10 years after 1989

First published: December 1999

Ten years after 1989, the consequences of the re-introduction of capitalism into Eastern Europe are clear and acknowledged even by some of the international agencies which sponsored the process.

The World Bank reports in its 1999 World Development Indicators: ‘In 1989 about 14 million people in the transition economies were living under a poverty line of $4 a day. By the mid-1990s that number was about 147 million, one person in three. The distribution of income in the communist period was relatively egalitarian, primarily because of a relatively flat wage distribution, but also because of the virtual absence of income from property and the redistribution of income through social transfers… Today, some eight years later, income distribution has worsened sharply, particularly in the former Soviet Union… the stress is showing in the declining or stagnating life expectancy and sharply worsening adult mortality. Today, for example, the probability that a 15-year-old Ukrainian male will survive until his sixtieth birthday is a mere 65 per cent, down from 72 per cent in 1980. The Europe and Central Asia region is the only part of the developing world with rising adult mortality rates. Even Sub-Saharan Africa, with its AIDS epidemic, is seeing a reduction in adult mortality.’

The proportion of the population living in poverty increased between 1987–88 and 1993–95 from 2.1 per cent to 14 per cent in Poland, from 1.3 per cent to 39 per cent in Romania, from 0.1 per cent to 29 per cent in the Baltic states, from 0.2 per cent to 66 per cent in Moldova, from 2.2 per cent to 44 per cent in Russia, from 1 per cent to 63 per cent in Ukraine, and from 6.5 per cent to 53 per cent in Central Asia (World Development Indicators, 1999).

This situation has not improved. Another study, the United Nations 1999 Human Development Report, stresses that even where there has been some resumption of economic growth, as in Poland, the historically unprecedented rise in inequality which has accompanied the introduction of capitalism has ensured that any benefits accrue to a tiny minority of the population – the new capitalist class: ‘The transition from centrally planned to market economies was accompanied by large changes in the distribution of national wealth and income. Data on income inequality indicate that these changes were the fastest ever recorded.’

The most comprehensive survey is by the United Nations Development Programme (UNDP), Transition 1999 – Europe and CIS Human Development Report. This states: ‘The “transition” in most of the countries in the former Soviet bloc in Central and Eastern Europe and the CIS is a euphemistic term for what in reality has been a Great Depression. The extent of the collapse in output and the skyrocketing nature of inflation have been historically unprecedented. The consequences for human security have been calamitous. By conservative estimates, over 100 million people have been thrown into poverty, and considerably more hover precariously just above subsistence.’

The report states that the introduction of capitalism into the region has ‘literally been lethal for a great many people’ with nearly 9.7 million men who would still be alive today had capitalism not been introduced.

It notes that ‘before the 1990s, countries of Central and Eastern Europe, and the Commonwealth of Independent States, were notable for providing their populations with a high degree of basic security. People’s right to full, lifetime employment was guaranteed. Although cash incomes were low, they were stable and secure. Many basic consumption goods were subsidised and regularly supplied. People had food security and were adequately clothed and housed. They had free and guaranteed access to education and health. They were assured pensions when they retired and regularly benefited from many other forms of social protection.’ But, since 1989: ‘The whole previous comprehensive system of social protection has been allowed to crumble.’

Moreover, on the latest available comparable figures most countries are still poorer than they were ten years ago: ‘By 1997, only Slovenia had a higher national income than it had in 1989, while Poland had finally recovered to that level.’ For the former Soviet Union, national income under capitalism is barely half what it was under a planned economy.

The report itemises what it calls ‘the human costs of transition’.


The biggest is the decline in life expectancy, which has ‘meant that several million people have not survived the 1990s who would have done so if the life expectancy levels achieved in the 1980s had been maintained.’

The second is the spread of diseases like TB that had been virtually eliminated prior to 1989.

Poverty increased from 4 per cent of the population of eastern Europe and the former Soviet Union in 1988 to 32 per cent in 1994, with ‘60 per cent of children suffering from some form of malnutrition’ in Poland, the number of pregnant women suffering from anaemia in Russia tripling between 1989 and 1994, and ‘20–50 per cent of children’ in Moldova suffering from rickets in 1996.’

An immense regression of the position of women in society: ‘During the Soviet era, quotas for women helped to incorporate them into positions of economic and political decision-making and authority.’ Since 1989: ‘Women have found themselves progressively pushed out of public life. Simultaneously their access to paid employment has declined and their total work burden both within the household and outside it has increased The increased work burden for women has been directly related to cutbacks in social services and the withdrawal of the state from the provision of social protection.’ At the same time: ‘Not only has women’s economic security been on the decline, but also their personal security has been under increasing threat. Violence against women has been on the rise.’

