The Wild East

Life in the highrise jungle of urban post-communism is not for the fainthearted.
Richard Swift takes the measure
of a new capitalism – that’s all shock and no therapy.
From New Internationalist
2004

THEY are mostly apartmentdwellers, these sceptical survivors who have lived for decades under communism. If you are lucky enough to be invited into their homes, their hospitality is exemplary. Scarce food and drink flow with unparalleled generosity. While they have memories and often connections back to a village somewhere, their life and fate these days is decidedly urban.

Housing is a huge problem for them. Overcrowding is the norm. Privacy is at a premium. Whoever can buy an apartment, does so. For most, a single-family dwelling is inconceivable. Young marrieds have to stay with their family – maybe even share a room with a sibling or two. But at its best there is a warmth and cosiness to this kind of apartment living. It could be in an older downtown building with some residual charm. More likely it is in some kind of Soviet-era monstrosity on the outskirts of town. Whether in an Eastern European city like Sofia or the capital of a former Soviet republic like Tashkent – whether in the architectural wonder of Lviv in the western Ukraine or Tbilisi in the far reaches of the Georgian Caucasus – postcommunist people are taking great care and pride ‘doing up’ their often cramped home interiors.

Meanwhile, the public realm outside their doors often festers with neglect. Corridors, elevators and stairwells are festooned with garbage and graffiti. Social certainties like guaranteed apartments are simply disappearing. So too are secure jobs, pensions, free (if inadequate) education and healthcare, affordable (if uninspiring) food, access to recreation. Postcommunist economies are being ‘reformed’: marketized and privatized in ways suggested by Western consultants paid for by the World Bank or USAID.

This destruction is intended. The views of just one US economist sums up the Washington Consensus: ‘Any reform must be disruptive on an historically unprecedented scale. An entire world must be discarded, including all its economic and most of its social and political institutions.’ The aim is to create Middle America on the Volga. ‘From each according to their ability, to each according to their need’ gives way to ‘if you can’t make money from it, then don’t do it’.

Not that most people were happy with communism. But with communism’s collapse, they were promised more democracy. Instead they are getting political bosses and fixed elections. If the economy had to be reformed, they wanted more opportunity. Instead they are getting oligarchy and corruption.

The champions of the unfettered market call it ‘creative destruction’, a phrase that comes from the conservative economic historian Joseph Schumpeter who saw it as ‘the essential fact about capitalism.’ And for the people in what used to be the communist world there has been destruction aplenty. Destruction of jobs. Destruction of living standards. Destruction of entire industries. Destruction of health. Destruction of lives.

Life expectancy is down. Suicides are up. So are alcoholism, drug abuse, prostitution and crime as people try desperately to cope. The severity of this crisis varies. The formerly communist countries of Eastern Europe and the tiny Baltic republics seem to have coped best with the changes. But even here (see the articles on Hungary and Romania) people are scrambling just to survive.

Economic shock therapy
Hardest hit have been most of the countries that used to make up the Union of Soviet Socialist Republics (USSR). Outside the glitzy downtowns of cities like St Petersburg, Kiev or Yerevan where the few prosperous New Russians, New Ukrainians or New Armenians gather, poverty has reached staggering proportions.

Between 1990 and 1999 the number of people living on two dollars a day or less more than tripled. Back in 1989, 14 million people in the USSR lived in poverty. Nine years later the number had skyrocketed to 147 million. This region has undergone a depression and demodernization unprecedented in peacetime over the last century. One Russian scholar estimates the destruction to be equivalent to a ‘medium-level nuclear attack’.

The creative part of this ‘creative destruction’ is a bit more elusive. Certainly it takes a certain creativity to survive as an entire way of life gives way under your feet – as all that is solid melts. But creativity in the sense that Schumpeter meant – the profit in the market ledger – has in this part of the post-communist world been, by and large, an export industry. A lot of the loot from entrepreneurial pillage is now stored in offshore bank accounts or invested in villas in locations like the French Riviera. Two billion dollars a month was spirited out of Russia alone under the corrupt Yeltsin regime. Even the capital that stays in the post-communist world is mostly devoted to speculative purposes or high-end retail – night clubs, fancy cafés, glitzy shops beyond the imagination of most people. Russians were so disgusted with the corruption and chaos under Yeltsin that, for some at least, the autocratic order of Putin and his new cabinet comes as a relief.

