1989.ECONOMIC CRISIS AFTER 1973
COLLAPSE IN POLAND AND HUNGARY
THE DOMINO EFFECT
Despite having suffered terrible human and material devastation, the Soviet Union emerged from World War II as a victorious superpower, widely respected throughout the world. Paranoid by nature and mistrustful of the intentions of his wartime allies, Joseph Stalin began building a security buffer zone along the western borders of the country. As mutual suspicions and misunderstandings generated ever increasing hostility between the West and the Soviet Union, the countries of Central and Eastern Europe, just liberated from Nazi rule by the Red Army, were sovietized. Between 1945 and 1948, Poland, Czechoslovakia, Hungary, a newly created German Democratic Republic, Romania, Bulgaria, Yugoslavia, and Albania became parts of a Soviet bloc, introducing one-party, nonparliamentary political regimes and non-market, centrally planned economic systems on the Soviet model. In 1949 and 1955 the Council of Mutual Economic Aid and the Warsaw Pact, respectively, forged a Soviet-run economic and military alliance.
Several countries soon revolted against Soviet domination. Yugoslavia, under the leadership of President Josip Broz Tito, took an independent line and split with Stalin in 1948. Both Poland and Hungary revolted in October 1956; the Hungarian Revolution became a war of independence against the Soviet superpower and was mercilessly crushed. In 1968 the reformist communist leadership in Czechoslovakia attempted to introduce "socialism with a human face," a more democratic variant of socialism, but was crushed as well by military force. After 1956 Poland freed the Catholic Church and stopped collectivizing agriculture, while Hungary, in spite of its military defeat and the bloody reprisals that followed, gradually abolished central planning and introduced a consumer- and market-oriented economic reform process. Poland became a land of permanent resistance, with spontaneous student revolts and workers' uprisings taking place in 1968, 1970, and 1976, leading to the Gdańsk revolt of 1980, which resulted in the foundation of the independent Solidarity movement, formally a union but in reality a political party. These episodes of protest deeply undermined the stability of the regimes and damaged what legitimacy they had achieved. The Stalinist restrictions that turned these countries into closed societies were eroded: both Poland and Hungary achieved certain "small" freedoms, freedom of travel fostered the spread of information, and opposition emerged.
The oil crises of 1973 and 1980 increased oil prices tenfold and signaled the transformation of the world economy. A new economic phenomenon, "stagflation," which combined stagnation and inflation, put an end to postwar prosperity. Unemployment hit even the advanced countries and shattered the less developed "peripheral" economies, including those of Central and Eastern Europe. The previously rapid economic growth of 3.9 percent per annum slowed down in the Soviet bloc to 1.9 percent, but soon Poland even experienced a decline of 1 percent, while Yugoslavia's economy shrank by 10 percent. Inflation became uncontrollable and manifested itself in these two countries as a hyperinflation of several hundred percent, reaching 1,000 percent per year, destroying economic stability. Export prices declined much faster and more steeply than import prices and generated a 30 percent increase in the trade deficit of state-socialist countries, such that they had to export one-third more goods for the same amount of imports. The economic benefits provided by the state-socialist regimes—rapid growth, full employment, a slowly increasing standard of living—evaporated. The countries of Central and Eastern Europe rapidly accumulated debt amounting to roughly 100 billion dollars. Servicing that debt consumed a huge part of the national income, and repayment became more and more difficult. Yugoslavia, Poland, and Bulgaria soon asked for rescheduling.
The state-socialist countries did not find an exit from the downward spiral. The regimes' elite lost its self-confidence and all hope for a return to normalcy. The population became deeply dissatisfied and demanded change, and the opposition gained ground. The devastating economic crisis generated an unsolvable political crisis: the stage was set for collapse.
The widespread dissatisfaction of the Polish population led to the Gdańsk workers' uprising on 14 August 1980, with the shipyard electrician Lech Wałęsa at its head. Within a few days, the workers of 156 firms and shipyards participated and were joined by dissident intellectuals. The government sent a delegation and signed an agreement at the end of the month. Solidarity emerged as the authentic representative of the working class, and eventually as a political party. In the space of a few months, three million people joined the movement, and the independent and powerful Catholic Church lent its support. As a result, the monolithic political structures were broken down. Under strong Soviet political pressure and permanent military threat, the Polish Communist Party prepared a military coup. In February 1981 General Wojciech Jaruzelski, minister of defense, was appointed prime minister and, a few months later, secretary general of the Communist Party. On 13 December 1981 the communist-led army took over and proceeded to arrest the entire leadership of Solidarity and put the media, local governments, and industries under military leadership.
