Eastern Europe: The origins of capitalist restoration

Why did the crisis of bureaucratic societies in the USSR and Eastern Europe lead not to a “left” exit, but to the restoration of capitalism?

In previous uprisings (1956, 1968 and 1980) against bureaucratic regimes in Eastern Europe, left-wing critiques were dominant. Why was the exit in 1989–1991 in the direction of a return to capitalism?

This question interrogates first of all the hope of an end to Stalinism by “the left.” We must start by specifying what we want to talk about, as the concepts (of “left” in particular) are opaque in a context where the parties in power and those who supported them defended the sending of tanks to Hungary (1956) or Czechoslovakia (1968) in defence of “socialism”, against a pseudo-risk of capitalist restoration.

Which societies are we talking about?

Often sterile semantic debates generally overshadowed one of the contributions of the Soviet debates of the 1920s - the analysis of the USSR as a “transitional” society (between capitalism and communism) without stable coherence after the overthrow of the old propertied classes, highlighting the contradictory logics that ran through it. The word socialism referred to a goal and not a stabilized society. The notion of a transitional society was retained by Trotsky in “The Revolution Betrayed,” again without a teleological vision (securing the future) and against any idea of a consolidated “realized socialism” – as was claimed by Stalin. “The question of the social character of the Soviet Union is not yet decided,” he wrote.

Contrary to his hope, the concrete scenario of the Second World War did not make it possible to settle this question. The spread of revolution led to crisis for the “construction of socialism in one country” and Stalinist hegemonism – but not in the developed capitalist countries. There, reformist logics under pressure from the competition between systems prevailed. In the USSR, the victory against fascism and the gains in living standards associated with post-war growth rates temporarily strengthened Stalin but quickly also led to the “Khrushchevian thaw” with its contradictions.

It was in this impure “in-between” that the uprisings of 1956 and those which followed took place. The problem of non-capitalist “transitional” societies claiming to be socialist was materialized in highly differentiated and evolving contexts over a third of the globe.

The importance of the “1968 years”

The hypothesis of a transformation of these societies where a socialist/communist logic would prevail was at its strongest in 1968 in a context of radicalization against all relations of domination on a world scale.

And indeed, the ideals of a “socialism with a human face” were making their way in spite of and against bureaucratic repression. Notably, as was often ignored and obscured, with the expansion of workers’ councils supported by the pro self-management wing of the Communist Party and the reconstituted official trade unions, during and against the Soviet intervention in Czechoslovakia.1

Jaroslav Sabata, one of the members of the Czechoslovak self-management current, stressed the fundamental stakes of a socialist democracy with regard to the outcome of 1968.2 According to him, it depended on the radical support of the Communists for the forms of democratic organization that had emerged at the heart of the enterprises and universities, demanding dignity and rights that no bourgeois democracy was able to recognize. Running through all the institutions of the system, popular in the ideals of equality that it defended, such an “outcome” (which was genuinely “left”) would have been able to resist the Soviet intervention by impacting the USSR itself: he believes that, on the basis of such mobilization and self-organization, the convening of a congress of Czechoslovak Communists – defying the “prohibitions” – would have changed the balance of forces against the troops of the Warsaw Pact,  “encouraging all the reformist forces of the Soviet bloc and of the USSR itself.” While they were in the majority, the reformist currents capitulated before the possible and ongoing popular mobilization, making them unable to stand up to the Kremlin. It was exactly the opposite choice to that the Titoist leaders made in 1948, on the basis of a power of resistance resulting from a powerful autonomous revolution.

The blocking of workers’ and self-managing socialist logics in Czechoslovakia meant a Brezhnevian-type “normalization.” This was also the case with a particular depth in the USSR.

Unfortunately, the Titoist regime, while denouncing Soviet intervention – and exploiting it as a possible threat in Yugoslavia – did not offer a coherent alternative “model”: the market reforms dismantling the plan (between 1965 and 1971) had profoundly deepened inequalities and strengthened the confederal nature of the system. Yet the socialist demands that were expressed in 1968 “for self-management from below” and against “the red bourgeoisie” associated with market reforms, were partly taken into account, while being “channelled” bureaucratically. Yet this was again a possible “bifurcation” of history.

