4. The Collapse of the Soviet System

The question poses itself: did the reformers anticipate the consequences of their policies? The answer is rather complicated. Undoubtedly, reformers were motivated primarily by a desire to change the system and were willing to advocate half measures, knowing full well that they will eventually require further measures. At the same time they probably did not fully anticipate the negative consequences, or they could not have advocated the policies so effectively. Of course, the policies enacted fell short of the policies advocated in many respects and reformers could always claim that their prescriptions had not been followed. Nevertheless, they all got sucked into the process, whether they supported the government or opposed it because they came to believe that every problem has a solution even if the solution engenders a new problem. In other words, they became participants and as such they were committed to the reform process. Even if they had reservations, they could not voice them; their only alternative was to remain silent.⁷ Thus the reform debate came to be dominated by an unspoken belief in the efficacy of a continuous process of reform even though that belief, judged from today's perspective, is clearly wrong.

Reform must be equated with the disintegration of a rigid, closed, changeless system, and the further it proceeds the more thorough the disintegration becomes. A continuous process must lead to indefinite decay. Only if there is a moment of discontinuity can the trend be reversed and a new system brought into existence. As I shall argue later, indigenous forces are not strong enough to reverse the trend by themselves. The process of disintegration must be superseded by a process of integration into Western society, and that process cannot be accomplished without assistance from the West. In its absence, the process of disintegration will continue and the universal closed society of the Soviet Union will break up into its component parts, but it will not be able to acquire and maintain the institutions or even the frame of mind of an open society.

Here I am concerned only with establishing the first step in this argument: I want to show that reform, both economic and political, is connected with the decay of the system in a reflexive fashion: decay invites reform and reform hastens decay. The point is obvious, once we look at reform from the point of view of the system: the weakening of the center constitutes a deadly threat. But the point is far from generally recognized; indeed, it has hardly ever been made. Perhaps the only ones who recognize its full import are the hard-liners who oppose reform in any shape or form - and they are fighting a losing battle. The reformers see it far less clearly. This is not surprising. Until recently, it would have been detrimental or downright dangerous to emphasize this point. To equate reform with disintegration would have doomed reform; and, even today, it may give intellectual ammunition to the hard-liners in the Soviet Union, not to mention China. But we are too far along in an accelerating sequence to be concerned about it. It is exactly because reform is bound up with decay that the process cannot be reversed. There may be repression, as in Tiananmen Square, but the status quo cannot be re-established. The monopoly of dogma has been well and truly broken and there is no point in paying lip-service to it.

Reformers have a hard time adjusting to changing circumstances. Until recently all discussion has had to be couched in Marxist terms and even today it is not really acceptable in the Soviet Union to question Lenin. Fortunately, Lenin went through many phases and there was one - the NEP or New Economic Plan, in which private enterprise was encouraged that provides a suitable ideological base for the current debate. Words like private property are suspect; it is more politic to speak of 'individual property,' as the most recent proposal submitted to the Supreme Soviet has done.

The pace of events has accelerated tremendously and it is hard enough to keep up with them without having to watch one's words. But mental patterns developed over a lifetime are difficult to break and having to abandon the dogma one has been trying to reform can be a disorienting experience. Reformers are doomed to disappear: they will be replaced by radical transformers on the one side and hardliners on the other.

I know from personal experience how difficult it is to adjust one's rhetoric to changing circumstances. When I started my foundation in Hungary in 1984, it was considered unnecessarily provocative to call it Open Society Fund; it was probably in the second half of 1988 when that would have ceased to be true. When I set up the Fund for the Opening and Reform of China in 1986, I was at pains to point out the connection between my concept of reflexivity and the Marxist concept of dialectics; today, people are singularly uninterested in the issue. In the Soviet Union I could truthfully present myself as an avid supporter of Gorbachev's new thinking, but I could not have said many of the things I am saying in this book and even today I may become persona non grata when I publish it. Events have moved at different speeds in different countries and in order to be able to function with my foundations I felt I had better keep my opinions to myself as an observer. It is only in the last year or so that I began to speak out; and it is only since the collapse of the Soviet Empire in Eastern Europe that I am less concerned with the fate of my foundations than with making my views known and influencing Western policy. Hence this instant book.

When reformers become radicalised they must revise and reverse their attitude towards the center of power. As reformers, any step that weakened the center and distributed power seemed a step in the right direction. But radical transformation requires a functioning executive power. It is not enough to destroy the central power of a closed society; a new authority must be established which is strong enough to bring open society into existence. That is the main obstacle to the transformation of communism which has not yet been overcome. How can one center be destroyed and another one created concurrently? And how can people switch from subversive to constructive activity or - what is even more difficult carry on both at the same time?