From behind the shield of martial law, the Jaruzelski government aimed to introduce radical economic reforms, solve the political and economic crises, and improve the situation of the population. It failed because it lacked popular legitimacy, suffered from a boycott by Western countries, and made severe mistakes. A wage-price spiral generated an inflation of 100 percent in 1982. The visits of the new Polish pope, John Paul II, mobilized millions of Poles and strengthened popular resistance. Strikes paralyzed the country.
In 1985 Mikhail Gorbachev became the head of the Soviet Communist Party and state and initiated his policies of glasnost (transparency) and perestroika (restructuring), aimed at achieving a democratic modernization of the country. He withdrew the Soviet troops from Afghanistan and changed the oppressive policy toward the satellite countries. The Soviet threat, which had been the only source of "legitimization" for the party-military regime of Jaruzelski, disappeared.
The Polish Communist Party looked for a compromise to save the regime: it granted partial and then general amnesties in 1984 and 1986, freed Solidarity leaders, and soon began secret talks. The Communist Party sought to share power in order to preserve some part of it, and the reemerging Solidarity, uncertain about possible Soviet actions, was ready for compromise. On 6 February 1989 roundtable negotiations began, and an agreement was reached by 5 April, stating that partially free elections would be held in June. One-third of the decision-making Sejm, the Polish parliament, and the entire newly established second chamber, the Senate (with one hundred seats), would be elected in free multiparty elections. Two-thirds of the Sejm would remain unchanged. The posts of president, prime minister, and ministers of defense and interior, the key positions in the government, would remain in the hands of the Communist Party. The government believed that it was a "good bargain." Wałęsa, however, pointed out the revolutionary significance of the new system, predicting that "the time of political and social monopoly of one party over the people was coming to an end" (Radio Free Europe, 3 March 1989, pp. 3–5).
His prophecy was fulfilled. The Communist Party was unable to gain a single seat from the freely elected parliamentary and senate seats: Solidarity had a landslide victory. President Jaruzelski could not form a government merely by monopolizing key positions. Committed to the democratic process, he at last accepted Solidarity's candidate, the Catholic opposition politician Tadeusz Mazowiecki, who on 24 August 1989 became the first anti-communist prime minister in the entire Soviet bloc since 1948. A total takeover by Solidarity soon followed, and Wałęsa became the president of Poland. A totally free election in 1991 crowned the transformation.
In parallel with the peaceful Polish revolution, Hungary experienced a radical transformation, although taking a different path to revolution. The point of departure here was the 1956 revolution. In spite of reprisals, Hungary could not return to Soviet-type socialism. The reestablished communist regime had to make concessions to the population. János Kadár, the new party boss and prime minister, gradually turned toward economic reforms, which proved successful. The compulsory delivery system in the agrarian sector was abolished, and in 1968 the New Economic Mechanism was introduced. Compulsory planning was eliminated, and market prices and profit motivation for firms were gradually reintroduced. The shortage economy, so typical in Eastern bloc countries, disappeared, and the regime began to promote a strong consumer orientation, which came to be known as "goulash communism." From 1962 citizens could freely travel to the West. Starting in the early 1980s, private entrepreneurship was introduced by means of a partial privatization of the economy. State-owned companies were sold and rented out to private bidders. During the 1980s 60 percent of services, 33 percent of agricultural output, and 80 percent of construction work was produced by private firms. The share of the private sector in industry remained low, at 15 percent. Commercial banking and a Western type of taxation were also reestablished during the 1980s. Foreign direct investment became possible, and giant multinational companies, among others General Motors and General Electric, established subsidiaries in the country.
During the decades of reform, a great part of Hungarian intellectuals and reformers gradually undermined the regime, stopping short of revolt. Opposition remained relatively limited but had an important moral influence. The engine of transformation, however, came from within the party as a push for "social-democratization." The reformers demanded a radical shift toward the practice and ideology of the Western welfare states, including the pluralization of the political system. Since the aging and overcautious János Kadár was unable to push further, a coup within the party led to an extraordinary party conference in May 1988, which practically eliminated the old party leadership and led to a gradual takeover by the reform wing. Consequently, prior to the roundtable agreement in Poland and without any major turbulence in the streets, the Central Committee of the Hungarian Communist Party decided in February 1989 to hold free multiparty elections within a year. In October 1989 an extraordinary party congress dissolved the party itself, and two parties were established in its wake: the reform wing formed the Hungarian Socialist Party, which boasted a Western-type social democratic program, while another small party kept the old name and the character of a successor party. The reformist socialists (often called reform communists) naturally did not want to step aside; they wanted to lead the unavoidable transformation and were confident in their ability to win free elections. This did not happen. In March 1990 the reform socialists gained only 10 percent of the votes, while the newly founded right-of-center Hungarian Democratic Forum won a landslide victory and formed a coalition government with smaller opposition parties. The regime collapsed peacefully.