Soviet stagnation and the “social contract”

In the 1970s, the blocking of market reforms took place in the sense of planning variants involving social relations of ad hoc production and distribution that expressed the importance of the working class base in legitimizing the regimes concerned – but by “depoliticizing” this without inventing and imposing a socialist alternative at the scale of society.

The relationship between party and state (at various levels) and workers was heavily dependent on recognized property rights. In such systems, the “political” with its ideological dimension (the rule of a party in the name of the workers and socialism – on their backs) was part of the “infrastructure.”

Michael Lebowitz has proposed an interesting approach to the “contradictions of actually existing socialism” centred on the USSR, especially in this phase.3 He stresses the need for the apparatuses to “legitimize” themselves – and we have seen this logic in all the countries concerned – whatever the precise historical scenario of their origin, by emancipating themselves, including from dependence on the USSR. Lebowitz takes into account their specific (political-social) relations of domination – what he calls the logic of the “vanguard party” ruling in the name of the workers – by directing them (thus keeping them in an alienated position).

Concrete analyses of the ad hoc relations between workers and managers and their “rational” behaviour have demonstrated – even in the absence of recognized rights to strike – the extreme strength of workers' resistance to market reforms, even in their 1960s variant – in response to the waste of bureaucratic planning.4 This was not a coherent power of control – because that would have to have been realized on a global scale of a socialist democracy within the entire economy – but of an alienated social power, deeply antagonistic to market relations, inscribed in the mechanisms of bureaucratic planning.

This was also understood by the currents opposed to reform (the “conservatives” like Novotny against Dubcek in Czechoslovakia) who sought to stabilize their own positions by relying on the workers against the reforms. It was to break this type of “conflictual connivance” that reformers – from Dubcek to Gorbachev – tried to introduce more rights and freedoms without changing anything essential.

For Lebowitz, the stabilization of party-state rule – as under Brezhnev – was embodied in what he calls a “social contract” (egalitarian and ensuring job security) within the framework of relations of domination, which were not democratic, of course.5 This type of pseudo-contract expresses a “logic” that he calls that of the “vanguard party” that seeks to legitimize and stabilize itself other than through repression. He points out that the Brezhnev era is often presented as the “golden age” for workers at the same time as the economy stagnated.

The unthinkable that materialized in the long term in the USSR was then that of non-market but deeply alienated relations within the big Soviet enterprises. A form not of “socialism” but of the socialization of workers, in conflictual connivance with managers. It crystallized non-market protections and gains in living standards – analysed by David Mandel, who highlighted the preponderant share of benefits in kind (housing, various social services, products) associated with employment in the “social income” of workers.

This logic meant the impossibility of breaking the compartmentalization of big enterprises and creating system-wide places for a “free association of producers” and a collective socialist consciousness capable of inventing rational means of reducing waste and improving the quality of production. In the same way, the means of achieving democratic and solidarity-based planning of the priority needs to be met and of joint elaboration of criteria of efficiency and social justice was permanently blocked.

Such was the common impasse – with more or less plan and market, with or without self-management under “actually existing socialism”.

Debt crisis and arms race

But it is also necessary to analyse what strengthened capitalist pressures within the parties/states themselves in the years leading up to 1989. This is particularly the case with the “debt crisis” (in hard currency) of the late 1970s in several countries: Yugoslavia, Hungary, Romania, Poland, and the GDR. Here again, several aspects should be highlighted. On the one hand, how the blocking of reforms after the Soviet intervention of 1968 (and Tito and Kardelj's responses to the political and social movements of 1968–71) produced a turn of the existing regimes not towards capitalism, but towards – popular – imports of Western products.

