Postscript
It is little more than three months since I started writing this book. It has been one of the most eventful periods in the history of Europe and undoubtedly the busiest period of my life. The two are closely connected. Not only does Eastern Europe take up more and more of my time and energy, but I also feel that my engagement is unsustainable: there is just too much to be done and I do not have the required energy. The same is true of Eastern Europe. There is also an affinity on a more abstract level: I am acting out a fantasy and so is Eastern Europe. A psychiatrist once told me how dangerous it is to act out fantasies and I am beginning to see what he meant. I am not too worried about myself: I have worked out effective survival strategies as a fund manager; but I do worry about Eastern Europe.
In re-reading the text I am struck by how little I need to change in spite of all that has happened. Many of the developments were unexpected. For instance, I thought that a live totalitarian like Ceaucescu could keep people terrorized indefinitely if he was willing to spill enough blood. He thought so too. The Reverend Laszlo Tokes told me that the authorities had allowed the crowd to congregate in front of his house in Timisoara in order to mow them down later, creating a terrifying example. He was spirited out of his house at night and kept in isolation in preparation for a show-trial which would have proved that the riot had been organized by imperialist agents from abroad. But Ceaucescu made a couple of mistakes. He had the temerity to organize a mass demonstration in his own support which gave people an opportunity to turn against him. Later, when the masses and the soldiers were staring at each other along the main avenue of Bucharest, the radio announced that the Defense Minister was a traitor and had committed suicide in order to avoid punishment. That was the turning point: the soldiers joined the people. As a result, Ceaucescu is no longer a live totalitarian.
Similarly, I did not anticipate Gorbachev's brilliant manoeuvre in response to the Baltic and Azerbaijani crises to abolish the monopoly of the Communist Party in the Soviet Union. Nor did I anticipate the dramatic acceleration in the trend towards the reunification of Germany. These developments did not cause me to revise anything I had written, but they brought into sharper focus some of the points I was trying to make in the book.
The most important point is that there is an unresolved conflict between destruction and construction. On the one hand, it is necessary to demolish the structures of a closed society and, on the other, the structures of an open society must be brought into existence. How to reverse the trend from disintegration to integration, that is the unsolved question: It requires a reversal of attitudes which does not come easy. People have learnt to regard everything that serves to diminish the power of the center as desirable; now they have to constitute a legitimate government and endow it with sufficient power to bring about a radical and in many ways painful transformation of the economic and social system.
To make matters worse, it is not only central planning but also the fledgeling market mechanism that fails to function properly. Without efficient markets profits turn into profiteering and the rush to privatise deteriorates into looting the store when the master is gone. The transition must be properly organised; that is why a strong government is needed. And even then, a trend reversal could not be achieved without significant outside assistance.
I singled out Poland as the most likely place where a change in trend could occur. The economy had deteriorated to a point where it would not take a great deal of resources to turn it around; a legitimate government had come into power, and the conditions were right for mobilizing the necessary support from the West. The Polish government did indeed embark on a radical stabilization program and received significant Western assistance for doing so. But the success of the program is far from assured. Indeed, I expect a severe economic crisis. The stabilization program will have created unemployment, but where is the new employment to come from? With no purchasing power at home, the demand for the products of cheap Polish labour must come from abroad. It will require Western operating management to gain access to Western markets and it is up to the Polish and Western governments to create the conditions for attracting foreign investment. Nothing could be more important than to make the Polish experiment succeed, because it would create the precedent that is needed to show that it is possible to transform a centrally planned economy into a market-oriented one. Events in Poland are closely watched in the Soviet Union.
The country which now has the best chance of accomplishing a successful transition is East Germany, where the power structure has effectively disappeared and there is a Western partner ready and eager to assume responsibility. It is interesting that the transformation is going to be accomplished by introducing the West German Mark as the currency. It reinforces my argument that the first requirement for a successful transformation is a sound currency.
Do the Western powers have as much determination to come to the aid of the Soviet Union as West Germany is showing in relation to East Germany? And is the Soviet Union ready to accept the strings which must be attached to assistance if it is to work? The answer to both questions is no. Indeed, West Germany's commitment to the transformation of East Germany bodes ill for the rest of Eastern Europe. It pre-empts the resources of the leading economic power in Europe and it diverts the attention of the rest of the world from the collapse of the Soviet system to the problem of German reunification.
I have a growing sense that the historic opportunity has passed and the process of disintegration cannot be arrested. Certainly, it would require increasingly larger efforts with decreasing chances of success and I do not see any sign of the will to do it.
The only ray of hope I can detect is that the Soviet Union still has a leader who has shown his ability time and again to take charge of the course of events just when it threatens to sweep him away. Gorbachev may be able to separate the office of the Presidency from the Politburo and the party apparatus. If he can generate enough popular support for that move, he may be able to start building up the Presidency as an effective executive organ which gathers around it the constructive forces12 while the old party apparatus remains the bogeyman. The process of construction and destruction may then occur concurrently, avoiding total disintegration. Again, massive Western assistance would be required to enable the Presidency to produce positive economic results. Since the alternative is civil war, to be followed by a likely Russian nationalist-socialist revival, it is very much in the Western interest to provide it.
3 March 1990