Now we come to one of the most interesting questions in our enquiry: where does Gorbachev fit into the picture? There can be no doubt that he played a crucial role in bringing about the present situation. Without him, events in Eastern Europe would not have accelerated the way they did. He deliberately set about dismantling certain features of the Soviet system. Did he want to destroy the whole system and, if so, why? And what did he want to put in its place? Did he want to change only certain elements of the system and, if so, which ones and for what reason? Did he know what he was doing? To what extent do the results correspond to his expectations? We need some answers in order to understand what has happened in the Soviet Union and what is to be expected.

We shall probably never know the truth. Historical research will be able to establish many facts, but the facts will be subject to many interpretations. Participants act on the basis of imperfect understanding. Their views are both inconsistent at any given point of time and subject to change in the course of time. In the case of Gorbachev, the situation is complicated by the fact that he is not at liberty to say what he thinks at any given moment. His rhetoric has changed remarkably over time. Did his thinking change, or did the conditions change that influenced the way he expressed himself? For instance, he has recently (December 1989) asserted that he is a committed Communist. The statement is a fact. What did it mean? That is a matter for conjecture. The conjecture can then be checked against other facts already known or to be established. It is in this spirit that I shall offer my interpretation.

Just as man created God in his own image, I shall do the same with Gorbachev. I believe that Gorbachev's view of the world is not very different from my own. Specifically, Gorbachev considers the distinction between open and closed society as the critical issue and, in his mind, the transformation of the Soviet Union into an open society takes precedence over all other objectives. That is the central point on which we are in agreement. We differ on many other issues. For one thing, he does not understand economics; for another, he is a Russian and imbued with its culture, which includes both the Soviet period and the epoch which preceded it. He is probably deeply committed to Communism as an ideal of social justice and he is not aware of the fatal flaw in its construction. We differ in all these respects; but I suspect that he has at least an instinctive understanding of reflexivity as a theory of history, otherwise he could not have moved as boldly as he did. He is also a good example of the participant with imperfect understanding; otherwise he might not have embarked on his adventure in the first place. Specifically, he did not realize that dismantling the Stalinist system is not sufficient to bring about a free society. He was driven by a desire to remove constraints and his vision did not extend far enough to envisage the problems he would encounter at that point. That is not surprising. Who would have thought he would get as far as he did in destroying the old regime?

I realize that my interpretation is difficult to reconcile with certain preconceived notions that are widely held, especially in the United States. We tend to believe that a leader's primary objective is to gain and hold power. Gorbachev, with his brilliant maneuvers in consolidating his position, seems to fit the mold. Yet I do not believe that Gorbachev wants power at any price and I have as evidence his behavior over the Armenian issue when it first arose. If the truth be known, Gorbachev is probably almost as squeamish about spilling blood as President Carter. Admittedly, he has a hot temper - he has shown it in arresting the Ngorno-Kharabagh committee when they insulted his wife - and his temper is running short. But I cannot see him turning into a despot in the manner of Peter the Great. In particular, I cannot see him presiding over the use of force in the Baltics.⁸

We also tend to believe that the primary concern of a leader is for the national interests of his country. We have been greatly influenced by the doctrine of geopolitics which holds that national interests are largely determined by objective factors which exert their influence over whatever government is in power. The doctrine does not hold up when a superpower radically redefines its national interests. Nevertheless, established patterns of thought tend to linger and it is still widely believed that Gorbachev is trying to change the system in order to regain the power the Soviet Union would otherwise lose. Recent events have put the lie to this contention: by no stretch of the imagination can it be argued that the upheaval in Eastern Europe serves to strengthen the geopolitical position of the Soviet Union - yet it was a push from Gorbachev that made the dominoes tumble. Events are increasingly reinforcing my interpretation.

Gorbachev's primary goal is the internal transformation of the Soviet Union. His recipe for accomplishing it is to break the isolation into which the Soviet Union has fallen under Stalin's rule and to integrate it into the community of nations. Thus, Gorbachev's foreign policy is guided by internal considerations rather than the other way around. This is the point that foreign policy experts in the West, well grounded in geopolitics, find so difficult to grasp.

Gorbachev's views on international relations are much better developed than the rest of his program. Indeed, the expression `new thinking' applies only to this sphere. It is also in this sphere that he can count on the most competent professional support. It is not an exaggeration to say that the foreign ministry is the only bureaucracy in the Soviet Union that is unreservedly committed to Gorbachev's policies. I was shocked when a foreign ministry official proudly told me some time in 1987 that `everything that has been done with regard to human rights has been done by our department.' I felt it should have been done by the interior ministry. As recently as the summer of 1989, the foreign ministry set up an economics section, recognizing that the officials charged with foreign economic relations were not doing their job.