It’s capitalist utopia these days – everything is up for sale. That’s certainly the impression that my colleague Andrew Kokotka (the designer of this issue) and I got as we travelled through the former Soviet Union. People trotted out their worldly goods in the weak sunshine of a Kiev afternoon and spread them out on blankets. Or maybe it was from the trunk of their car beside the river in Tbilisi in Georgia. Every electricity pole was covered with tear-off posters for all manner of goods and services. A middle-aged woman named Astghik approached us on the streets of the Armenian capital, Yerevan, with a plastic bag full of necklaces that she maintained would keep our blood pressure in check – absolutely necessary when experiencing ‘creative destruction’. Astghik needed the money so she could pay her children’s (poorly paid) teachers extra so they would not ignore her kids in school. Yes, classroom attention has become a commodity too.

So has medical care. Armenian friends described how a doctor told them their young son ‘looks fine now but next week he might be dead’ as she tried to convince them he suffered from salmonella poisoning. After all, treating salmonella (whether you have it or not) is a lot more lucrative than taking care of a simple case of stomach flu. If you pass your exams and want to graduate – a little something for the principal will be in order. If you are in the army and due your leave, your commanding officer has his hand out. Or say you need a passport or another of the myriad documents necessary to manoeuvre through life. What are often taken for granted as simple rights in the West have become ‘negotiable exchanges’ in this part of the world.

No match for bourgeois decadence
Communism was always supposed to be about the future, but somehow it always felt more like the past. Whether it was old ladies with headscarves and stick brooms sweeping out Red Square or the denunciations of everyone from Kafka to the Rolling Stones for ‘bourgeois decadence’, one got the sense of a world run by a bunch of old fogies. Their values were mostly small ‘c’ conservative – go slow, be stable and predictable, don’t rock the boat. Sure, there were the early days of real revolutionary fervour and debate. Then came social engineering on a grand scale: Stalin’s forced march collectivization The champions of the unfettered market call it ‘creative destruction’ and industrialization and Mao’s Great Leap Forward and Cultural Revolution resulted in the death of millions. But this kind of brutal radicalism (more akin, some would claim, to fascism) gave way to a plodding system where crimes and dysfunctions leant more toward the predictable and irritating. You knew what you could get away with and what was dangerous. Injustice and oppression abounded, but the system provided a certain level of welfare for those who lived under it. Resignation gradually replaced fear.

The myth of the system’s radicalism was sustained by both those who controlled it and its enemies in the West. For the former it provided proud credentials for their ‘scientific’ rule. For the latter it proved that no alternative to corporate power was desirable.

Still, it was a way of life to which people adapted with a shrug of the shoulder and a wicked joke at the expense of communist pretension. In the West much concern was expressed about the sad fate of those living under the communist yoke. Oddly there is no such outcry now. Instead those pushed to the margins of mere existence are fed with ‘ no pain, no gain’ sermons about ‘ staying the course’ of reform. The main concern of the free-enterprise zealots has not been the suffering but rather the fear that post-communist politicians would shrink from administering the necessary policies to create a viable capitalism.

The politics of convenience has replaced the concerns about human rights violations that marked the Cold War. When Boris Yeltsin launched a military assault against the Russian Parliament in the fall of 1993, the West, led by the Clinton regime in Washington cheered him on. Although an odd precedent for democracybuilding, their man-in-Moscow was seen as the best hope to continue with brutal economic reforms.

Today, turning blind eyes to unholy alliances with despotic leaders is common practice. So Kuchma in the Ukraine or Aliyev in Azerbaijan are wooed and coddled despite blatantly undemocratic practices. The worst case is probably that ‘warrior against terrorism’ the President of Uzbekistan, Islam Karimov – the recipient of US troops and much Western largesse who now runs a vicious police state. Uzbekistan currently holds some 6,000 Muslims in custody for simply practising their religion outside official Government-approved channels.

A kleptocracy has emerged almost everywhere in this region. Those who had power and position under communism have repositioned themselves as either economic oligarchs or political bosses. In many cases they are one in the same. In Eastern Europe this process has in part been kept in check by a relatively open political system. Elsewhere the looting of public wealth has been pretty crude. Russia and Armenia have emerged with some of the most severe gaps between wealth and poverty in the world.

The system takes a ride
In a car on the way to Ukraine’s airport at Kiev, a police officer looms with a torch out of the early morning fog. Our driver is deemed to be drunk (at 6am in the morning!) and a ‘fine’ of $100 is required if we are to catch our flight. The amount is half of what our friend makes in an entire month. It’s a common story: the kind of corruption that occurs at the top gets into the very bones of a society as people follow the examples, of their élites at a micro-level. It’s not so much a question of morality as it is one of survival.

