Few political tumults in living memory are more thoroughly sanctified than the handovers of power in Eastern Europe that began in 1989. In standard tellings, the Eastern bloc was a stricken land of cardboard cars, cracked Plattenbau, lignite dust and political police. A bumbling communist elite had squandered all legitimacy. The people rose up against despotic regimes and demanded the liberties enjoyed by their fellow Europeans in the West. Democracy arrived in a hurry but, crucially, with little violence. Former electricians and playwrights took over the leadership of their states. The time had come to live in truth.
The script of 1989 as a triumph of liberal-democratic perseverance over communist dictatorship has lasted more than a generation. Like the revolutions of 1848, 1989 has its actor-historians, its own Lamartines and Louis Blancs. In the West, there is an established literary and cinematic canon, along with a deeply grounded mentality—a special vintage of liberalism that could be termed 1989ism—characterized by a belief in the power of civil society, a view of dissidents as the vanguard of liberal democracy and a trust in markets, whether for ideas or goods. Yet this orientation is more prevalent in contemporary politics and popular culture than in the academy. Beginning in the 1990s, Western historians like Charles Maier and Stephen Kotkin began subjecting the story to the newly available archival record. Together with a handful of other scholars, among them Peter Gowan and Giovanni Arrighi on the left, they pointed to the indebtedness of Eastern European communist regimes to Western banks as an underappreciated dimension of the collapse of state socialism. The years 1989–91 could only be considered peaceful if one ignored the drop in life expectancy among victims of Washington’s shock therapy in the former Soviet bloc.
Contrary to some airbrushed retrospectives, almost no major strands of the popular movements in Eastern Europe called for the dismantlement of socialism, but rather for its refurbishment, along with appeals to ‘respect the constitution’. The Eastern dissidents may have looked like familiar figures in the Western mirror, but their ideals and courage had been acquired under socialism not in spite of it. Meanwhile, key sections of the communist elite of East Germany, Hungary and Poland, far from being blind to the course of events, recognized their weight and force, even if they kept this knowledge highly restricted. They understood that the popular swellings within their societies were only fully comprehensible—and could only be managed—if one grasped the burdens weighing on their balance sheets.
It is on these burdens that Fritz Bartel trains his focus in The Triumph of Broken Promises, drawn from his doctoral thesis at Cornell (he currently teaches international affairs at the Bush School of Government and Public Service at Texas A&M). Heeding calls from Maier and Kotkin to ‘see capitalism and communism in comparative perspective’, Bartel presents the end of the Cold War and the rise of neoliberalism as ‘interconnected products of a shared history—specifically the history of the world economy in the late twentieth century’. The dissolution of Soviet communism is understood as the outcome of sustained attempts by both blocs to discipline their economies in the wake of the energy crisis triggered by the Yom Kippur War. While the West, above all the United States, was able to leverage its position in world markets in order to impose structural adjustments, Bartel argues the Soviet states did not have the same means at their disposal. They became reliant on Western credit and, in turn, on their own economic advisers who managed their relationships with foreign lenders. ‘In a supreme irony’, Bartel writes, by the late seventies ‘it was only the development of global finance capitalism that allowed late socialism to exist’. The question The Triumph of Broken Promises poses is why the Western liberal democracies were able to see through the unpopular administration of economic austerity while communist governments proved unable to do so. When it came to the social contracts forged in the postwar boom, ‘promises’ made to the population proved easier to break in the West than in the East, where living standards were less negotiable—hence Bartel’s title.
Bartel opens his account with an arresting diptych of economic despair, Western and Eastern. In 1979, American wage-earners felt the sting of Federal Reserve chairman Paul Volcker’s punitive interest-rate hikes, which were designed to combat inflation at the cost of mass unemployment. ‘Car salesmen sent coffins to the Federal Reserve full of keys to unsold cars’, Bartel writes, ‘and farmers blocked the Fed’s front entrance with their tractors to protest the rising costs of doing business.’ Ten years later, in the midst of Hungarian communism’s collapse, a pensioner in Budapest addressed an open letter to the last communist finance minister, László Békesi. With his economic security evaporating and the cost of living prohibitive, he sardonically requested ‘an appropriately long and sturdy rope’ to relieve the state budget of his upkeep. The Russian word ‘perestroika’, as Bartel relates, which means something like ‘readjustment’, was first used by Soviet analysts to describe austerity policies in the West in the 1970s before it was applied domestically in the 1980s.
The Triumph of Broken Promises proceeds in two parts. The first traces what Bartel calls the ‘privatization’ of the Cold War from 1973 to 1985, as contracting growth and pressure from financial markets compelled governments on both sides to retreat from prior commitments. Bartel begins with the economic slowdown that affected both systems from 1970, problems that were exacerbated by the 1973 oil crisis. The sharp rise in prices drastically altered the relationship between the Soviet Union and the Eastern bloc. For the Kremlin, this meant that the cost of aid to the Comecon countries was higher than ever, since the flow of manufactured goods to the ussr could not make up for the energy subsidies that Moscow provided in return. Meanwhile, the opec states concentrated their petrodollars in American and European banks, which began to look for suitably large-scale investment opportunities. The Eastern bloc had new incentives to advertise itself as an attractive destination for Western capital. In Poland, where mass workers’ protests against price rises in 1970 had forced the ouster of the long-serving Władysław Gomułka, the new leader, Edward Gierek, inaugurated the ‘New Development Strategy’. With Soviet largesse shrinking, Gierek believed the best option was to accept offers from Western banks for more credit to finance a push in the technological sector and restore export competitiveness—an attempt to raise living standards for the workers who had helped bring him to power.
One of the many ironies Bartel unearths is that Western bankers were among the most confident backers of the state-socialist economies, which they viewed as having enviable enforcement mechanisms at their disposal in addition to the Soviet Union’s energy trade surplus. ‘Who knows which political system works?’ declared the head of Citibank’s international division, in 1982. ‘The only test we care about is: can they pay their bills?’ For a period in the 1970s, it appeared to be a win for both sides, with Western banks believing they had a reliable new frontier of investment, while the Eastern bloc leaderships believed their credit could finance a leap-frogging modernization process and perhaps even take advantage of crisis in the capitalist world. communist leaders hoped that ‘their access to cheap Soviet raw material and Western credit markets’ would enable them ‘to avoid the disruptive adjustments austerity brought to Western societies’. In the us, concerns were first voiced by defence intellectuals rather than bankers. As Bartel recounts, Brzezinski took to the pages of Business Week in 1976 to sound the alarm that Comecon states might strategically default, while Kissinger warned that they could be manipulating the economic infrastructure of the West in their favour. Bartel, though, sees no evidence that such geo-strategic discussions ever occurred on the other side of the Iron Curtain.