Mass Privatizations

The transition from communism to capitalism in Eastern Europe entailed a change from state control and operation of most economic activity to private ownership. While privatization took place between 1990 and 2000, the distribution method and sales of shares in state-owned enterprises to the private sector varied for each state.

Significant program differences led to a wide range of economic and social outcomes. The best transition programs created widespread ownership and a competent management structure, the worst oligopolistic owners or outright corruption. In the more fortuitous cases, citizens received shares in the new companies, competent managers were appointed and the economy prospered. Civil society felt included in the process. In the worst cases, oligarchs siphoned off wealth, firms often failed and people felt disenfranchised.

Foreign Investment and Voucher Privatizations

One of the early goals of the privatization programs was to attract foreign capital and management. For various reasons, this was largely a failure: only Estonia (50%) and Hungary (20%) were able to sell a significant proportion of state property to foreign buyers. The public quickly became wary of losing too much of the national patrimony and the programs became politically unpopular. Foreign investment during the period did take place but it was largely for “green field” or new investments.

Because of the growing unpopularity of foreign ownership, and the perceived need to speed-up privatizations to promote growth, countries decided to sell or distribute their assets domestically rather than to foreigners. In some cases, especially Russia, Hungary and the Commonwealth of Independent States, shares in firms were assigned to workers and management. These programs, especially in Russia and the CIS, allowed managers to gain effective control; either pressuring workers to vote for management’s corporate governance boards or leveraging management’s greater number of shares to obtain low-interest bank loans and buy out a controlling interest. The Russian privatization resulted in the top 100 firms being handed over to single individuals, usually in collaboration with the banks and the state who helped them buy-out existing shares at low prices.

In the Czech and Slovak Republics, Lithuania and Poland vouchers were created and distributed allowing the public to obtain shares in individual firms – in Czech-Slovak and Lithuanian programs – or in funds which held shares in the various companies in Poland. Other countries generally followed variations of these models. The individual share model anticipated the creation of an Anglo-Saxon type stock market; the fund model anticipated continental-type holding companies. In Hungary, a state agency was created which continued to hold shares of the former state-owned enterprises. Some programs worked for a time, then ran into a variety of problems. The choice of transition program and its success had important implications for the future of civil society in Eastern Europe.

One unfortunate aspect of the politics of the transition period was the emphasis placed by the international institutions, in particular, the World Bank and IMF, on creating private management ownership rather than on social equity in the distribution of assets. While somewhat equitable distribution programs did finally take place in most of the Eastern European countries, the international institutions may have been instrumental in the very corrupt and inequitable outcome of the Russian and CIS privatizations.

Liberal Values, Democratic Society and Ownership

Political scientists have postulated a relation between the liberal values emanating from the enlightenment and a stable democracy. The idea is that a democratic society is perpetuated by its members’ practice and beliefs. Both from a Marxist perspective, where a bourgeois class anchored in the practice of free markets and civic freedoms, protects its ownership interests, or from a behavioralist-institutionalist perspective, where the habit and practice of market and civic freedoms is institutionalized.

When people are excluded economically or civically in any way, even that of perception, their support for democratic institutions weakens. The absence of experience with liberal values due to a command and control economy, monarchy or dictatorship, can weaken the appetite and support for democracy. As many countries in Eastern Europe transitioned from monarchy to communism with, at most, a brief interwar period of market economy, support for enlightenment values was shallow when the transition finally occurred.

Political Extremism

Umberto Eco provides an excellent dissection of fascism, a particular case of political extremism. Eco considers fascism more of a disease of the human spirit than a coherent political philosophy. Many of his identifiers, or symptoms of fascism, are present among Eastern European right-wing skinheads and Neo-Nazis. Racism, misogynism, nationalism, anti-intellectual, anti-democratic, propaganda and leader centrism are a few of the more notable characteristics, along with a love of violence. The major far-right political parties, though eschewing in some cases the fascist label and their support for some of these values, display clearly, nevertheless, the symptoms of fascism as outlined by Eco.

There was a noticeable rallying to the novelty of liberal democratic values after the fall of the wall. But aspirations outpaced reality. Strong growth over many years since has raised income levels, (now between 50% to 70% of those in West Germany) along with life span and general well being but it also heightened economic differences. In addition to greater class tensions growing wealth in weakened states was an invitation to corruption.  The great recession of 2008 soured many on capitalism, the West and its values which had, after all, led to the collapse.  Eastern European economies have been aided substantially by the inflow of EU regional funds but the assistance has often gone politically, and the West looked at with envy and resentment.

Globalization has further undermined any middle class left from the communist period along with the fragile middle class built up during the post-transition period. A threatened middle class is, according to Eco, one of the drivers of fascism. With this class no longer convinced that its future lies in globalized world markets, it becomes open to populist-nationalist solutions to its problems. Such solutions are all the more relevant in countries where the culture of folk-nationalism, except during the communist period, was the norm. The combination can be lethal to democracy, along with a disenfranchised working class

Cultural Expression and Reproduction of Value Systems

The granting of egalitarian rights in the new democracies to ethnic and religious minorities, the LGBTQ and women has threatened the traditionally dominant classes. Even middle and working classes can feel threatened, regardless of the realism of these fears.

