The Red Flag: A History of Communism (101 page)

The Romanticism of the entrepreneur did, of course, involve struggle, but it was the peaceful struggle of business competition and not the violent militancy of the Communist revolutionary. And it looked as if for much of the world, the two-century-long global ‘civil war’ was over. Though the neo-liberal order increased economic inequalities enormously (most notably in China, which became the second most unequal society in Asia after Nepal’s Hindu monarchy), there was little pressure for social revolution. China, once the most radical opponent of the American-led order had become one of its main beneficiaries, growing wealthy by exporting its goods to the West. Within China, and indeed in much of the rest of the world, neo-liberalism offered the promise of wealth and improvement without the need for class struggle or war. Everybody, it seemed, could become Bill Gates if they were energetic enough. Francis Fukuyama’s claim that history had ended looked highly plausible a decade after 1989.

The lessons learnt from the fall of Communism played a central role in the neo-liberals’ intellectual victory. If Communism’s role in the defeat of Nazism contributed to the widespread acceptance of mixed economies after 1945, its implosion in 1989 was commonly regarded as proof that Friedman, Reagan and Thatcher had been right and the state should withdraw from the economy. The Soviet command economy was not seen as fundamentally different from the post-war mixed economy, but as a more statist version of it. As the journalists Daniel Yergin and Joseph Stanislaw argued in their popular 1998 obituary of socialism,
The Commanding Heights
, the fall of the Berlin Wall brought with it ‘a vast discrediting of central planning, state intervention, and state ownership’.
²
Unsurprisingly, the failures of Communism were regularly used by supporters of liberal globalization, flexible labour markets, free trade and sound money to condemn their critics; in 2000 the
New York Times
columnist Thomas Friedman ended an attack on the anti-globalization protesters in Seattle with a contemptuous history lesson:

The supporters of 1990s-style liberal capitalism did not only use the experience of Communism to argue that the free market was economically necessary; they also insisted that it was morally superior. Fukuyama, in
The End of History and the Last Man
(1992), made the case most forcefully. All men and women, he argued, needed individual dignity and recognition (
thymos
), and only liberal democracy could deliver that to everybody in equal measure. Communist and other totalitarian states, which put party ideology and collectivism first, were unable to do this. Fukuyama was, then, offering a liberal Romantic alternative to Marxist Romanticism. People were not happiest when involved in creative, collective labour, free of the shackles of the market, but when they were free to express themselves and secure recognition from others.
⁴

Fukuyama’s thesis captured the spirit of the times. Capitalism, it was now widely believed, was not only inevitable but morally good. It had inherited the revolutionary mantle from a discredited Communism, solving the problems of equality and settling the global civil war. A new, high-tech capitalism, free of the old hierarchical production line, was creating a culturally and politically ‘flatter’ society. It might produce economic inequalities, but they mattered little, for greater wealth would help everybody. The real enemies of equality were not bloated plutocrats but desiccated bureaucrats, who arrogantly set themselves above ordinary people.

The ideology of the new capitalism, with its love of cultural rather than economic equality, appealed to the Romantic generation of 1968 who were now taking over positions of power. The language of Tom Freston, the boss of the American music channel MTV, showed how far the new capitalism defined itself against the old Communism in a 2000 interview:

Freston was condemning the disciplined societies of the 1950s West as much as Communism, and the end of the Cold War saw the dissolution of the old Revolutionary Liberal alliance, the triumph of the neo-liberals and the end of the neo-conservative era – at least temporarily. In part, neo-conservatism was too expensive. Reagan’s combination of military build-up and tax cuts had led to enormous state deficits, which threatened a serious crisis.
⁶
But electorates were also pleased to see the end of Cold War militancy and the moralistic neo-conservatives, and they welcomed a new 1960s generation.

The neo-liberal revolution, now separated from its neo-conservative twin, was therefore conducted not by the nationalistic right but by the cosmopolitan centre-left. The American Bill Clinton, the German Gerhard Schröder and the British Tony Blair, all products of the counter-cultural shifts of the 1960s, announced their discovery of a ‘Third Way’ – steering a path between social justice and the market. However, this turned out to be a path that veered rather more sharply in the direction of the market. Free-market capitalism now had a new and more appealing set of champions: the relaxed, jeans-wearing, 1960s left rather than the angry, be-suited right of the 1940s and 1950s. By the end of the decade, ‘Second International’ parties ruled virtually every West European country, but few ideological connections remained with the organization founded in 1889.

Beyond the developed world, neo-liberalism was a much more revolutionary force – its vanguard the IMF and the World Bank, and behind them their chief financiers, the United States. Former Communist Eastern Europe was especially affected, though not everybody accepted the IMF’s recipe. The results of such a revolutionary onslaught were predictable: exposing inefficient Communist industry to the rigours of the market overnight brought severe recessions, high unemployment and pockets of extreme poverty and inequality. Economies contracted sharply throughout the former Soviet bloc, shrinking by an average of 17 percent
in 1992, and only beginning to recover three years later. By 1997 every East European country bar Poland still had a smaller economy than in 1990.
⁷