Gorbachev's vision of the world can be an inspiration for us all. It is based on the concept of an Open Society. He spoke of belonging to a `European house.' His remarks were badly misinterpreted. Where are the frontiers of Europe, people wanted to know, in the Ural mountains, or at Vladivostok? It seemed more convenient to draw the line at the Western frontier of the Soviet Union. But that is not what Gorbachev had in mind: he thought of Europe as an open society, where frontiers lose their significance.

This is a thought worth cherishing. It envisages Europe as a network of connections, not as a geographic location. The connections are open and manifold. They encompass every aspect of thinking, information, communication and exchange, not just the relationships between states. Being open-ended, its scope extends beyond the continent of Europe: it includes the United States as well as the Soviet Union, not to mention the more recent members of Western civilization such as Japan.

This conception turns Europe into the ideal of Western civilization, the ideal of mankind as an open society. Within this conception there is a need for closer association between states, but the states do not define or dominate the activities of people. It stands in contrast with the concept of Fortress Europe. It is an extension of the concept of civil society to the international arena.

All this may sound very idealistic to Western ears, but it holds great appeal for people who have been deprived of the benefits of an open society. Whether people in the West can also resonate to it will have considerable bearing on the future shape of the world.

There have been previous attempts to translate similar ideas into reality, notably in the League of Nations and in the United Nations. In each case, the institutions foundered because they could not protect themselves against totalitarian regimes: Mussolini and Hitler in the first case, Stalin in the second. It is noteworthy that one of Gorbachev's first gestures was to pay up the Soviet Union's arrears with the United Nations.

Perhaps because he attached such high hopes to his foreign policy, Gorbachev had much less clearly defined objectives in internal politics and economics. He wanted to give people an opportunity to express their will and he had a ready-made instrument for the purpose: the people's assemblies, called Soviets, from which the Soviet Union derived its name. But he failed to think out the relationship between the Soviets and the Communist party and, when the issue arose, at the Party Congress which reactivated the Soviets, he improvised a makeshift solution. He was even more vague in his plans for the economy.

Gorbachev ran into insuperable difficulties almost from the start on two counts: the economy proved incapable of reform and the desire of the various nationalities for increasing autonomy could not be assuaged. One might add a third difficulty the inability of the Soviet Union to maintain its hegemony over Eastern Europe - but Gorbachev refused to treat it as a problem and therefore it did not become one. The first two were not so easily dismissed.

Gorbachev had great confidence in his own ability to lead; therefore he did not feel the need for well developed strategic plans. That was just as well. Had he considered all the difficulties in advance, he might not have had the temerity to embark on his course. Less than three years ago, Columbia University sovietologist Seweryn Bialer could argue convincingly that the Soviet Union could never follow China along a path of economic and political reform because China was homogeneous while the Soviet Union was both internally and externally an empire which needed a repressive regime to hold it together. His analysis was valid, but Gorbachev was so determined to change the regime that he was not deterred by it. I shall consider the problems of the economy and of the nationalities separately but, of course, they are intrinsically connected.

I shall first try to answer the question, why was the `golden period' of reform missing in the Soviet Union? There are several factors at play. One is the almost total lack of comprehension about elementary economics that permeates the country and reaches the highest echelons of leadership. The contrast with China is striking. There, former Communist party General Secretary Zhao Ziyang was an accomplished economist, and he had a think-tank of brilliant young intellects at his disposal. There is nothing comparable in the Soviet Union. As a member of the Soviet top leadership told me: 'We do not understand economics and we are afraid to ask any questions because we would betray our ignorance. We thought that our economists would know what to do because they were so good at pointing out the shortcomings of the system, but we have been bitterly disappointed.'

Closely related to the lack of understanding was the lack of concern with economic issues. Gorbachev was primarily preoccupied with politics, partly because he had to capture the levers of power and partly because he believed, correctly, that political change is a precondition of economic change. He exploited brilliantly every instance of failure and used it for replacing people in power with his own nominees until he reached a position within the party which by traditional standards would be considered impregnable. Only then did economic issues come to the forefront of his attention. He could no longer blame others for the failures; yet his own nominees were not much better than the people they replaced; thus, he had to start taking the blame. Moreover, the traditional yardsticks are no longer applicable in determining how secure his position is. An impregnable position within the party may not be sufficient to protect him when the party itself is losing power.