Artists continue to hold up the torch of cosmopolitan culture, even as far-right groups march and rally around their own heavy metal music and symbols. The struggle for control of mass media is being fought out wherever liberal values have been challenged.

Successful young entrepreneurs returning from the West conversely bring their more liberal values with them. A younger demographic will also replace those who have lived all their lives under communism. Fears of economic and social loss can fall away if proven irrelevant in a newly vibrant economy.

Far-Right Movements

Challenges are both economic and social in varying measure. The strengthening of right-wing movements in the countries of the former Yugoslavia was largely due to social factors. Their economic transition was facilitated by the relatively decentralized economy under Tito.

The Kosovo war with Serbia pitted Muslims against Christians. It fostered claims being developed elsewhere of “replacement”. The idea here is that Western elites are trying to replace European populations with immigrants. Though immigration to Serbia was minuscule, the narrative of Muslim replacement was embraced in response to NATO’s participation in the war on the side of Kosovo. NATO’s advanced reasons to intervene were nationalist politics – Serbia’s desire to reclaim territory from Muslim Kosovans – and the risk of genocide.

Right-wing movements in Serbia have a life of their own. Though in the West the identitaires took inspiration from the Kosovo conflict, the two movements have not been able to meld. Local particularities and the absence of immigration in Serbia have kept the Serbian far-right in a separate, if sympathetic, constellation from their western counterparts.

In the rest of Central and Eastern Europe outright fascist and neo-Nazi, alt-right, and identitaire groups exist alongside mainstream parties with right-wing tendencies; Hungarian Prime Minister and head of Fiduz, Viktor Orbàn, speaks of his “illiberal democracy”. Indeed, Fiduz has taken steps to curtail the free press, minority rights, openness to immigrants and many of the other “values” of liberal democracy. It has forced the Central European University, founded by George Soros, to move from Budapest to Vienna.

Similarly, in Poland, PiS (Law and Justice) is putting forward a program attacking an independent judiciary, the media and another far-right boogeyman: LGBTQ rights. In the Czech Republic, a billionaire leader fosters radical “free market” solutions. Both Hungary and Poland are in violation of EU covenants because of these measures and the subject of Article 7 sanctions. In Ukraine the far-right consists of diverse fascist and neo-Nazi groups which often play host to international gatherings, concerts and recruiting. Fascist symbols and international affiliation are commonplace.

Liberal society has also reacted. In Prague, 200,000 demonstrators turned out on the anniversary of the “Velvet Revolution”. Far-right groups previously prominent in the Ukrainian parliament were voted out in the last election. In reaction to conservative rule in Slovakia a reform prime minister, the first woman, has been elected. In Romania, the street has contested the prevailing political class – 500 straight days of consecutive protests against corruption – with some success.

The die is never entirely cast as human beings struggle.

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This narrative, which is particularly popular online, is also seeping through public debate. One need only take a look at Emmanuel Macron‘s speeches to see the conflating of western European (or even French) values with those of the entire Union, sidestepping what is actually listed in the Treaties. The picture painted is more or less thus: the original founding countries are able and willing to push forward along the path of ever closer union. The partners that joined in the two eastern enlargements, on the other hand, are backward and stubbornly opposed to more integration, thus holding the entire project back. Some even draw the conclusion that the EU has expanded too fast, and that proper federalisation had to take precedence over enlargement.

This is a comforting narrative, at least for western Europeans. It also contains a kernel of truth: concerns about the rule of law and separation of powers in Eastern European Member States are legitimate and well-grounded. It is also undeniable that these countries and their governments have been quick in pointing to Brussels as a scapegoat for all their ills. What does not follow is the belief that, in their absence, the rest of the continent could speedily achieve unification. Upon closer scrutiny, this belief is revealed to be little more than wishful thinking.

In Search of a Liberal Core

The first problem, when romanticising the EU’s supposed western liberal core, is defining its borders. When it comes to dogged defence of State autonomy, Austria is not that different from Poland. Even if one assumes that the demarcation overlaps with the old ideological borders of the Cold War, the comparison does not look stronger. The current Italian government, which openly cites Orbán as a role model, has no claim on a moral high ground over Eastern Europe. In the United Kingdom, the Tories (who share ECR membership with the ruling Law and Justice party in Poland) are entrenched both in protection of the establishment and in some cases literal aristocracy – hardly a better track record than the Czech Republic or Slovakia.

One may refine this even further, and argue that the western integrationist core corresponds to at least five of the six original founders. This subdivision, however, also fails scrutiny. France has done much to retain its autonomy, particularly in foreign policy and security. The Kingdom of the Netherlands – a liberal western European country if ever there was one – remains one of the most determined opponents of federalisation, especially on military matters and Eurozone reform.