An ugly political culture is emerging. Cars blow up mysteriously or people just disappear. Deaths occur in police custody. Assaults by some quasi-official security force take place on offices and computers. Important documents are removed. A key figure or potential witness to a corrupt deal gets killed in a runof- the-mill robbery. It smacks of organized crime vendettas where the motive is revenge or cover-up.

Overt political motivation is here too. It is widely believed that the bombings that killed dozens in Moscow apartment buildings before the second brutal Chechen war – a war that cemented Vladamir Putin’s strongman image – were the work not of Chechen terrorists but of some murky department of the Russian security service. Then there is the Ukrainian journalist – a thorn in the side of the Kuchma regime – whose head turned up in the woods outside Kiev.

For most of the population this is simply theatre to be observed with a shake of the head or a shrug of the shoulders. Proof of the failure of society to free itself from the iron grip of the state. Proof that nothing ever changes.

I thought of different ways to take the measure of post-communist life in a market economy. What would the Rand Corporation do for instance? Ah-hah, I thought... a focus group. So I got together a group of Armenian students for a discussion. They were just entering their teens when the old system came apart. Now they were university students and finding it very tough. On the positive side, they said that they had more freedom to speak their minds now and that life was more interesting. They all felt their access to the internet was very important for democracy.

But education was very expensive and depended on a massive family effort. All lived at home. They recalled the days of free education when students could travel anywhere in the communist world. They worried for Armenia. They worried about jobs: that many must now go to Russia for work. They worried too that foreigners were buying up essential services – the Italians had the water, the Russians the electricity. They especially worried about the growing gap between rich and poor. They wondered why they couldn’t have the best of both worlds: the new freedoms but also the equality and the guaranteed security of the old system. Good question.

Life After Communism

In the ‘transition’ from communism, the suffering of the people of Eastern Europe and the former Soviet Union has been great, while the hoped-for freedom from exploitation and autocracy remains elusive.
The NI maps some of the costs of market-driven shock therapy.

Post-communist meltdown in Russia
• Throughout the entire Yeltsin transition period, flight of capital away from Russia totalled between $1 and $2 billion US every month.

• Each year from 1989 to 2001 there was a fall of approximately 8% in Russia’s productive assets.

• Although Russia is largely an urban society, 3 out of every 4 people grow some of their own food in order to be able to survive.

• Male life expectancy went from 64.2 years in 1989 to 59.8 in 1999. The drop in female life expectancy was less severe from 74.5 to 72.8 years.

Transition costs – shock therapy• The increase from 1990 to 1999 in the percentage of people living on less than $1 a day was greater in the former communist countries (3.7%) than anywhere else in the world.

• The number of people living in ‘poverty’ in the former Soviet Republics rose from 14 million in 1989 to 147 million even prior to the crash of the rouble in 1998.

Economic success
Poland was the only ‘transition' country moving from a command to a market economy to have a greater Gross Domestic Product in 1999 than it did in 1989.1 GDP growth between 1990 and 2001 was negative or close to negative in every country of in the region with Russia (-3.7), Georgia (-5.6), Ukraine (-7.9), Moldova (-8.4) and Tajikistan (-8.5) faring the worst.

Equality
Slovakia tops the Gini index as the most equal country in the world. Russia and Armenia are amongst the most unequal.

Privatization
Between 1993 and 1995, 20,000 out of 27,000 Russian state enterprises were privatized. The Government sold them for about 10% per cent of their true value.

The state rolls back in
Despite its transition to a market economy the bureaucracy in Russia has grown dramatically. The Soviet bureaucracy under Brezhnev (Soviet centralism) made up about 12 million people. It ballooned to 18 million under Gorbachev (restructure). Under Yeltsin (transition) the number of state functionaries in Russia alone exceeded that for the whole Soviet Union in Gorbachev’s time.

Soviet resurrections
Of the 20 current presidents of Eastern European nations (excluding the former Yugoslavia) and countries which used to be part of the Soviet Union 11 are former party insiders (called nomenklatura).

The Ego of them all
Turkmenistan ‘President for Life’ Saparmurat Niyazov has erected a golden statue of himself that rotates 24 hours a day so that it always faces the sun and has renamed the months and days of the week to honour himself, his mother and his favourite national heroes.