Massive cuts in spending on education – down 50 per cent in Bulgaria, for example. Women have suffered disproportionately: ‘Expenditures on nursery and other pre-school facilities have been slashed; in countries of the former Soviet Union more than 30,000 are reported to have been closed between 1991 and 1995’ – which has ‘increased the burden of household work on women and diminished their opportunities for employment.’

Unemployment has risen from negligible levels to more than 10 per cent across the region.

The report concludes: ‘There has been a tragic breakdown in human security with respect to access to social services and social protection. There is no longer any secure entitlement to a decent education, a healthy life or adequate nutrition. With rising mortality rates and new and potentially devastating epidemics on the horizon, life itself is increasingly at risk.’

A 1999 report by the United Nations Children’s Fund (Unicef) looked specifically at the position of women. It concluded that since 1989 14 million jobs held by women have disappeared, state-supported childcare services have collapsed, women’s life expectancy has decreased in 16 out of the 27 countries studied and the proportion of women in parliaments has fallen from a third to 10 per cent.

Even in East Germany, with the highest living standards of the former East European states, unemployment is around 20 per cent, double that in the West, and an opinion poll published by Der Spiegel in October 1999 found that easterners think their old regime was better on seven out of nine counts including healthcare, education, housing provision, industrial training, law and order, gender equality, and social security. Unification is now seen as colonisation, with westerners occupying 75 per cent of top civil service jobs, 90 per cent of professorships in universities and 99 per cent of top jobs in industry and the armed forces in the east (Financial Times, 4 November).

These figures demonstrate a simple fact: for the majority of the population capitalism is worse than the planned economies which it replaced.

Taking a wider perspective, the advance of capitalism into Eastern Europe and the dissolution of the Soviet Union, have given the greatest impetus to imperialism, and US imperialism in particular, since the period before the First World War. As a result, imperialist exploitation of the majority of the population of the world has been enormously intensified – with, according to the World Bank, living standards in sub-Saharan Africa, for example, lower today than in 1970.

This strengthening of imperialism has inevitably led to an immense increase in human inequality within and between states – the gap between the income of the 20 per cent of the world’s people in the richest countries increased from 30 times that of the 20 per cent in the poorest states in 1960, to 74 times as much in 1997.

Moreover, the dissolution of the Soviet Union, the only military counterweight to the US, has allowed this rising exploitation to be enforced by naked military violence – from the Gulf War, through the racist intervention in Somalia to the bombing of Yugoslavia. Direct colonialism has also re-emerged – with the creation of NATO ‘protectorates’ in Bosnia and Kosovo – and all NATO states now committed to reconfiguring their armed forces for offensive military action.

While the main blows have fallen upon the peoples of the third world, the former Soviet Union and Yugoslavia, the new international relationship of forces, has given capital the opportunity to attack the welfare states created in Western Europe after the Second World War – amid a shift of the entire political spectrum to the right, including the biggest votes for racist and fascist parties since the 1930s.

Nor will it end there. The world is now more threatened by the use of nuclear weapons than at any time since Hiroshima and Nagasaki. Washington is working furiously to regain the ability to use its nuclear arsenal with impunity by developing anti-ballistic missile systems, as it embarks upon a vast new arms race in Asia designed to confront and break open the Chinese economy.

This dynamic unleashed by 1989 was predictable and predicted. The populations of Eastern Europe and to a lesser extent the former Soviet Union were so deeply alienated and demoralised by the crimes of the bureaucracy that many of them thought capitalism would be better. They were wrong. In reality, public ownership of industry, planning and control of foreign trade protected those economies and the living standards of their populations from the far more powerful advanced capitalist states. Public ownership and planning allowed their industrialisation and the provision of high levels of social welfare, security and education than would have existed under capitalism.

As Trotsky argued until the end of his life: ‘The fall of the bureaucratic dictatorship, if it were not replaced by a new socialist power, would thus mean a return to capitalist relations with a catastrophic decline of industry and culture.’ This was because: ‘The Soviet system with its nationalised industry and monopoly of foreign trade, in spite of all its contradictions and difficulties, is a productive system for the economic and cultural independence of the country… What is involved [in the restoration of capitalism]… is not the introduction of some disembodied democracy but returning Russia to the capitalist road. But what would Russian capitalism look like in its second edition?… A capitalist Russia could not occupy even the third rate position to which Czarist Russia was predestined by the course of the war. Russian capitalism today would be a dependent, semi-colonial capitalism without any prospects.’

