Bank Run on Communism by Stephen Kotkin

Back in the 70s, most commentators thought that the capitalist West, not communism, was nearing collapse, and even in the second half of the 1980s, communist systems seemed not doomed but uncertain. Unexpectedly, however, 1989 turned out to be annus mirabilis, producing revolutions in Eastern Europe that sparked repercussions around the globe, from apartheid South Africa to one-party Mexico. The Romanian case, like the East German one, indicates that much of the interpretive challenge consists in analyzing how East European Communist regimes fell in the absence of organized oppositions. This requires a different understanding of social process from the usual invocation of something called "civil society".

The later slogan has proved to be catnip to scholars, pundits, and foreign aid donors. After "modernization theory" (the hugely influential 1950s-1970s developmental theory") had morphed by the 1980s into "democracy promotion," the notion of "civil society" became the conceptual equivalent of the "bourgeoisie" or "middle class"-that is a vague, seemingly all purpose collective social actor. It was claptrap. Several hundred (sometimes just several dozen) members of an opposition- with a handful of harassed illegal associations and underground self-publications (samizdat)- were somehow a "civil society"? Meanwhile, hundreds of thousands of party and state officials, political police operatives, army officers- who often went to school, worked, and even lived together, controlled all (state) property, public spaces, communications networks, and institutions, and had their own clubs, resorts and shops- were somehow not a society?


Such widespread misapprehension transpires when normative thinking- imagining how things ought to be- gets the better of analysis. Needless to say, in 1989 "civil society" could not have shattered Soviet-style socialism for the simple reason that civil society in Eastern Europe did not then actually exist. The mostly small groups of dissidents, however important morally, could not have constituted any kind of society. On the contrary, it was the establishment- the "uncivil society" that brought down its own system. Each establishment did so by misruling and then, when Mikhail Gorbachev's Kremlin radically shifted the geo-political rules, by capitulating- or by refusing to capitulate and thus making themselves susceptible to political bank runs. Suddenly, decades of bravery by disparate dissidents- the moral thunderbolts, the "anti-politics", the "living in dignity"- were swamped by a cascade of activism on the part of formerly inert masses and by elite opportunism. Would-be totalitarian states, which aspired to total control and total mobilization, by the same token proved to be totally vulnerable.

Incompetence in Communist systems was structural. To remove any possible threats of being unseated, and to increase the bonds of dependency, officials preferred appointing the less able to be their direct subordinates. Even insiders lamented that those who rose up in the system were narrow-minded and submissive. Although members of "uncivil society" were better educated than most of their compatriots, that education equipped them with a cliche-ridden vocabulary and crimped world view. Minimal experience of travel or foreign languages was combined with maximal experience of administering structures and circumstances, always created by someone else's power. And though intriguing and prevaricating required certain gifts, the party-state fostered a kind of "negative selection"- rewarding loyalty and punishing all else. What Vilfredo Pareto had at the turn of the twentieth century bitingly noted about elites generally- that classes dirigeantes (ruling classes) turn into classes digerantes ( digesting classes), fixated on consumption and self-preservation- in Communist systems proved inimical to correction.

The regimes' stubborn denials of the existence of any social conflict made elementary conflict into an existential threat. It was not just not that Soviet-style socialism stoked working-class consciousness through proletarian rhetoric and ritual, then blatantly functioned as a system of elite perquisites, producing ubiquitous grumbling. It was the near-complete absence of outlets or safety valves for basic popular grievances, beyond petitioning and letter writing to officials or to the media. Having imposed one-party rule and a centrally managed economy, having abolished independent labor unions and voluntary associations, having forced outward conformity through informer networks, uncivil society found itself unable to handle spontaneous social life. Even the mere indication of a desire for privacy, a mere inaction, could constitute- in view of its total claim on people's lives- a challenge to such a regime. Each protest action, each conflict, contained within it the equivalent of a near system crisis. If people could not strike without risking being killed or tortured, if a play's production could not be suspended without hundreds of students risking expulsion from university and incarceration, and if price increased could not be implemented without putting the jobs of high officials in jeopardy, the system was at latent risk of upheaval even in the absence of society-wide organized opposition. Repression provided no lasting solution to social problems.

Party conservatives were properly wary of Gorbachev's 1980s revival of socialism with a human face. But their alternative, conservative modernization- meaning a further tightening of the "discipline" as well as profligate investments in technological panaceas- failed to re-energize the systems. This just left muddling through, which held out great appeal. After all, the system raised up the members of society, and they hoped the system would somehow save them, especially if capitalism finally descended into the second great depression that the Communists had long predicted for it. But someone forgot to tell the post-World War II capitalist world to go into a death spiral. Instead, the competition in living standards all but bankrupted the Communist systems economically. Consciously or not, borrowing from the West amounted to a substitute for conceding the "uncivil society's" monopoly on power, but the bill came due.

After the world price of oil tumbled precipitously in 1985-86, the Soviet Union- which itself could not itself beg for more money- eventually became contaminated with the "Polish disease", too, borrowing from capitalists to satisfy consumer desires in a socialist country. Even the dim-witted began to comprehend the depth of the trap: If socialism was merely aiming to placate consumers just like capitalism, only not as well, was socialism's existence even justified? To put the matter in its starkest terms, how long could the muddling through continue if Western bankers refused to roll over the loans?

What to do? Communist rulers in China- who endure as of this writing- discovered the solution: a police state market economy. On June 4, 1989, when multi-candidate elections took place in Poland that would culminate in the formation of a Solidarity-led government, the tanks rolled into China's Tiananmen Square. It was a coincidence, but an extraordinary one: one Communist uncivil society capitulated, the other stood firm. But after bloodying its people who were demonstrating for political openness, the leadership of China also ended up deepening the country's turn toward economic openness. Who would have guessed it would be Chinese Communism rather than the East Europeans, who would embrace the market and global integration?...In sum, the uncivil societies of Eastern Europe, whether conservative or reformist, remained largely bound by the ideology, unlike the Leninist-type copycat single party in non-Communist Taiwan or the recovering post-Mao Communist party on mainland China.

What happened to the Eastern European establishment in 1989? What did they do or not do and why? This is the point explored in this book. "The fundamental question," Hungarian intellectual Gyorgy Konrad had written in 1984, "is, can an ossified, conservative elite absorb ideas that are foreign to it. Can it distribute and devolve power so as to exercise it more skillfully, so that the danger of collapse will no longer threaten it? Our not altogether reassuring experience has been that communism will break before it will bend." In fact, the uncivil societies set themselves up for the equivalent of political bank runs.

It may seem a depressing tale, yet perhaps it is not as disheartening as that of ruinous elites in a market economy. In the 1990s and 2000s, American elites in a market economy colluded in the United States' descent into a sinkhole of debt to foreign lenders, enabling besotted consumers to indulge in profligate consumption of imported goods. America's unwitting policy emulation of irresponsible uncivil societies was facilitated by communism's implosion in Eastern Europe, which opened the bloc economies to global integration, and by the savings-rich Asia. It was in such an environment that the spectacular incomprehension, lucrative recklessness, and not infrequent fraud of elites- bankers, fund managers, enabling politicians- booby-trapped the entire world's financial system. After the meltdown that commenced in the fall 2008, we can only hope that the market and democracy prove their resiliency and good governance and accountability return. In the meantime, if Eastern Europe's experience is any guide, those responsible will largely escape any reckoning.