The Red Flag: A History of Communism (94 page)

Communist regimes found these challenges particularly difficult
because, despite their image of power and monolithic unity, they were politically weak. They had been captured by powerful heavy-industrial and defence interests, and also could not risk renewed social conflict with workers. But west of the iron curtain, too, governments, especially of the left, found it difficult to promote reforms that might alienate workers. Meanwhile, business and the conservative right mobilized against the power of labour at home, moves which coincided with a massive American rearmament programme against the USSR. But this was an ideological counter-revolution as much as a military one. Much as Kennedy had tried to compete with the USSR by stressing a new capitalist model of Third World development, so Reagan’s United States adopted some of the revolutionary, optimistic style of 1970s Third World Communism in the interests of a right-wing liberalism. After an era of superpower
realpolitik
, ideas again took centre-stage.

In the early 1940s, at the height of debates over the Nazi–Soviet pact, a young Brooklyn-born college lecturer, Irving Kristol, was regularly to be seen in Alcove Number 1 of the New York City College cafeteria, devouring the latest issues of the Trotskyist-leaning magazines the
Partisan Review
and the
New Internationalist
, edited by the Trinidadian Marxist C. L. R James. The Stalinists, meanwhile, occupied Alcove Number 2. Like many New York intellectuals, they were all absorbed in European intellectual struggles, and they remained so.
³⁷
But by the end of the 1970s Kristol had switched sides in the conflict. He was now at the centre of a ‘neo-conservative’ group of intellectuals, many originally from the Marxist left, who were developing the intellectual firepower for a counter-revolution against the socialist and Third-Worldist vision of equality.

Were the neo-conservatives Trotsky’s revenge on the USSR? It may seem far-fetched to seek Marxist roots in neo-conservatism, but a striking number of the writers for
The Public Interest
, Kristol’s neo-conservative journal, had been close to Trotskyism. They were now hearty cheerleaders for capitalism, having become, in effect, a variety of American nationalist (although as promoters of ‘universal’ American values rather than narrow xenophobes). But they shared a number of Trotskyist
attitudes: internationalism, a belief in struggle, the utopian notion of a moral society at the ‘end of history’, a hatred of Stalinist
realpolitik
, and most importantly, a Romantic belief in the power of ideas and morality to change the world. The Trotskyist journals that Kristol had read so avidly in the 1940s condemned Stalinism from a Romantic perspective – for ignoring the role of mass enthusiasm in socialism – and similarly, neo-conservatives believed in the power of ideological commitment. Yet where Trotskyists hoped to mobilize the proletariat with ideas of collectivism, the neo-conservatives tried to rouse public opinion with a mixture of bourgeois morality and high patriotism. Although, like the old Marxist left, the neo-conservatives maintained links with organized labour, they had been incensed by the student assault on university authorities in 1968, and were outraged by the New Left’s support for Communist guerrillas in the Vietnam War.

Kristol and his group, therefore, were the capitalist equivalent of the Romantic Marxists, calling for moral renewal and a mobilization against the Communist threat. But just as Communism was most effective when it combined the Romanticism of the young Marx with the technocratic later Marx, so the capitalist counter-revolution needed rationalistic as well as moral foundations. It found them in ‘neo-liberalism’, promoted most effectively by another, slightly older Brooklyner – the economist Milton Friedman. Friedman, a former New Dealer, was a militant opponent of the mixed economy created in the aftermath of World War II. He popularized an elegant and coherent vision of the laissez-faire economics propounded by people such as his fellow Chicago professor Friedrich Hayek: states, Friedman insisted, were predatory, corrupt and inefficient, stifling growth and creativity. Their power had to be destroyed and the natural forces of the market allowed to flourish. This ideology was highly technocratic: Friedman even argued that monetary policy – and thus, in effect, economic policy – could be run by a computer, which, free from political pressure, could defeat inflation. But it was also revolutionary. As one of Friedman’s students remembered: ‘What was particularly exciting were the same qualities that made Marxism so appealing to many other young people at the time – simplicity together with apparent logical completeness; idealism combined with radicalism.’
³⁸