Socialist Action shared this view in 1989 and argued: ‘Far from more liberal and progressive world order emerging from the process leading to the overthrow of the bureaucracy from the right in Eastern Europe, capitalism is throwing back the progress of humanity on a world scale more than at any point since World War II’ (1989 – a turning point in world history, May 1990).

Immediately following Yeltsin’s assumption of power in Russia in August 1991, we wrote: ‘Economic catastrophe is sweeping Eastern Europe and the USSR with the attempt to re-introduce capitalism. It is bringing the rise of racism, reactionary nationalism, and moves to capitalist dictatorship. Stalinism in Eastern Europe, by repelling the working class from socialism, has brought these countries to the brink of disaster. The assault on the working class, and the violent moves of these societies to the right, are also discrediting those in the West who believed that the events after 1989 in Eastern Europe – the introduction of capitalist governments – represented a way forward. Instead they confront the working class with the threat of the greatest defeats in its history and the unfolding of a period of unparalleled reaction in Europe – and internationally.’ (1917, 1941, 1991 – the Russian Revolution fights for its life, September 1991).

This view was rejected, at that time, not only by social democracy and Eurocommunism, but also by many who claimed adherence to Marxism. They argued that the economic base of the Soviet Union, and Eastern Europe, was either no different to capitalism, and therefore not worth defending, or that the USSR was actually worse than capitalism.

The former school of thought was represented in Britain by Socialist Workers’ Party leader Tony Cliff’s theory of state capitalism. Consistent with this, Socialist Worker declared on 31 August 1991: ‘“Communism has collapsed” our newspapers and TV declare. It is a fact that should have every socialist rejoicing.’

The view that the USSR was worse than capitalism was adopted by Workers’ Liberty, who announced that the introduction of capitalism into Eastern Europe 1989–91 was such a great advance that they called upon Yeltsin to crush opposition to it by banning the Communist Party of the Soviet Union.

A variant of these views was put forward by Ernest Mandel, the Fourth International and some of the editorial board of New Left Review. The Fourth International held theoretically the view that the Eastern European economic systems were superior to capitalism, but in practice supported the events leading to the restoration of capitalism – embellishing them with the new concept of a classless ‘democratic revolution’. New Left Review editorial board member, Tariq Ali, dedicated his book on the Soviet Union, Revolution from Above, to Boris Yeltsin ‘whose political courage has made him an important symbol throughout the country.’

The historical balance-sheet of these theories is now clear. The dynamic of the events in 1989 was not a challenge to the bureaucracy from the left, but the restoration of capitalism from the right. That led to everything Trotsky analysed it would – economic catastrophe, social reaction and a colossal new impetus to imperialism. Those who supported that dynamic placed themselves on the side of forces which have reduced hundreds of millions of people to desperate poverty and brought the world closer to the use of nuclear weapons by imperialism than at any time since 1945. Most such forces have continued their political degeneration. A few, such as the SWP and New Left Review, have drawn back from some of its practical consequences – by opposing the bombing of Yugoslavia, for example. Having done so they should also reconsider the theories which failed the test of the greatest political events since the Second World War.

This is not simply a question of theoretical consistency. It has immense practical significance. US imperialism is now turning its attention towards the re-conquest of China – whose economic dynamism is based not on capitalism, but upon the rejection of the policies applied by the IMF in Eastern Europe. As a result, in just 20 years the Chinese planned economy has quadrupled in size, with commensurate rising living standards.

Consider what the re-introduction of capitalism would mean for China’s population of 1.3 billion people. Despite its absolute size, in terms of income per head China is a developing country, ranking 145th in the world, behind such states as Papua New Guinea, Morocco, El Salvador, Paraguay, Costa Rica or Botswana. In Russia, capitalism brought a fall in GDP per head of 43 per cent in just five years. Starting with living standards little more than a fifth of those in the Soviet Union in 1990, an equivalent fall in China would make the difference between life and death for literally millions of people.

The re-introduction of capitalism into Eastern Europe and the former Soviet Union was the greatest defeat of the international working class since fascism. By strengthening imperialism, it inaugurated a colossal regression in human civilisation and culture. The next period of advance of the international working class movement, and humanity, will be built upon, and is arising out of, the struggle against the consequences for the world of those events.