Autarky is not a socialist “ideal”. On the other hand, trade must be controlled. The hypothesis of being able to easily repay through exports was combined with offers of credit from Western banks then accumulating petro-dollars in search of investments. The unexpected slowdown in global growth in the 1970s weighed on exports. Another unforeseen event: the choice of the Fed in the United States to raise interest rates and its chain effects on debt. But each of the regimes concerned would react in a different context and according to different choices: Yugoslavia, after the death of Tito (1980), discovered the extent of its foreign debt, while it had no internal coherence to confront it. This would be the first decade of recession, marked by hyperinflation and a considerable rise in strikes but also of nationalisms. It was a decade of open crisis of the system and the federation – without a political and trade union force capable of offering solidarity-based “Yugoslav” orientations in response to the crisis. Poland, meanwhile, attempted a price modification that produced the workers’ uprising leading to Solidarnosc, which would mark the entire decade. Hungary chose to sell its finest flagships to foreign capital. Ceausescu's Romania decided to repay its debt in full on the basis of a dictatorial policy. And the GDR was more dependent than ever on the financing and choices of the USSR.

The latter was not indebted in hard currencies (subject since the Cold War to the blocking of external financing via CoCom under US pressure). But it had been bogged down in Afghanistan since 1979 – as the United States was in Vietnam, with in addition the specific impact on the Soviet economy of the new arms race launched by Reagan from the beginning of the decade. Changes in oil prices (and the USSR’s desire to profit from this in its exports) produced growing tensions within Comecon.

For the first time in decades, the gaps between developed capitalist and “socialist” countries were widening, even though they had narrowed until the 1970s – which until then had given the feeling of “catching up”. Witness the comparison of Gorbachev's discourse and policies humbly aimed at obtaining Western credits whereas Khrushchev boasted of catching up with capitalism by 1984 – and ventured to send rockets to Cuba!

Gorbachev's turn

Gorbachev's rise to power (1985) changed the historical situation in many ways.  His initial goal was not capitalist restoration but the search for a concentration of the USSR's resources for itself. Perestroika (economic reform) and Glasnost (the search for transparency, particularly in the media) aimed, in a way, to “de-bureaucratize bureaucracy”. The purpose of Perestroika, brilliantly analysed by Donald Filtzer, was to try again to respond to the squaring of the bureaucratic circle. Filtzer shows how – far from any “capitalism” – the bureaucracy failed to increase the productivity of labour and control the surplus on which its own privileges depended.6

The choices of domestic reforms, initially close to what had been tried in Hungary, aimed to strengthen the accountability of “enterprise collectives” (including managing directors). They were accompanied at the international level by a desire for concrete Soviet “disengagement” (to be credible with Western creditors) and to release internal resources: the withdrawal of its troops and funding in the GDR, but also the cessation of Soviet aid to Cuba and the Third World, and the end of “interventionism” in the countries of the “Soviet bloc” – which radically changed the situation of the “sister parties” in Eastern Europe.

The 1989 upheavals began in Germany

This is where foreign policy and therefore also Gorbachev’s reforms were at stake. The FRG's credits were much more important to him than Honecker's hated regime. The Soviet leader was, on the contrary, popular in the GDR. He supported the fall of the Berlin Wall and prevented any repression of demonstrations. He hoped, with Mitterrand, to build a kind of European Common Home where NATO and the Warsaw Pact would be dismantled.7 The two Germanys were supposed to be consulted on the definition of their future relations.

The opacity of 1989 – from Germany to the USSR

Since 2009 and the opening of the archives, we are only beginning to perceive what were the practical conditions for German unification – which was the first extension to the East of capitalism (and what would become the new European Union).

Contrary to many superficial judgments reducing the GDR to the Stasi and bureaucratism and thus assuming that the East German population had “nothing to lose” from this unification, it is obviously necessary to understand both the terrible power of attraction of the DM and the West German showcases, and a deep clash of “societies” (in terms of people and culture) that had become different – where the population of the GDR (especially women and single mothers),  did have something to lose10 and were deeply humiliated. The witch hunt (against Communists) and discrimination were all the wider because the capitalist restoration did not need a bourgeoisie emanating from the old apparatus (unlike other countries): the powerful German bourgeoisie existed, endowed with its currency functioning perfectly as capital – which was lacking everywhere else.

