Defeating Communism Didn’t Necessarily Defeat Its Deprivations

The 1989 collapse of European communism presaged different fates for different nations, BU’s Cornell Ban says. Photo courtesy of Flickr contributor Daniel Antal

Last November marked a milestone that’s ancient history to today’s college students, but unforgettable to their elders: the 25th anniversary of the dismantling of the Berlin Wall—and the end of the Cold War. At the time, it was a given that the nations of eastern Europe, freed from both Soviet oppression and socialist economics, would experience freedom and prosperity.

In reality, the results have been mixed.

Inequality pockmarks Russia, the Balkans, and the Baltics, but development and welfare spending have given the Czech Republic, Slovakia, Hungary, and Slovenia inequality levels below the EU-15 (the European Union countries prior to May 2004) average, says Cornel Ban, a College of Arts & Sciences and Pardee School of Global Studies assistant professor of international relations. “The absolute poverty rate is basically close to zero in Slovenia and the Czech Republic,” he notes. Yet Hungary has seen a surge in neo-fascism recently.

BU Today asked Ban about the state of eastern Europe today and the region’s importance to the United States.

BU Today: How would you assess the living standards of the former Eastern Bloc today?

Ban: It was never a “bloc” per se. Hungarian socialism was extremely different from its Romanian counterpart. This is even more so today, when what you see in the region is a dizzying mosaic of market-society arrangements, ranging from Slovenia’s social democratic model to Georgia’s libertarian one. In a way, while Slovenia has been, at least until recently, on its way to becoming a hybrid of Sweden and Austria, Georgia put into practice some of the most ambitious aspirations of the Tea Party. The closer you are to Slovenia’s attempt to reconcile market dislocations and socioeconomic rights, the better off you are economically, on average.

The attempt made by Russia and some of the oil-rich states in the Caspian region to build on the back of a commodity supercycle has been accompanied by some modest growth of the local middle classes. But this has happened in parallel with failure to address extreme levels of deprivation for the bulk of the population and the accumulation of large fortunes at the top. The collapse in oil prices and the geopolitical confrontation over Ukraine throws this state of affairs into uncertainty.

Most Romanians and Bulgarians have been pushed to the side, bereft of basic income support or health infrastructure, at best stuck with wages that barely cover the most frugal of needs. Poverty levels in southeastern Europe and some of the Baltics remain very high indeed. One of the results is that high emigration impairs labor markets and pension systems in these countries. Close to three million Romanians voted with their feet during the past decade and moved to Western Europe. Others did a lot better. Available statistical evidence produced by the EU shows that it is the Czechs, not the Swedes or the Danes, that have the lowest poverty rate in the EU. Increasingly, scholars think that the differences between the East European welfare states are less pronounced than the differences between them and the traditional West European welfare states.

In a recent talk at BU about the anniversary of the Wall’s dismantling, you said that Slovenia and the Czech Republic have “socially inclusive” capitalism. What does that mean?

I mean that the transition from the socialist developmental state to some local form of capitalism has not been associated with leaving a large share of your active population in hopeless unemployment, has avoided noticeable levels of child poverty, and has kept the share of population at risk of being poor below average EU standards. You are less likely to be statistically poor if you were born in Slovenia than in Italy.

How did the losers you identified—the Baltic countries, Russia, southeastern Europe—go wrong?

In strict economic terms, the Baltic states, Romania, and Russia are not losers per se. In fact, their income per capita has converged quite rapidly with those of developed states. But they failed to treat with decency the majority of their citizens. These are systems that have put brakes on social mobility, worsened access to health and education, and turned the majority of their populations into large masses of politically disenchanted working poor. At times, this went hand in hand with the lack of solidarity between majorities and despised ethnic minorities. If you look at Hungary, you see that the government’s onslaught against the economically disadvantaged predated state-sponsored mobilization of racist prejudice against the Roma.

Politically, Russia could have used the commodity boom to do what Brazil did: a massive reduction in inequality and poverty, two variables that without fail are associated with sustainable development. Instead, the Russian authorities put in place a combination of selective economic liberalization, economic nationalism, and a state-managed system of rents that left a very large share of the population outside of the bubble economy of the past 15 years. Ukraine did even worse, and they did not have the commodity cycle to benefit from.

In theory, they can all do better. Inclusive development is not all that hard to figure out in theory: meritocratic and accountable bureaucracies, financial institutions that boost higher value-added sectors, robust public investments in health, education, and research, social and employment policies that increase social mobility, while reducing poverty and inequality.

What is the US security interest in this region and its economic health?

Hungary aside, Washington has very strong relations with the new EU member states from eastern and central Europe. What the US government can do is work harder to discourage authoritarian temptations such as those seen in Hungary and channel more support at actors who work to reduce the region’s human development deficit. The United States has been invested in sponsoring civil society actors who fought—many times successfully—for a classic political liberalization agenda. The United States could benefit from expanding this support to groups that express widely shared concerns in those societies that their present and future are shadowed by increasingly rigid socioeconomic stratification. I also think that the United States could boost funding for the graduate education of the brilliant students of its allies in the region, while working with governments there to better integrate returning PhDs in the public sector, where shoddy expertise remains a huge problem.