.' Human agency is null: we
are mere dupes of 'the system', until we repudiate it outright. What
goes for ethics also goes for history, literature, the rest of the
humanities and the social sciences. The 'late Marxist' sees them all
... not as subjects for disinterested intellectual inquiry but as forms
of social control."
Many in Europe feel that the above paragraph might as well have been
written about Anglo-Saxon capitalism. Reduced to bare-bones
materialism, it is amoral, if not immoral. It upholds natural selection
instead of ethics, prefers money to values, wealth formation to social
solidarity.
Predators everywhere - Russian oligarchs, central European cronies,
Balkan kleptocrats, east European managers - find this gratifying. All
others regard capitalism as yet another rigid and unforgiving creed,
this time imposed from Washington by the IMF and multinationals rather
as communism was enjoined from Moscow by the Kremlin.
With eight of the former communist countries about to become members of
the European Union - albeit second rate ones - transition is entering
is most fascinating phase. Exposed hitherto to American teachings and
practices, the new members are forced to adhere to a whole different
rule book - all 82,000 pages of it.
European "capitalism" is really a hybrid of the socialist and liberal
teachings of the 19th century. It emphasizes consensus, community,
solidarity, equality, stability and continuity. It places these values
above profitability, entrepreneurship, competition, individualism,
mobility, size, litigation and the use of force. Europeans firmly
believe that the workings of the market should be tampered with and
that it is the responsibility of the state to see to it that no one
gets left behind or trampled upon.
European stakeholder capitalism is paternalistic and inclusive.
Employees, employers, the government, communities and suppliers are
partners in the decision making process or privies to it. Relics of
past models of the market economy still abound in this continent:
industrial policy, Keynesian government spending, development aid,
export and production subsidies, trade protectionism, the
state-sanctioned support of nascent and infant industries. Mild
corporatism is rife and manifest in central wage bargaining.
For some countries - notably Estonia - joining the EU would translate
into a de-liberalized and re-regulated future. Others would find the
EU's brand of the market a comfortable and dimly familiar middle ground
between America's harsh prescriptions and communism's delusional model.
The EU's faceless and Kafkaesque bureaucracy in Brussels - Moscow
revisited - should prove to be a relief compared to the IMF's ruffians.
The EU is evolving into a land empire, albeit glacially. The polities
of central and eastern Europe were always constituents of empires -
reluctantly or by choice. In some ways they are better suited to form
an "ever closer union" than the more veteran members.
Eastern Advantages
By: Dr. Sam Vaknin
Also published by United Press International (UPI)
Also Read
Transition in Context
Lessons in Transition
Is Transition Possible?
Leapfrogging Transition - Technology and Post Communism
Many of the nations of central and east Europe have spent most of their
history as components of one empire or another. People in this region
are used to be at the receiving end of directives and planning from the
center. Though ostensibly fervid nationalists, they are ill at ease
with their re-founded and re-found nation-states.
The identity of the denizens of these parts is more regional than
national and evolving towards the supra-national. People are from this
or that city, or district, or village. And they aspire to become
citizens of Europe and the great experiment of the European Union. They
are only hesitantly and tentatively Macedonians, or Moldovans, or
Belarusians, or Kazakhs, or Yugoslavs.
The likes of the Czechs, the Estonians and the Slovenes are well-suited
to become constituents of a larger whole. They make better Europeans
than the British, or the Norwegians. They have survived far mightier
and more bloated bureaucracies than Brussels'. They are unsurpassed
manipulators of officialdom. In the long run, the new members stand to
benefit the most from the EU's enlargement and to form its unwaveringly
loyal core.
Not yet the full-fledged individualists of the Anglo-Saxon model of
capitalism - these nations are consensus-seeking team-players. Tutored
by centuries of occupation and hardship, they are instinctual
multilateralists. They are avid Westerners by persuasion, if not yet in
practice, or geography.
Moreover, their belated conversion to the ways of the market is an
undisguised blessing.
Though still a promise largely unfulfilled, the countries in transition
could now leapfrog whole stages of development by adopting novel
technologies and through them the expensive Western research they
embody. The East can learn from the West's mistakes and, by avoiding
them, achieve a competitive edge.