The failure of the scenario hoped for by Gorbachev and the fiasco of perestroika (dismantling the plan without having a market) at the domestic level radicalized the new laws towards capitalism.

Meanwhile, in all the countries of the East, the absence of Soviet intervention in the face of the fall of the Wall opened the floodgates of a domino effect. In Czechoslovakia, it took the form of the “Velvet Revolution.” But in Poland it was shock therapy – so brutal and violent for the workers that less than two years later, they “voted” for the return of the “ex” through the ballot box, without being aware that the latter had switched to a role of “comprador bourgeois.” The “privatizations” began, though they were opaque in the absence of money-capital.

In other words, the shift to capitalism came from above. And not from the workers but against them, from an essential part of the “Communist” apparatuses. It came in a dated way after the systematic repression of great episodes sketching out a socialist, self-managing anti-bureaucratic revolution. And while the workers and peoples concerned had no political means of finding together a solidarity-based, democratic and socialist way out of the impasses of the system.

An “easy” capitalist restoration?

However, the socio-economic reality of the “capitalist restoration” was far removed from the “ease” of the bourgeois shift of a substantial part of the former Communists; and the idealized image of the fall of the Wall as happy and democratic obscures what privatization meant (“easy” with the DM of German unification and much more difficult everywhere else).

It is not enough to want to be “bourgeois” to have the associated socio-economic powers. The USSR was far more than any other country marked by several decades of suppression of market mechanisms and the crystallization of powerful regional bureaucracies. The “transition” (capitalist transformation) was neither democratic nor peaceful, but on the contrary of great violence and extreme opacity. The violence of these transformations (visible in the suicide statistics, the decline in life expectancy in the 1990s) is deeply minimized or interpreted in a culturalist way disconnected from capitalist transformation: this is true of the presentation of wars (in the former USSR or Yugoslavia) between new independent states – while they are underpinned by deep rivalries in the appropriation of territories to be privatized; but this is also true of the concealment of the insidious violence of changes in social status accompanying the rise of structural unemployment and dizzying inequalities.

As for capitalist scenarios and processes of restoration, they are still largely to be analysed far from clichés and in a concrete way – distinguishing the change in nature (function and purposes) of the state and the transformation of the economy – in changing geo-political contexts, thus affecting the dynamics of social struggles. Let us highlight only a few aspects of the necessary study projects.

Political pluralism itself was introduced everywhere without difficulty (since it came from within the single party itself) at the beginning of the new decade. It is not in itself the “sign” of capitalist restoration. It was not part of a social and political (revolutionary) mobilization and self-organization of workers allowing resistance to market mechanisms and the conscious and organized emergence of a socialist transformation and consolidation of the system. Nowhere has the end of the single party resulted in the expression of a truly “communist” and democratic political-trade union pole based on the workers. Serious analysis of the new “pluralism” requires us to emphasize its deep anti-democratic limits. It is again this characteristic that made it possible to move from bourgeois (pro-capitalist) governmental coalitions to changes in the nature of the states via “reforms” aimed at eradicating any link with a socialist past/future, transforming institutions and property relations. Big enterprises, especially in Russia (and in countries that had the same productive structures) remained for a time (with small vegetable gardens) “shock absorbers” of this violence, offering profoundly degraded means of “social protection” in kind. More than half of Russia’s trade was based on barter relations during the 1990s, while the new “capital” that accumulated in the sale of raw materials abroad would be placed in tax havens (until the crisis affecting the state debt in 1996). But overall, this non-progressive destruction has atomized and rendered difficult as a whole the struggles of workers.8

As for the new bourgeoisie, we will focus here on Europe alone.9 It is obviously necessary to distinguish between the “comprador bourgeois” – ready to sell their skills within the old apparatuses to facilitate privatization and Western credits – and the new “emerging” capitalist powers aspiring to defend their interests in the wider world. But China did not want to be (and could not be) Yeltsin's Russia – and Putin learned from this. The monetary and political unification of the country could only be achieved under Putin at the turn of the 2000s. This also restored the external status of a Russian “great power” – backed by the legacy of its military-industrial complex. It is obviously necessary to analyse differently the scenarios of a new peripheral status for Eastern Europe, polarized between (and more or less in the orbit of) Russia and the European Union.