The results, though, differed sharply. In countries where there was a reasonably strong state machine and where elites had already begun to disengage from Communism by the 1980s, such as Poland, Hungary, Slovenia and the newly split Czech Republic and Slovakia, neo-liberal ‘shock therapies’ were largely implemented and were successful in restoring growth, although at the cost of poverty for many. The promise of European Union membership – with its emphasis on the rule of law – also helped. By the new millennium, these economies were emerging from the slump. In much of the former Soviet bloc, however, states were already very weak and neo-liberal assaults on them merely enfeebled them further. Governments therefore lacked the power and authority to enforce market reforms and instead corrupt kleptocratic economies emerged – unhappy half-way houses between state control and the market. Businessmen and ex-officials soon ‘captured’ these struggling states, bribing officials to give them preferential treatment; taxes were left uncollected, foreigners refused to invest, and capital, rather than flowing in, poured out into shady offshore accounts.
⁸

The greatest failure of neo-liberal experiments came in Russia itself. By 2000 Russia’s economy had shrunk to less than two thirds of its 1989 level – a more devastating recession than America’s Great Depression.
⁹
The collapse of the Soviet state and the theft of its economy had already begun under Gorbachev but the neo-liberal policies pursued by the post-Communist Yeltsin government intensified the problem.
¹⁰
Rapid privatization amounted to little more than the asset-stripping of state enterprises by government crony capitalists, and lawlessness deterred investment and encouraged capital flight. The problem lay, as before, in the weakness of the state, which could not raise taxes, impose legal norms and contracts, or prevent organized crime and bureaucratic-cum-capitalist larceny. The collapse finally came following a further fall in the oil price in 1998. Foreign investors financing the now vast government debt lost faith and fore-closed. The Russian state was forced to default on its debts, bringing with it humiliation for its key adviser, the IMF, and laying the grounds for a backlash against the West and liberal democracy in the 2000s. President Vladimir Putin – the grandson of one of Lenin’s and Stalin’s cooks and a former KGB officer – combined capitalist economics with an increasingly
authoritarian politics, whilst rehabilitating some of the symbols of the Stalinist past; one of his earliest acts was to bring back the tune (though not the words) of the old 1944 Soviet national anthem, abandoned by Yeltsin in 1990.

If the end of Soviet Communism brought one of the great economic failures of the twentieth century, the effective end of Chinese Communism brought one of the century’s – and indeed history’s – great economic successes. The Chinese regime, whatever its other failings, lifted more people out of poverty more rapidly than any other government in modern history, with the help of the new globalized economy which allowed it to export to the West. After a brief freeze after the Tian’anmen massacre, Deng Xiaoping pressed ahead with market reforms from the early 1990s. And in 1993 the archetypical command economy was finally abandoned and the plan abolished. But in China, unlike the Soviet bloc, encouraging markets did not mean undermining the state; on the contrary, the Communists strengthened it. Both their own experience in the 1980s and that of Yeltsin’s USSR convinced them that, paradoxically, to flourish markets needed a powerful state, controlled by a powerful party.
¹¹
Corruption still remained embedded within the system, and inequality has increased, but the newly assertive market-state laid the foundations for the extraordinary take-off that made China the most dynamic economy in the world throughout the 2000s. At the same time the repressive machinery of the old Communist state remains, including the old penal ‘reform through labour’ system (
laogai
).
¹²

The global neo-liberal revolution of the 1990s and 2000s was naturally traumatic for Communists, and they engaged in a number of diverse adaptations – some embracing the market, others battening down the hatches and resisting the forces of globalization. Where neo-liberalism was reasonably successful and political collapse avoided, Communists quietly ditched their Marxism and signed up to the market. In Central Eastern Europe they abjured red for pink and refashioned themselves as pro-capitalist Social Democrats. Though they criticized shock therapy and promised to soften the effects of economic liberalization, when they were returned to power in the mid-1990s (in Hungary, Poland and
Bulgaria) they did little to challenge the new system. The high point of the pink
revanche
came in the Polish presidential election of 1995 when former Communist Aleksandr Kwaśniewski defeated the anti-Communist hero Lech Wałęsa. The most successful Communists-turned-Social-Democrats were, predictably, the Italians; most Italian Communists joined the new Democratic Party of the Left, which dominated coalition governments in the late 1990s and in 2006. The old symbols of activism and labour – the hammer and sickle – were combined with a distinctly conservative image of rootedness: the oak tree.

In Asia, similarly, a successful capitalism reconciled Chinese, Vietnamese and Laotian Communists to the market, if not to liberal democracy, and elected Communist governments in the Indian states of Kerala and West Bengal pursued free-market policies. Mao’s mummified corpse still occupies the mausoleum on Tian’anmen Square and he still stares from the banknotes, but his ideological influence has been reduced to a negligible amount. The official ideology is still Marxism-Leninism-Mao-Zedong-Thought, and a Beijing academic institute is dedicated to its study. However, this is a technocratic Marxism, stripped of any radical commitment to equality. The official line is that once China has become rich, it can then think about Communism. Nobody predicts when this might happen. Meanwhile, efforts to infuse the party with ideological commitment have failed. In 2005 President Hu Jintao launched a Mao-style campaign, demanding that all party members spend every Thursday afternoon and Saturday studying party history and engaging in self-criticism. He was disconcerted to find that they were not taking it seriously, and that commercial websites were doing a brisk trade in pre-prepared self-criticisms. A new rule was introduced requiring that they be written by hand, but the campaign was generally agreed to have been a failure.
¹³