Technology is a social phenomenon with social implications. It fosters
entrepreneurship and social mobility. By allowing the countries in
transition to skip massive investments in outdated technologies - the
cellular phone, the Internet, cable TV, and the satellite become
shortcuts to prosperity.
Poverty is another invaluable advantage.
With the exception of Slovenia, Estonia, Croatia and the Czech Republic
- the population of the countries in transition is poor, sometimes
inordinately so. Looming and actual penury is a major driver of
entrepreneurship, initiative and innovation. Wealth formation and
profit seeking are motivated by indigence, both absolute and relative.
The poor seek to better their position in the world by becoming
middle-class. They invest in education, in small businesses, in
consumer products, in future generations.
The Germans - sated and affluent - are unlikely to experience a second
economic miracle. The Serbs, Albanians, Ukrainians, Poles, or Romanians
won't survive without one. The West is just discovering this truth and
is opening its gates - albeit xenophobically and intermittently - to
poorer foreigners. For what is immigration if not the importation of
ambitious indigents, certain to revitalize the EU's rich and somnolent
economies?
The countries of central and eastern Europe, thus, stand to benefit
twice.
Their own economic Renaissance is spurred on by a striving home-grown
proletariat. And they are uniquely positioned - geographically and
culturally - to export destitute go-getters to the wealthy West and to
reap the rewards of the inevitable spurt in entrepreneurship and
innovation that follows. Remittances, returning expatriates, thriving
and networked Diasporas would do more to uplift the countries of origin
than any amount of oft-misallocated multilateral aid.
This cornucopian vision is threatened from numerous sides.
Geopolitical instability, resurgent trade protectionism, dysfunctional
global capital markets and banks - can all reverse the course of a
successful transition to market economies. Still, the more pernicious
threats are from the inside: venal, delegitimized politicians, brain
drain, crumbling infrastructure, cheap foreign competition, or
inter-ethnic tensions.
Perhaps the most serious hindrance to progress would be a fanatic
emulation by the countries in transition of the European Union. An
overly generous social safety net, a sprawling bureaucracy, inane laws
and regulations about everything from the environment to the welfare of
pigs, paralyzed decision-making processes and deleterious subventions -
can all scupper progress and depress entrepreneurship and innovation.
The cautionary tale of east Germany - smothered by western red tape and
lethargy - should forewarn every new member and aspiring candidate.
They need to join the European Union in the hope of helping to reform
it from the inside. They should not succumb to the allure of German
largesse, nor acquire the French, Spanish, Greek and Portuguese
addiction to it. They cannot afford to.
Europe's Four Speeds
By: Dr. Sam Vaknin
Also published by United Press International (UPI)
Pomp and circumstance often disguise a sore lack of substance. The
three days summit of the Central European Initiative is no exception.
Held in Macedonia's drab capital, Skopje, the delegates including the
odd chief of state, discussed their economies in what was
presumptuously dubbed by them the "small Davos", after the larger and
far more important annual get together in Switzerland.
Yet the whole exercise rests on a series of politically correct
confabulations. To start with, Macedonia, the host, as well as Albania,
Bulgaria, Romania, Ukraine and other east European backwaters hardly
qualify for the title "central European". Mitteleuropa is not merely a
geographical designation which excludes all but two or three of the
participants. It is also a historical, cultural, and social entity
which comprises the territories of the erstwhile German and,
especially, Austro-Hungarian (Habsburg) empires.
Moreover, the disparity between the countries assembled in the august
conference precludes a common label. Slovenia's GDP per capita is 7
times Macedonia's. The economies of the Czech Republic, Poland, and
Hungary are light years removed from those of Yugoslavia or even
Bulgaria.
Nor do these countries attempt real integration. While regional talk
shops, such as ASEAN and the African Union, embarked on serious efforts
to establish customs and currency zones - the countries of central and
eastern Europe have drifted apart and intentionally so. Intra-regional
trade has declined every single year since 1989. Intra-regional foreign
direct investment is almost non-existent.
Macedonia's exports to Yugoslavia, its next door neighbor, amount to
merely half its exports to the unwelcoming European Union - and are
declining. Countries from Bulgaria to Russia have shifted 50-75 percent
of their trade from their traditional COMECON partners to the European
Union and, to a lesser degree, the Middle East, the Far East and the
United States.