A “spring of discontent” beckons
Eastern European states are facing economic meltdown, with the prospect of a “spring of discontent” in several countries, according to commentators in the region.
Deep recession has provoked rising protests throughout the Baltic States and Eastern Europe, some of which led to violent conflict with police. Last week, police fired tear gas at over 7,000 protesters outside the parliament in Vilnius, Lithuania. The demonstration was called by trade unions to protest against an austerity package, including tax increases and benefit cuts. The government plans to make public sector cuts, to attack social security payments, to increase VAT and to abolish tax breaks on medicine and home heating.
In Bulgaria, which is plagued by corruption, hundreds of protesters were arrested and injured in violent incidents across Sofia. These disturbances have increased the ruling government’s instability. The protests were reportedly triggered by the random murder of a student in a crime related incident, which brought out students in protest at the country’s dire social disorder. Hardship throughout Bulgaria worsened during the bitterly cold winter due to severe heating and power shortages as a result of the Russia/Ukraine gas dispute.
In Riga, the capital of Latvia, an estimated 10,000 protesting against the harsh conditions of an IMF bailout, were detained after street battles between protesters and the police. Under pressure from trade unions and opposition parties, the Latvian president, Valdis Zatlers, threatened to call an election. A few years of economic growth, the country of 2.2 million people now suffers disastrous hikes in joblessness, unemployment and deepening recession. The Lativian government was forced by the economic crisis to turn to the IMF, last year, for a bailout. Many state employees have not received wages in recent weeks, while VAT and excise duties increased.
The deepening economic crisis, which is resulting in social catastrophe for millions of people, is the root cause of the instability and street clashes. Following ‘boom’ years, the economies of the region are expected to fall by 5% in 2009, with inflation reaching 13%. And social tensions and protests are spreading rapidly; Romania, which joined the EU along with Bulgaria, in 2007, is expected to soon also suffer ‘public order’ breakdowns. Even Estonia, whose government has more cash reserves than most of its neighbours, suffered a 3.5% contraction in the economy, in the last quarter of 2008. Support for Prime Minister Andrus Ansip is falling fast.
“Ill-equipped” Eastern European economies
The eastern European countries are “ill-equipped” to deal with the impact of the global downturn and risked "social meltdown", according to Dr Jonathan Eyal from the Royal United Services Institute in London. "These are often fragile economies … with brittle political structures, political parties that are not very well formed and weak institutions. They are ill-prepared for what has hit them…Last year it was the core western European countries which were shaky; now it is the weaker periphery that are getting the full blast of the crisis."
The Romanian car maker, Dacia (owned by Renault) halted production in Romania for two months after local demand halved. Now 4,000 car jobs are under threat. Companies like Dacia assured the local population that their “low-cost” (and low waged) plants would be the future for Eastern Europe, replacing manufacturing jobs in Western Europe. But now the greedy bosses want to increase profits by relocating to even lower waged parts of the world. A Japanese wire factory based in Romania recently announced it will relocate production to Morocco.
Not just workers but the emerging middle classes of the region are also taking a battering from the economic downturn. Big sections of the new middle class took out home mortgages in euros but with local currencies collapsing, repayment is becoming impossible for many. Public sector jobs will be cut as governments are axed to deal with falling tax revenues and bigger national debts. Furthermore, falls in currencies mean salaries will be worth less.
Across Eastern Europe, 2009 will see worsening recession, mass job layoffs, higher inflation, home losses and greater poverty. Capitalist restoration will be seen by millions to have been a huge hoax and cruel illusion. After the collapse of the Stalinist regimes in the late 1980s and early 1990s, working people in the region were told they would have to take “bitter medicine” before winning market economy prosperity. This meant ‘shock therapy capitalism’ – the shutting down of much of industry, the collapse of welfare provisions and a giant leap in mass unemployment and poverty. Across the region, the economies of former Stalinist states contracted by at least one third. Life expectancy rates fell dramatically in many countries. (See also ‘World Economy: Russia and Eastern Europe in the 90s – Capitalism kills’, by Clare Doyle, CWI, 20 January 2008, on socialistworld.net).
The region came under the prey of foreign capital and the greedy oligarchs, who looted the national economies through corrupt privatisation programmes. The term ‘gangster capitalism’ summed up the interlinking corrupt governments and obscenely rich oligarchs who controlled the great wealth of the region, while most working people fell into the abyss of great poverty and privations. Big swathes of the population of the region, particularly the young, were forced to emigrate to find work – usually the lowest paid jobs with the worst conditions
The ‘good times’ were meant to be the last several years of economic growth. However, these ‘boom’ years were largely predicated on low wages and draconian workplace conditions. Now even those jobs are drying up.
The entry of many of the region’s countries into the EU was sold as the path to “prosperity and stability”, but now working people and their families are staring in the face of poverty and instability.
