Aviezer Tucker of Harvard University on “The Legacies of Totalitarianism”, Transition and Populism in Central Europe

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Professor Tucker, your recent book The Legacies of Totalitarianism published by Cambridge University Press is considered to be a milestone devoted to our understanding of societies of Central and Eastern Europe. Is there any specific feature in which the Czech society differs from the general Central Europe?

Czechs like to think they are more Western than other counties. Apart of the geographic fact and the benefit the country derives from proximity to the German economy, and the historical traditions of the First Republic, the Czech Republic still shares more with Slovakia and Hungary than it does with France and Denmark.

Communism was the most homogenizing political system in world history. Forty years of this system generated many similarities between countries that had nothing in common historically like Bulgaria, Latvia, and the Czech Republic. In some respects Czech and Slovaks started from a lower point than Hungarians and Poles. For example, though Poland has maintained private farms and Hungary allowed private businesses, in Czechoslovakia there was no commercial private property. Czech dissent was more liberal and intellectual than in Poland or Hungary, but that tradition is disappearing from the Czech political scene, at least for now.

Since the Communist Party destroyed its “reformed” wing after 1968, it could not reform itself as in Poland and Hungary, which made the transition smoother and easier. Unlike the Baltic countries, Visegrad countries failed to use their diaspora in the West to refresh their political and other elites. So, in comparison with other post-Communist countries, the Czech Republic has more in common than with other countries. And if we consider the aspects that distinguish it, the results are mixed, some make it a better, more liberal and prosperous place to live and some do not.

Is there a lesson you believe we should learn from the process of privatization and reforms of systems of justice which CE countries went through in the 1990s?

It is a common mistake to label post-totalitarian economic systems as “free market capitalism”. This mistake may be based on a bivalent view of economic systems as either socialist or free market capitalist, or on misidentifying “capitalism” with overt economic inequality. There was a third way, privatization without marketization, private property, inequality, but no free competition, and strong correlation between political power and economic wealth.

The debate in the early nineties between advocates of “market socialism,” gradualists, shock therapists and those who wished to maintain command economy was theoretical, in the irrelevant sense of the word, since governments had little control over the evolution of the economy without control over the late-totalitarian elite and government bureaucracies. The choice of policy hardly affected the results: If the state kept the monopolies, the managers continued to control them and transmuted their naked liberties into rights by stripping the assets they controlled. If the state decided on quick privatization, the managers became owners through manager buy-outs and could then sell the firms or their assets if the assets were worth more than the company, as was often the case. If the state did nothing, the managers privatized spontaneously and again gained control of the properties. The late-totalitarian elite that prospered after totalitarianism prepared the fall of Communism by “nest-feathering” and transformed itself into a class of “businessmen”, cashing in on patronage networks to position themselves favorably in the privatization process.

If the state decided on voucher/coupon privatization, the manager maintained actual control and again stripped the assets in the absence of legal or market mechanisms through which dispersed owners could control corporate government and management. The introduction of investment funds that collected the vouchers from individuals to concentrate ownership did little to help small investors gain control over the management of their vouchers/coupons; first, because they could not control the corporate government of the investment funds, whose owners could and did liquidate and steal them by stripping their assets, and second, because some investment funds were owned by banks which were owned by the government and so privatization became a method for the government to transfer ownership back to itself… Initially, voucher privatization appeared politically attractive, giving gifts to the whole population. It was ideologically appealing to visiting libertarians enthralled to apparently see Milton Friedman’s idea in action (though Friedman conditioned it on the rule of law that was absent after Communism), as a whole population became owners with an apparent stake in the new privatized economy. But many vouchers became worthless because their owners could control neither the companies they owned, nor the investment funds they invested in.

Gradual reforms gave the managers more time to strip assets. Naked liberties to control cash flows and to access assets can become property rights by transferring liquid and other unspecific and portable assets, like precious metals, abroad. Even West Germans who gained properties in East Germany quickly learned to adapt to the post-totalitarian conditions and engaged in the same activities, stripping assets and lobbying the government for subsidies.

Privatization” in the post-totalitarian context did not mean severing contacts between “privatized” firms and the state, between managers-owners and politicians and bureaucrats. Firms and the state remained entangled with each other in complex webs of transfers of subsidies, credit, and protectionism from the state to firms, and kickbacks, bribes, political contributions and so on from the firms back to politicians and governing political parties. After “privatization”, the new owners divided their firms into private assets and public liabilities. The state paid for industrial subsidies either from taxing healthier parts of the economy such as small businesses, commodities and weapons, or from loans, the issuing of international bonds, or by taxing foreign direct investment (FDI).

So, what have we learned and what will we be able to teach countries that may move to privatize in the future like Cuba? First, it is absolutely essential to create first the infrastructure for the rule of law, even if it means importing your judges and policemen from abroad, as they try to do now in Ukraine and parts of Latin America. Without the rule of law, there is no point in distributing coupons. Second, the process of privatization should be managed by an independent agency and not by politicians and should be open to foreigners. International accounting firms can handle the auction for a percentage and foreigners may pay more and offer more to locals than local mafias of former secret policemen and party bosses. Third, after privatization, the state should remain neutral and not offer subsidies or protection to the privatized firms, or this would not amount to privatization.

Today in most countries in CE Europe we can often witness people being nostalgic over the old “good days” of totalitarian regimes which allegedly provided for safety and security. Newly formed political parties often respond to these feelings by downplaying the problems of the old regimes and criticizing harshly social changes of the last 25 years. How should we keep a sound view on these problems? How and what to teach our children so they could have a true understanding of what has really transpired?

I do not think there is a genuine movement for restoration in the space between Russia and Germany. I think there are protest movements that say what they think would frighten the “establishment” and Brussels. There are two reasons for it.

One is global. The economic mess that has started almost ten years ago is still with us. This leads to the rise of populist movements and politicians everywhere, including the United States and Western Europe. Populist movements usually advocate contradictory goals, less taxes and more public services, less immigration by tax paying foreigners and higher pensions, more taxes on foreign companies and higher investment in the economy and so on. They also may advocate more freedom and return to a strong state. In post-Communist Europe populism is particularly acute because the people were not ready for 2008. When they went through painful economic changed in the nineties, there was a clear narrative: The Communists ruined the economy, there will be painful reforms, but then we will live like Austrians and Germans. This allowed the governments to institute reforms and for the people to be patient. But the crisis of 2008 does not have a clear culprit. Some anonymous bankers made bad decisions half a world away, so why should Poles and Czechs suffer?!

Second, this came after a couple of decades of pretty high levels of corruption on all levels of government and by politicians of all stripes. This creates a temptation for voting for non-politicians, dictators and businessmen, under the particularly East European illusion that a strong state can solve problems that a liberal state cannot and that very rich people are above stealing to become richer. Then, lack of experience with politics leads people, again, not just in post-Communist Europe, to believe contradictory promises, to support policies that are internally incoherent. I believe this will be a passing fashion and that soon the global economy will recover, Russia will not have the money anymore to subsidize European populism, and liberal democracy will return in triumph.

We really do not need to rerun the 1930s in European history. Part of the problem may be that after 1989 everybody wanted to either forget history or did not know how to study and teach it. If we do not learn from history, especially totalitarianism, we may repeat it. Karl Marx wrote that when history repeats itself twice, it is first as a tragedy and then as a comedy (he meant Napoleon the First and the Third respectively). He may still be right about totalitarianism, but then the joke will be on us.

www.amazon.com/author/aviezertucker

Josef Sima
Aviezer Tucker
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