Enterprises divided into shares

But I would like to end on the central issue of “privatization.” More than anything else, they were a revelation of what the old systems (and their state power) were - certainly, non-socialist but allowing neither dismissals nor an accumulation of money-capital. The goal of capitalist restoration imposed the transformation of the state, currency and property relations – as part of a process (chaotic, bureaucratic and long) of commodification of the means of production. What money-capital would “privatize” (buy) companies? Such money-capital did not exist at the national level – except, as has been said, for the united Germany, and, one might add, in relation to Hong Kong and “foreign investments,” China. In general, therefore, the choices of the new leaders were divided in the initial phase of capitalist transformation, essentially into two groups: a minority (mainly Hungary and the Baltic republics) opted for sale to (real) foreign capital from the beginning of the process.

Most of them have carried out “mass privatizations” without money: the “legal” transformation of enterprises divided into shares which can be “bought” with “coupons”' distributed to workers and populations, and, depending on the country, leaving open several “choices”': “this property is legitimately yours” (to a greater or lesser extent), the “reformers” in the collective or common enterprises have been able to say. But if you prefer to leave your shares to the state or sell them to foreign capital, you can make these “choices.” The hope that the “state” would manage these “shares” in a “social” way – or that the foreign capitalist would contribute real wages and modern technologies – made it even more difficult to resist these traps. The “black book” of these “privatizations” is yet to be written.

Catherine Samary is a specialist of former Yougoslavia, member of the Fourth International and the NPA.

Original article in French SolidaritéS, translated by fourth.international.

• 1See my article in Le Monde Diplomatique, May 2020 https://monded…
• 2J. Sabata, “It wasn’t the tanks that crushed us,” East European Reporter, Vol.3 N°3; Autumn 1988, interview pp.3-7.
• 3Michael Lebowitz, “The Contradictions of ‘Real Socialism’: the Conductor and the Conducted”, 2012.
• 4I have analysed the rational behaviour and contradictions of Soviet planning and its reforms – with or without self-management –while recalling the terms of the debates of the 1920s and the stakes of the alternative rationality of a socialist economy, in “Plan, Market and Democracy – the experience of the so-called socialist countries”, IIRE Notebooks for Study and Research, 1988, which can be downloaded from my website.
• 5Op. cit. (The contradictions...). I have discussed this approach in the different case of the Yugoslav experience where market margins were extended with increased self-management – and national – rights.
• 6Donald Filtzer, “Soviet Workers and the Collapse of Perestroika: The Soviet Labour Process and Gorbachev's Reforms, 1985–1991” (Cambridge Russian, Soviet and Post-Soviet Studies). Also read the many articles by David Mandel, especially on the workers' struggles in Russia, Ukraine and Belarus.
• 7This reflected an eclectic ideology very present in the 1970s in tension with neoliberal schools, combining the theses of the “convergence of systems” and socialist interpretations of neoclassical theoretical models. See Joanna Bockman, “The origin of neoliberalism; Between Soviet socialism and Western Capitalism. A galaxy without borders” Theory and Society Vol. 36, No. 4 (August 2007).
• 8Cf. the studies mentioned on workers' struggles at the time of Perestroika and the end of the USSR – and Slovenian specificities (on this subject, see my website).
• 9The Cuban case remains separate. But the Chinese scenario of capitalist restoration requires specific analysis and periodization highlighting major differences with the USSR including three: 1) the taking into account by the CCP of the disaster of Russian privatization and the importance of maintaining a ruling party-state; (2) the weight and specificity of reforms concerning Chinese agriculture; 3) absence of external pressure from the IMF and the EU. See in particular Au Loong Yu on “bureaucratic capitalism.”