Capitalist restoration failed
For decades, triumphant capitalism promised its neo-liberal ideology was the “only path” for the peoples of the former Stalinist states. Today, it is beyond debate that capitalism has failed to ‘deliver the goods’ for the mass of people in Eastern Europe. Attacks on jobs, conditions and on welfare services will inevitably provoke more mass protests.
It is vital that independent unions are built to spearhead workers’ struggles against the cuts and the bosses’ attempts to make the working class pay for the crisis of their system. All job losses, wage cuts and social cuts must be opposed. Bankrupt banks and industries need to be nationalised, under democratic workers’ control and management.
The situation is also catastrophic in Russia. After 9 years of uninterrupted economic growth, official unemployment (always an underestimate) hit 5% at the end of last year, with 400,000 jobs being lost in November, alone. In the same month, industrial production fell 10 %, compared to November 2007. The Russian stock market plummeted by three-quarters since summer 2008.
The Russian economy is hugely damaged by the collapse in the oil price, from $147 in mid-July 2008, to $35-40 by the end of 2008. The rouble will probably continue to fall, to 35 or 40 to the dollar over the next six months, which will eat into Russian’s living standards.
Even the notorious oligarchs are facing straitened circumstances. According to Forbes magazine, Oleg Deripaska, formerly Russia’s richest man, with a supposed fortune of $28 billion, is facing the possible collapse of his business empire. His estimated debts were $14 billion, according to the Wall Street Journal, in December 2008,
Such is the depth of the crisis, the Putin regime organised a massive $200 billion-plus bailout for the banks and favoured oligarchs.
For a while, Russia’s economy appeared to avoid the worst of the world economic crisis, compared to Western Europe and the US. Now entire towns and cities, often dominated by one major employer, such as the steel industry, are reduced to 3 or 4 day ‘working weeks’ and workers are sent on 1 or 2 month unpaid "holidays". In other parts of Russia, wages are slashed by up to 50%-60%.
Protests are growing in cities across Russia and can emulate recent events in Eastern Europe. “Russia is preparing for a replay of the same scenario that played out in Riga,” commented Pavel Sirovs from the Latvian newspaper ‘Diena’. Important industrial struggles broke out over the last few months in Russia, including in the car-making sector, which, in some cases, saw concessions won from the bosses. Opposition is even growing amongst social layers that Putin previously rested on. ‘Car protests’ took place last year in Russia’s ‘far east’ and elsewhere, over the jump in import duties for foreign-made cars. In Vladivostok city, protesters held up signs reading: "Mr. Putin, aren’t you patriotic? Why don’t you buy a Lada – instead you get driven around in a BMW." In response, Putin sent the feared OMON riot police from Moscow (4,000 miles away) to the region to quell protests.
Amongst the ‘political class’ in Moscow, rumours are rife that Putin will seek to have President Medvedev resign this year, making his ‘ally’ take the blame for the economic crisis.
Clearly Putin’s so-called unspoken ‘social contract’ with the Russian people – promising rising living standards in return for the ‘stability’ of his authoritarian regime and limits on democratic rights – will become unstuck as economic crisis leads to social deterioration.
Far-right danger
As well as fighting on the industrial front, working people in Russia and Eastern Europe will come to conclude they need political parties that represent their class interests, in opposition to the various stripes of pro-capitalist parties that dominated the political scene for over two decades. This entails building new workers’ parties, with a socialist programme, which will take on the corrupt parties of the oligarchs and of capitalism. These new parties must fight for genuine socialism, which has nothing in common with the one-party, bureaucratic Stalinist regimes that ruled in the former Soviet Union and Eastern Europe. The planned economy under these regimes initially saw significant improvements in living standards and social welfare but dead-hand parasitic bureaucratic control and domination, and the lack of real workers’ democracy and control of society, eventually led to economic stagnation and collapse. Real socialism means working people democratically controlling and managing the economy, for the benefit of the majority.
In the absence of a clear socialist alternative to the gathering economic and social storm, the far right, and reactionary, populist nationalism can make headway, particularly amongst the legions of disillusioned and demoralised unemployed youth. Last year saw violent confrontations in the Czech Republic between supporters of the misnamed ‘Workers’ Party’, a far-right organisation, and the police, when several hundred supporters tried to march into a mainly Roma area. This incident should serve as a stark warning to the working class of the region; the far right and also the ‘mainstream’ pro-capitalist politicians will attempt to scapegoat minorities and immigrants for the consequences of the market economy and two decades of unbridled neo-liberalism.
The workers’ movement throughout the region must reject the poison of racism and xenophobia and organise united workers’ resistance to social cuts and attacks on jobs. The real enemy is the capitalist system and its political representatives that have brought social catastrophe to the peoples of Eastern Europe and the former Soviet Union. This is the enemy that needs to be brought down and replaced with a rational, humane society – a socialist society.
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