Gorbachev made a serious error in failing to recognize that political change was only a necessary but not a sufficient condition of economic change. He had a rather naive belief in democracy: allow people to make their own decisions and they will make the right decisions. But business cannot be run on consensus. Within each organization there must be a well-defined chain of command; and, in the absence of autonomous business organizations, there must be a chain of command for the economy as a whole. If the economy is to become restructured, someone must be in charge of the restructuring. No attempt was made to establish the appropriate authority.

Managing change requires a different kind of institutional setting than managing a system that aims to be changeless. Japan had the Ministry of International Trade and Industry; Korea had the Economic Development Agency; even China had the State Commission for Economic Reform; but the Soviet Union did not establish an appropriate organ. The existing structures of command were retained, only some of the faces were changed. The most important error, and the one which can be held responsible for the breakdown of the economy, was the decision to decentralize prematurely. State enterprises were given greater autonomy before they were reconstituted as autonomous entities and new forms of economic activity were authorized before their scope and mode of operations were properly defined. As I have mentioned before, reformers learned to regard any step that distributes power as a step in the right direction. Events proved how wrong they were.

The bureaucracy was totally unprepared for functioning in the new environment. They were adept at taking their cues from above. They had learned to watch which way the wind was blowing at the top and to position themselves accordingly. Gorbachev told them that the system had changed and they had to take responsibility for their own decisions. At first they mouthed the slogans of perestroika without really believing them, but then they discovered the system had indeed changed and they were not subject to as harsh a discipline as before. They did what any bureaucracy would do in the circumstances: they avoided responsibility. The result was a paralysis in the decision-making process. Decisions took even longer to reach than before and the gap between decisions and their execution grew even wider.

Reinforcing the paralysis was the issue of nationalities and the desire of the republics for greater autonomy. The writ of Moscow simply did not run in the outlying regions of the Empire.

Several other factors can be cited in the failure of perestroika to produce any initial benefits. There was no residual knowledge of free enterprise to draw upon. Nor was there a large emigre community to provide support. Private enterprise, in so far as it got started, could derive much greater profits from exploiting the anomalies of the system than from incremental production. I have heard of a fertilizer company selling its production for hard currency in Finland, only to have it sold back to a Soviet agri-complex at a higher price without even changing the label. I have met the head of a successful cooperative, Artiem Tarasov, who shocked public opinion by paying 90,000 rubles one month as his Communist party dues (members are supposed to pay 2 percent of their income to the party every month). He told me how they bought surplus raw materials from State enterprises at a discount, and sold them abroad in a barter deal for computers which they could resell in the Soviet Union at 30 times the official rate of exchange.

On balance, incremental benefits from newly authorized forms of economic activity have been far outweighed by the disruption of the established forms. If you shake a rigid structure, it will collapse. That is what happened in the Soviet Union. The only reason why economic life did not come to a complete standstill is that it had not relied purely on the formal structure in the first place. There are many informal arrangements and they are becoming even more pervasive. I have heard of an unofficial trading organization which has some 3,000 state enterprises as members.

Economic restructuring is sorely in need of a concrete experience of success. If only some desirable new product became widely available! People would have at least one piece of tangible evidence of what the future might bring. For instance, sanitary napkins manufactured by Johnson & Johnson would bring considerable relief to women still using primitive methods of protection to cope with their monthly period. Johnson & Johnson is, in fact, part of the consortium of US firms that is trying to arrange a series of interconnected joint ventures. Negotiations have been going on for the last two years but the first deal, involving Chevron, that would produce the oil that would provide the hard currency for the other products, has still not been completed. It is unlikely therefore that locally manufactured sanitary napkins will become available any time soon. Unfortunately, not much relief can be expected from any other quarter either in view of the long lead times involved.

In the absence of positive results. public opinion has reacted adversely to the manifestations of free enterprise. There is a strong streak of egalitarianism in Russia whose roots go back before communism to the rural communes, called obschina, which flourished after serfdom was abolished and which, in turn, harked back to the halcyon days before serfdom was introduced.

Since there is no understanding of economics, people confuse profits with profiteering. They do not realize that it is only the distorted price structure that makes the windfall profits possible. Instead of pressing for the abolition of price controls, they clamour for the suppression of private enterprise. There has been a severe backlash. Many of the rights given to cooperatives have been subsequently rescinded; the reform program prepared by Deputy Prime Minister Abalkin has been kept in abeyance and Prime Minister Ryzhkhov introduced a new five-year plan instead. But Humpty-Dumpty cannot be put together again; the economy is drifting into chaos.