In the summer of 1989 communism practically collapsed in Poland and Hungary, without opposition from the Gorbachev-led Soviet Union. When Nicolae Ceauşescu, the Romanian communist dictator, turned to Moscow suggesting that military intervention be used to stop Solidarity in Poland, he was turned down. Moreover, when the new Polish prime minister, Tadeusz Mazowiecki, made his first state visit to the Kremlin, Gorbachev said at the official banquet: "It might surprise some people, that I wish you success" (Radio Free Europe, 15 December 1989, pp. 14–15).
A door had been opened in the wall dividing East and West. The wall needed a real, physical opening, however, and this took place in the spring and summer of that year. The Hungarian reform-communist government of Miklós Németh announced in May 1989 the destruction of the Iron Curtain, the fortifications erected in the 1950s and 1960s along the old Hungarian-Austrian borders. Watchtowers and barbed wire fences were dismantled and even sold in small pieces as souvenirs. This action had only a symbolic meaning because the Hungarians had passports and traveled freely, but it nevertheless gained tremendous practical historical importance. Thousands of East German tourists, who spent their vacation in Soviet bloc countries because they were prohibited from traveling to the West, recognized the opportunity and walked through the opened border to freedom. In the early summer months six thousand East Germans crossed the Hungarian border illegally via Austria to West Germany. Several thousand more waited in hurriedly built refugee camps on the Hungarian side of the border. Hungary had a valid agreement from 1969 that mandated it to stop German citizens from leaving Hungary for a third country without a visa, but the government decided to ignore it. After thorough negotiations, the border was officially opened on 11 September and was crossed by twenty thousand East Germans within a few hours. The entire world watched the dramatic crossing on television. It had shocking consequences: German tourists in Czechoslovakia jumped over the fences of the Bundesrepublik's embassy, and 2,500 gained asylum and free departure for West Germany. When the train whose path crossed through East Germany passed through Dresden, thousands of East Germans tried to stop it and climb aboard. They were attacked by the police, but the avalanche became unstoppable. Over three weeks in late October, 1.3 million East Germans participated in two hundred agitated demonstrations in Berlin, Dresden, and Leipzig.
The end came swiftly. On 7 October the ailing hard-line communist leader of the German Democratic Republic, Erich Honecker, gave a speech on the historical success of the GDR at a mass celebration of the fortieth anniversary of its foundation. Within a month, the police state had disintegrated. Personnel changes in the top leadership were made in a frantic attempt to calm the political storm: Honecker resigned on 18 October and was replaced by Egon Krenz, the former security chief. It was too late and too little. On 4 November one million people demonstrated in Berlin, and a few days later demonstrators began attacking and destroying the infamous Berlin Wall, symbol of the division of Germany and Europe. The regime had run out of options, and on 9 November the communist government announced the opening of the wall and "allowed" free travel to the West. A real exodus began: in a single week, five million East Germans visited West Berlin, and fifty to sixty thousand people left every month to resettle in West Germany. The hard-line East German communist regime collapsed, and the ordinary people virtually united the two Germanys.
An apathetic, hesitant Czech population, withdrawn from politics for two decades after the Soviet bloc invasion of Czechoslovakia in the summer of 1968, observed the collapse of the Polish, Hungarian, and German regimes next-door without reacting. However, on 17 November, following the collapse of the Berlin Wall, fifteen thousand young people, mostly students, gathered in Prague to celebrate the anniversary of the death of a student who had been murdered by the Nazis. The demonstration had been authorized to take place outside the city center, but the increasing number of students, already thirty to fifty thousand, marched toward Wenceslas Square in the heart of the city. Riot police attacked them, arresting a hundred and injuring more than five hundred people. All of a sudden, strike committees were founded, and on 20 November a crowd of two hundred thousand engulfed the streets. Václav Havel, a playwright and a famous dissident who had been arrested three times, addressed the protestors from a balcony in Wenceslas Square. The next day another hundred thousand demonstrators flooded Prague. Two days later three hundred thousand people participated in a mass demonstration organized by the opposition party Civic Forum in Prague. Simultaneously, a hundred thousand demonstrators occupied the streets of Bratislava, the Slovak capital city, and hundreds of thousands gathered to hear Alexander Dubček, the hero of the Prague Spring of 1968. A general strike was called for 27 November.