The two Brooklyners were not themselves close, and indeed there were major intellectual differences between them. Though both were
visionaries, and were willing to support forceful attacks on Communism, Kristol’s neo-conservatives were more militaristic, moralistic and apocalyptic in their outlook, and were more positive about the role of the state and labour, than the neo-liberals. In the aftermath of 1968, however, they came together in the struggle against Communism, convinced, like the old Leninists, that a vanguard of intellectuals had to attack the old, corrupt state and replace it with something new. Neo-liberals and neo-conservatives united behind a programme of ‘revolutionary liberalism’ that used the Marxist-Leninists’ militant and mobilizational methods against them. And they found their champion in another former New Dealer, now radical anti-Communist – Ronald Reagan.

The continuing erosion of American power and evidence of revolutionary success in the Third World strengthened the credibility of the neo-conservatives. They were convinced that President Carter, in forcing America’s gendarmes to respect human rights, was weakening both them and American power. The neo-conservative intellectual Jean Kirkpatrick (later Reagan’s ambassador to the United Nations) developed one of the most influential arguments for anti-Communist militancy, by drawing a sharp distinction between ‘totalitarianism’ and ‘authoritarianism’. Unlike ‘authoritarian’ regimes, she argued, which would evolve into liberal democracy as they modernized, ‘totalitarian’ regimes would never do so. Therefore if the United States wanted to promote democracy, it had to support authoritarians against totalitarian Communists, however unsavoury the former were.
³⁹

The climacteric year of 1979 proved to be the turning point. The United States’ policy was buffeted by a series of disasters: the Sandinistas’ revolution, the Islamist defeat of the Shah of Iran and the Soviet invasion of Afghanistan. All seemed to bear out the neo-conservative analysis of Soviet strength and aggression, and the following year Americans responded by voting to fight back, electing Ronald Reagan president by a landslide the following November.

The crisis of America’s economic order, though, was more acute and the response more immediate. Washington’s efforts to maintain both defence and welfare spending by printing money succeeded for some time, but the blows to American prestige in Iran and Afghanistan were the final straw, and Washington faced a flight from the dollar and the end of its status as the major world currency. On 14 October 1979 the head of the Federal Reserve, Paul Volcker, implemented the anti-inflationary
measures proposed by Friedman and decided to give financiers what they wanted: a massive hike in interest rates, an assault on inflation, and a highly valued dollar. This, together with the so-called ‘supply-side’ economic revolution, increased the profitability of capital – cutting taxes on corporations and reducing welfare, whilst raising unemployment and weakening the power of labour.
⁴⁰
More generally, it marked the final end of the economic order established at Bretton Woods in 1944. The Vietnam defeat had shown Washington that it could not maintain its global hegemony by taxing and conscripting its citizens, but only in 1979 did it, almost accidentally, find a viable alternative. International finance would become the fuel of American power. It was this alliance between the United States and global finance that gave it the power to fight a new phase in what is often called the ‘second Cold War’. And it was this powerful system that was to bestride the world for almost three decades, until it spectacularly imploded in September 2008.

The United States’ final struggle against Communism was therefore largely financed by foreign loans – many of them Japanese.
⁴¹
Washington could now fight to regain its global supremacy without demanding sacrifices from its population. However, its objective – rearmament – had less impact on American power than its unintended consequences. In order to fund its massive borrowing, the United States used high interest rates to attract much of the world’s capital. That in turn caused a financial famine within the Second and Third Worlds: a $46.8 billion outflow from the G7 industrialized countries in the 1970s became a $347.4 billion inflow in the 1980s.
⁴²
The resulting shortage of capital inevitably hit the indebted, and especially Communist regimes.

