Front Page Titles (by Subject) THE SOVIET LEGACY * - Political Economy, Concisely
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THE SOVIET LEGACY * - Anthony de Jasay, Political Economy, Concisely 
Political Economy, Concisely: Essays on Policy that does not work and Markets that do. Edited and with an Introduction by Hartmut Kliemt (Indianapolis: Liberty Fund, 2009).
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THE SOVIET LEGACY*
The countries that eked out a dismal existence behind the Iron Curtain between 1945 and 1989 were colonies of an unprecedented kind. Every colony in modern history was colonized by a power that was its superior in crucial aspects of civilization, technology, organizing and governing ability. The European colonies of the Soviet Union had the unique misfortune of being subjugated by a power that was their inferior in all but brute military strength. It was a bit like Belgium becoming a Congolese colony. That might happen yet, but not in our lifetime.
Unlike most others, the Soviet colonies had nothing to gain and nothing valuable to learn from the occupier. What the peoples under Russian rule did learn was misbehavior, cynicism, mendacity, dissimulation, and mutual mistrust. They refused to learn the supposed virtues of socialist man, the exemplary behavior of the good Soviet citizen who devotes his life to serving the noble goals set before him by the Communist leadership. They did not end up all bad; they developed capacities of self-defense, ingenuity in the face of need, resistance in the face of force, and rapid grasp of opportunities.
Common to all these colonial subjects was silent contempt for the Soviet people, the Soviet state, and the native authorities who acted on the Russians’ behalf. Contempt for the authorities entailed contempt for their laws. Stealing from the state became a sport, not misbehavior. There was deep contempt for the judiciary and the police that administered what was seen as a mockery masquerading as the rule of law. Disrespect for state law, however, was not offset by greater respect for society’s own unwritten conventional rules of decent behavior, mainly because the ties that would normally bind workmates, colleagues, and even mere strangers had been frayed so thin by the maniacal tugging of a perverse dictatorship that ruled by intimidation, make-believe, and the destruction of all relationships except loyalty to the state.
Every society in the Soviet bloc was horizontally sliced in two. The top slice consisted of the nomenklatura, the party rank and file that supported it, and the secret police that had to protect the tenure in power of the whole upper slice, including first of all its own secure tenure. Comically enough, the secret police in nearly every satellite country was called the “security” police or service, though the only security it cared for was the secure enjoyment of its own and its accomplices’ place on top of the ordinary people.
Like everywhere else, the ordinary people formed the bottom class, with one difference. Everywhere else, there is some upward mobility driven mainly by ability, effort, and luck. In the Soviet colonies, upward mobility from the lower into the upper slice of society depended first and foremost on proofs of loyalty and usefulness to the party. Proof more often than not included denunciation and betrayal of one’s fellows and hypocritical play-acting and flattery of the mighty.
A really striking feature of the postwar history of this part of Europe is that nowhere were the nomenklatura, the party hacks, and the secret police called to account. When Hitler’s Germany collapsed, the Western allies in their zones of occupation initiated a large-scale “denazification” process, screening out and banning from certain public posts or sending to prison those who played an active role in Nazi misdeeds. Many of them fled to the Soviet zone, where the Russians and later the “German Democratic Republic” found useful collaborators among them. But when in 1989 the Soviet colonies regained their independence, party bosses and secret police officers, let alone minor functionaries, all went scot-free, the more so as they have all declared that they had always been social democrats at heart. Apart from those guilty of murder and torture (difficult to prove), they were tacitly forgiven for the humiliation and misery they had inflicted on their own people while they enjoyed the power, prestige, and privileges that accrue to members of successful criminal conspiracies. The watchword was “no witch hunt.” When in early 2007 a new Polish government started a belated campaign of screening former secret police agents and their civilian helpers (most of whom collaborated under duress), large sections of Polish opinion protested and were loudly echoed by intellectuals in Western Europe who invoked the infamous memory of McCarthyism in the USA. Screening might or might not have become a nasty witch hunt, but dispensing with it was to confirm the widespread conviction that unless you actually rob the bank or mug an old lady in front of several reliable witnesses, you never have to pay for wrongdoing and can always walk away with its fruits.
Thanks to “no witch hunt,” when privatization began, ex-secret-police officers, ex-leaders of the Young Communist movement, and ex-“red directors” were all there in the starting blocks, ready to jump and appropriate state property. They had the advantage of their own ready-made network of ex-comrades who “knew all the ropes” and who could smooth each other’s little ways. The present Hungarian prime minister, an ex-Young Communist and member by marriage of a powerful Communist clan, now a billionaire, made his first millions by buying state property for a symbolic peppercorn and then losing little time selling it back to the state for many millions. The extreme case is Bulgaria, where practically all industry and commerce have come to be owned and run by former secret police officers. It is in Bulgaria that contract killings of business rivals are the most frequent, and one wonders whether there is some causal relation between the ownership structure and this muscular kind of competition.
Could it be said that while the Soviet legacy is not pretty, it has not done real harm, for the European ex-colonies of Russia are now all champions of economic growth? Despite near-total fiscal irresponsibility (that bought the present government its election victory) even Hungary is managing to grow at 4 percent, 6 percent is normal in Poland and the Czech Republic, while the Baltic states have been beating the 10 percent threshold for several years. In the face of such performance, does endemic and shameless corruption really matter?
It is easy to forget the depths of poverty, dilapidated infrastructure, and near-insane investment planning to which these countries had sunk during Soviet rule and socialist management. Some large industrial complexes were actually running at negative value added, meaning that at world prices their bought-in inputs cost more than their output was worth; this in turn meant that, had they been closed and their workers sent home, the national income would have increased. The present high growth rates in these countries are mostly the combined result of the gradual elimination of such absurdities, of the rush of new technologies being borrowed from the West, and of inflows of capital and management induced by the cheapness of local labor—in that order of importance. All these growth-boosters are welcome but almost by definition temporary. Some current economic policies in the ex-Soviet satellites are interesting and promising, provided they are persevered with; radical tax reform and the move from complex tax structures to a flat tax is one of them. Nevertheless, the catching-up phase of easy growth is unlikely to last longer than fifteen to twenty years.
The role of corruption that became endemic in the colonial era is the big question mark. Some economists argue that it is a method of rational resource allocation, for it is the most efficient supplier who can offer the highest bribe to get a government contract, and it is a good thing that he gets it. To say this is to forget that bribing is not an open auction but a clandestine transaction that, in addition, has such non-price aspects as confidence and relationships. Moreover, even in open auction the less efficient might be able to offer a higher bribe than the more efficient if he could furnish cheaper, shoddier work thanks to protection offered by the bribe-taker—an option not open to the high-quality, high-cost competitor. Reams could be written about the effects of corruption, and no incontrovertible conclusion may be available in economic theory. One’s gut feeling, though, is that whatever corruption may do to costs and quality in a particular transaction, its wider effect upon the behavior and willingness to play by the rules of an entire people who watch corruption thriving cannot but be seriously damaging. Prosperity does, after all, depend on the punishment of misbehavior.
[* ]First published as part 2 of “Misbehavior, Punishment, Prosperity,” by Liberty Fund, Inc., at www.econlib.org on September 3, 2007. Reprinted by permission.