The neo-Stalinist government did not stand a chance. It reacted slowly and desperately: on 24 November a hardly known party official was appointed first secretary of the party, and on the 26th the old members of the Politburo were replaced by reformists. On 9 December Gustav Husák resigned from the state presidency. At that time the party tried stabilizing its position by forming a coalition government with leading opposition representatives Jan Čarnogursky and Jiři Dienstbier and technocrats such as Václav Klaus. These desperate attempts failed. At the end of the year Václav Havel was elected president, and announced in his New Year's message of 1990, "People, your government has returned to you" (Havel, pp. 395–396). The Czechoslovak "Velvet Revolution" did not meet with serious resistance.
This was not the case in Romania. After the collapse of the Berlin Wall, the paranoid dictator Nicolae Ceauşescu triumphantly presided at the Fourteenth Party Congress in Bucharest and masterminded the election of six members of his family to the leading bodies of the Communist Party. A longtime favorite of the West, he felt so sure of himself that in December he went on a state visit to Iran and, upon his return, called a mass gathering on Republican Square in Bucharest on 21 December to condemn the already explosive unrest in Timisoara, a border city of mixed Romanian and Hungarian population. He thought that he could rally the population to traditional nationalism and labeled the unrest an "anti-Romanian conspiracy." However, he had to retreat from the balcony of the Central Committee building when the officially gathered, pro-government demonstration turned against him. The square was cleared by the riot police, but the events became unstoppable. A state of emergency was declared and the army ordered to act, but the military leaders refused and several army units joined the uprising. The crowd attacked official buildings. The infamous elite Securitate army of seventy-five thousand remained loyal to Ceauşescu, and the streets of central Bucharest became a battlefield, resulting in the death of about one thousand people. Unlike other Communist parties in the region, the Romanian Communist Party, ruled with an iron fist by the Ceauşescu family, refrained from making spectacular personnel changes and refused to give up armed resistance. Its obstinacy provoked the bloodiest revolution in 1989.
A National Salvation Front rapidly emerged in the political vacuum, led by former officials of the regime who had been removed by the dictator, such as the retired general Nicolae Militaru, Petre Roman, Ion Iliescu, and Silviu Brucan. The crowd attacked the Central Committee building, and the bloody Christmas Revolution came to a grotesque conclusion: the dictator, his wife, and some of his closest aids escaped by helicopter from the roof of this building, landed on a field, and entered a waiting car. At the end of a car chase worthy of action movies, the dictator and his wife were taken to a military base, where a televised "trial" was hastily organized. The death sentence was immediately executed by a firing squad. The people of the country looked at the dead bodies of the couple on the screen. The popular revolt destroyed Romanian national Stalinism.
The regime also collapsed in Bulgaria, where the old and corrupt Todor Zhivkov leadership successfully suppressed any kind of reform orientation and opposition until 1989. In November of that year, nevertheless, a coup within the top inner circle of the party, organized by a reform-oriented group led by Petur Mladenov, replaced the old leadership. As everywhere else, they could not control the pace of change: free elections were held in the summer of 1990, and the regime collapsed peacefully.
Similar transformations began in multinational Yugoslavia but soon turned in the direction of a bloody civil war. Reforms to introduce a free market and democracy took a backseat to demands for national independence, and the first free elections strengthened nationalist lines and aspirations. After 1991 not only the communist regime but also Yugoslavia ceased to exist.
The domino effect hit Albania in 1991. Finally, the Soviet Union, cradle of the communist revolution, also abolished state socialism and disintegrated as a multinational state in 1991. In Europe 1989 became the year of miracles, "annus mirabilis."
See alsoAlbania; Berlin Wall; Ceauşescu, Nicolae; Cold War; Commonwealth of Independent States; Communism; Eastern Bloc; Germany; Gorbachev, Mikhail; Havel, Václav; Honecker, Erich; Hungary; Iron Curtain; Jaruzelski, Wojciech; Kádár, János; Poland; Romania.
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Radio Free Europe 14, no. 9 (3 March 1989).
——14, no. 50 (15 December 1989).
Ivan T. Berend