Not all Communist states were affected: China, together with other East Asian states, had little debt and benefited from a new liberal trade regime. It was allowed to export cheap industrial goods to the United States, and by the 2000s China was to take the place of Japan as the main source of capital for an indebted Washington. But the USSR’s satellites in Eastern Europe and its allies in the South were less fortunate. Their industrial goods were not in demand, and as a group they were the most indebted of all countries. In 1979 Poland’s debt service ratio was a massive 92 per cent, and the GDR’s 54 per cent, compared with Mexico’s 55 per cent and Brazil’s 31 per cent, and much higher than a prudent 25 per cent.
⁴³
They now faced crippling interest rates and the withdrawal of loans. As Stalin had anticipated when he rejected Marshall
Aid, succumbing to the lure of Western credit was dangerous. East European Communists were to rue the day they took the Western shilling.

Poland and Romania effectively became bankrupt and suffered the humiliation of having to beg Western capitalists to reschedule their debt; Hungary and the GDR were in less serious trouble, and survived with temporary financing. All had to cut living standards, particularly for the industrial working class – something they found painful. Communist states were weak, and their regimes had little legitimacy. The debt crisis was to corrode it even further.

Predictably, unreformed Stalinism was best able to impose austerity. When Romania defaulted on its debt in 1981 and was forced to request rescheduling, bread rationing was introduced; energy was only available intermittently, and the use of refrigerators and vacuum-cleaners banned. Work was intensified and extended to Sundays and holidays. When petrol became scarce the government, supposedly a harbinger of modernity, was humiliatingly forced to encourage a return to horse-drawn transport. The Securitate developed a Stasi-style network of informants to enforce discipline, and the state intruded ever further into private life, including the notorious compulsory examinations of women to stop abortions and reverse the falling birth-rate.

In the more liberal and decentralized Yugoslavia, in contrast, the federal state’s austerity programme only accelerated political disintegration. Deeply indebted, it was forced to go cap in hand for loans to the IMF, which imposed tight conditions in 1982. A previous supporter of decentralization, the IMF now declared, understandably, that if austerity measures were to work, the republics had to be stripped of their autonomous powers to borrow and create money. The wealthier republics – especially Slovenia and Croatia – objected, and struggles between them and their poorer neighbours continued throughout the 1980s, setting the scene for the apocalyptic breakdown of the 1990s.
⁴⁴
Communist leaders increasingly acted as republican, rather than all-Yugoslav politicians, and local nationalisms replaced Marxist Yugoslavism. Tito’s death in 1980 had dissolved some of the country’s unifying glue, but the consequences of international debt and IMF intervention did the rest. The bonds holding Yugoslavia together were disintegrating.

In Poland, the debt crisis brought the almost complete collapse of Communist power. When in 1980 the government was forced to impose austerity measures and reduce the distribution of meat, it was met by
strikes. The stoppage at the Lenin Shipyard in the Baltic port of Gdańsk was one of the best organized and the workers soon moved from economic to political demands. They erected a wooden cross outside the factory in memory of four workers killed in 1970 and launched a broader movement, ‘Solidarity’, to fight for social justice and independent trade unions. The strikes, joined by people across the social spectrum, spread and the economy was soon paralysed. The Communists, now led by Stanislaw Kania, had no option but to permit trade union activity entirely free of party control. In August 1980, Solidarity and the party signed agreements which, for the first time since the end of the Popular Fronts of the 1940s, gave non-Communists real power. For the next sixteen months, the Communists and Solidarity faced each other in a tense stand-off.

This could not last for ever. Solidarity was becoming more assertive, and a planned strike in December 1981 raised Soviet fears of rebellion. The Kremlin put pressure on Kania, and the leader of the army, General Wojciech Jaruzelski, to rescue the decaying party by imposing military rule. The Polish leadership was naturally reluctant to take responsibility for an unpopular crackdown, and Kania even seems to have become sympathetic to Solidarity.
⁴⁵
Moscow decided he had to go, and he was replaced as first secretary by Jaruzelski, who, threatened by a Red Army invasion, agreed to Moscow’s wishes.