When it comes to European integration and European political culture, there is no such thing as a pro-integration, liberal core. Significantly more lip service is paid in the West to the ideas and values of European integration, but the willingness to translate that into a meaningful pooling of sovereignty is low. French vetoes date back to the foundation of the Coal and Steel Community, and the recent wave of illiberalism sweeping across the West has dimmed prospects even further.

The Blame Game

The turn towards illiberalism is a common phenomenon all over the Western world, even at its margins like in the Philippines. The Republican Party in the United States started to change in the early 1990s with the likes of Dick Cheney and Newt Gingrich, when the EU was newborn and ended at the Oder. This point cannot be repeated too often: what is branded as “populism” in current political discourse is, as a phenomenon, very much independent of the EU and its existence, let alone its membership composition.

Its specific European manifestation is also significant to this argument. Several European countries have increasingly shifted towards illiberal positions – not just in Eastern Europe, but also in the west. Track records on integration are negative all across the map. It is completely unfair – and in many ways gaslighting – to blame Eastern Europe for the halt to integration.

The UK undoubtedly holds the record of vetoes, exemptions, and red lines, covering a broad range of matters from collective defence to the single currency. London’s outright exemption from the principle of ever closer union was in itself an admission of defeat for serious prospects of political unification. Britain’s prominence, however, shouldn’t blind us to the obstacles placed by others. Britain itself was often an excellent alibi for other sceptical countries, allowing to entirely skirt discussion on topics like common defence because London had already vetoed them anyway.

Several European Member States didn’t even need this alibi to shoot down integration. France voted down the proposed European Constitution in a referendum. While it is currently busy trading thinly veiled accusations with Germany over who is falling short on what initiative, it has also displayed a dogged determination at patrolling its own borders in the wake of the refugee crisis. Denmark also has opt outs, and is profoundly sceptical of further integration. The Netherlands, Germany, and all Nordics are squarely against Eurozone reform, while their equivalents in Club Med are vehemently against aligning their policies to those required to make a banking union function.

The conclusion is inescapable: there is no popular legitimacy anywhere in Europe for more integration. But if European integration is dead in the water, who is the culprit? Curiously, very few political camps in the Union have actually owned up to the chronic lack of political will that allowed this to happen. Pointing fingers and outsourcing the blame is a popular strategy, but it leads down a dangerous road – one with no answers and an abundance of acrimony.

Eastern Europe Is Europe

When the discussion moves to the economy and workers’ movement, its ugliness becomes all the more apparent. A popular narrative, particularly among left-wing circles in Italy and France, is that the eastern enlargement was driven by companies in the quest for cheap labour. Reinterpreting the enlargement as a product of shadowy forces is a way of delegitimising it. The short-sightedness of this argument is so total that it’s hard to tackle what makes it so wrong.

The Single Market, of course, grants freedom to trade and move across the Union, and that naturally includes businesses. Ultimately, however, the Single Market is also about long-term economic convergence. Companies truly committed to a quest for cheap labour on meaningful time-scales go to South-East Asia – wages in eastern Europe will not remain low forever. Thirdly, and most importantly: businesses do not dictate EU policy, nor that of its Member States. There is no secret cabal of corporations who manipulate governments from the shadows.

There is little doubt that powerful economic actors like corporations have played a role in European integration, and that these same actors can count on powerful lobbyists. But this is part and parcel of political life in any democratic country. The belief that these actors could unilaterally drive a political undertaking of such a scale based on profit sheets alone is close to a conspiracy theory – the obsessive quest for an agent on whom to pin the blame.

Paradoxically, Eastern Europe tends to be a lot more outspoken than the West in its support for the EU in general, in spite of the sometimes stark disagreements over the rule of law and democratic values. This is no coincidence: for many of these Member States, the EU and NATO are a matter of survival, not of policy-making. With an aggressive Russia to the east, and a history of totalitarian dictatorship still eerily close in their past, there is little room for geopolitical experiments. Hungary is at present the only Member State in Eastern Europe bucking the trend, and openly adopting an openly friendly position towards Russia.

The entrance of Eastern Europe into the EU was a bold political act that took place within a limited window of opportunity. Together with NATO’s expansion, it banished the spectre of further Russian domination of the newly independent countries. Renouncing it over political rows is another classic example of the myopia that affects European political culture.

Meaningful Unity

Ultimately, playing the blame game by exploiting regional rivalries is the epytome of failures when it comes to integration discourse. European unity is about undoing the damage the continent wrought upon itself through two global conflicts and the Cold War. The latter in particular divided Europe in half for forty years, resulting in very different experiences, problems, and ways of looking at the world. The hypothetical future unification of Europe resembles the reunification of Germany, but on a much larger scale.

This can feel daunting – and so it should. The quest for peaceful, democratically legitimate European unity is an ambitious and unprecedented undertaking, one spanning many generations. This lofty goal cannot be meaningfully pursued without keeping an eye on the obstacles that lie on the road ahead. It will take decades to even start mitigating the damage done by forty years of division, Communist dictatorship, and foreign occupation of the eastern half of the continent. Playing the blame game, however, is one sure way of failing in this grand endeavour.

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