One-Track Bind

By now you have heard that history did not end in 1989, yet for nearly a quarter of a century there were plenty of people who behaved as if it had. Whether it be the expansion of NATO, the European Union, multinational corporations, global trade, or the integration of technology in our daily lives, there was something of an inevitable feel to many of the trends that followed the collapse of Communism in Central and Eastern Europe. Some of these phenomena came off with relative success, but to varying degrees each of them—and the means by which they were carried out—contributed to the feelings of alienation that now sees voters looking to reject anything that resembles the status quo.

When Republicans and Democrats, Labour and the Tories, Christian and Social Democrats, all agree—as they did for decades until recently—that taxes and spending should drop, unions should weaken, and banking be deregulated, the choice at the ballot box really does mean less. Just as a monopoly on a particular consumer good is a recipe for unsatisfied customers, the lack of competition in ideas breeds complacency. There are sensible cases to be made for many of the post-89 economic policies, but their application everywhere, in perpetuity, and sans debate gives rise to the tangible feeling that citizens are no longer part of the public policy process. In many cases that appears intentional, with governing elites feeling little need to make their case to the public.

“One might ask whether in the current situation there is any possibility of gaining broad acceptance at all — but one cannot simply assume that the majority of the population would have understood the sense and consequences of [reformist Deputy Prime Minister Leszek] Balcerowicz’s policies in the first place,” the Polish intellectual Adam Michnik wrote in a November 1992 editorial arguing that market-friendly changes be carried out with or without public acquiescence.

Not only does the very title of Philip Ther’s Europe since 1989: A History belie Francis Fukuyama’s now recanted assertion that linear human progress— and thus history—concluded with liberal democracies with market economies, but Ther sets about demonstrating how damaging the ideologically charged hyperbole, and the real world policies based on it, has turned out to be. Though nominally a work of history, Ther casts a skeptical eye— as well as placing heightened emphasis—on post-1989 economic trends. “[B] lind belief in the market as an adjudicator in almost all human affairs, irrational reliance on rationality of market participants, disdain for the state as expressed in the myth of ‘big government’… have had grave side effects,” he writes.

With aftershocks of the 2008 financial crisis still reverberating, onesize- fits-all reforms implemented in the post-communist world (and later in Western Europe too) now look less benevolent. Ther’s analysis gains strength from the benefits of hindsight and early on in this new English edition of a 2014 German-language book, he pays tribute to the late Tony Judt, noting this volume could serve as a postscript to Judt’s Postwar, which concludes in a pre-crisis 2005. Like Judt, a committed social democrat, Ther probes the economic dogma that set-in during the immediate post-communist period. However, the added years and increased data mean his dissection of neoliberalism comes across as less political and more empirical.

If today’s hostile political climate is partially explained as a backlash against the neoliberal era, it remains curious why this angst did not more clearly manifest itself in the intellectual and policy circles earlier. Not unlike the recent post-Trump epiphany of American media, which realized they had done a poor job of documenting the concerns of people beyond the coasts, this has a lot to do with who sets the narrative. In the Central and Eastern European context, many of the experts and analysts writing about the success of reforms in post-communist Europe in the 1990s were simultaneously working as the advisers on those same reforms.

In other words, neoliberal reformers were touting the success of neoliberal reforms in a textbook case of confirmation bias (at best) or dishonesty (at worst). Dubbed the “Brygada Mariotta” in Poland for their proclivity for lodging at the Marriott hotel, these globetrotting consultants and their onthe- ground allies made essentially the same recommendations no matter the country: privatize, liberalize, and deregulate. Ther points to the American Jeffrey Sachs as the archetype of this group. Whereby Sachs and company attribute Poland’s years of continued growth—including the distinction as the only EU member not to enter recession after the 2008 financial crisis—to the potency of their shock therapy reforms, there is an equally compelling case that by maintaining a strong hand in certain economic sectors (like coal) the state aided stability. “It could also be explained by the decision to moderate reforms and the (largely continuous) economic policy of the post-communist government that came to power in 1993,” Ther writes.

In a comparative example between the Visegrad states and former Soviet republics, it is the Visegrad states’ higher—not lower— welfare spending that aided structural reforms, Ther notes. “The history of the transformation period also disproves one of the central neoliberal theories: that higher social security spending curbs economic development,” he continues, noting that Central Europe’s elevated spending as compared to the Baltics has translated into increased prosperity, more consistent growth, and an improved ability to weather the 2008 financial crisis.

Even though something close to a standard set of reforms were applied across the board, they have produced varied economic models and results (scholars Dorothee Bohle and Béla Greskovits make a distinction between neoliberal capitalist, embedded neoliberal, and corporatist economies that emerged in the post-communist EU members). Ther fleshes out many of the standard theories for disparate results; be it geography, early 20th century history, or nascent entrepreneurship in the 1980s. Nonetheless, the commonalities are unmistakable. “Every post-communist country in Europe attempted liberalization, deregulation, and privatization, often with unintended consequences and ripple effects,” Ther writes. “The one common outcome in all countries prior to Europe enlargement was growing inequality on a social and spatial level.”

Ther divides Europe’s implementation of neoliberalism into two distinct waves, the first immediately after 1989 and the second starting in the late 1990s. Whereby wave one was driven by organizations like the IMF and World Bank, the second more subtle wave was driven by private think tanks, consultants, and media conglomerates. In an effort to appear more favorable on prestigious global rankings that might help draw foreign direct investment, governments raced to implement investor-friendly policies like flat taxes. Ther’s exposition of this latter era shows how standardized this neoliberal thinking had become by the turn of the millennium. He uses The Economist’s Emerging Market Index as a prime example. “The very title of this weekly column is remarkable, because it equates countries and their populaces with markets,” he writes.

While the first half of the book tracks the implementation of neoliberalism in Europe, the second maps out the consequences. One section analyzes the socio-economic discrepancies between urban and rural populations. In general, big cities and the most geographically westward portions of post-communist countries fared best. Later on, a full chapter compares various cities from the region including Vienna and Berlin. The Visegrad capitals do quite well in comparison. For example, between 2000 and 2005 GDP per capita grew by 38.5 percent in Warsaw, 72 percent in Prague, and 88 percent in Budapest—compared to a 3 percent decline in Berlin.

Indeed Germany generally proves an interesting test case, and even people living in Central Europe tend to forget the tremendous divide that remains between the old East and West Germanys. A study conducted by the Berlin Institute for Population and Development for the 25th anniversary of reunification found that out of Germany’s 20 most prosperous cities just one, Jena, is located in the former DDR. None of the 30 largest German companies listed on domestic stock exchanges are based in the East. Real estate is worth half as much in the old East and salaries are just two-thirds what they are in the old West.

Ther uses the country as his prime example of “cotransformation,” whereby “‘East’ and ‘West’ are not inflexible units and that the states and societies within these wider areas have diversified both in relation to each other and internally.” He argues that this is emblematic of a larger European trend, and though the exposition on Germany is another strength of this book, beyond the occasional anecdote, the analysis of Western Europe is generally thin (though Ther does delve into the struggles of Southern Europe in more recent years). While Ther contends that he is writing a “historiography of neoliberalism” that “moves from East to West,” in fact most of it remains firmly focused on the East with the West serving as something like a controlled variable for gauging the East. In this way, and despite his best efforts, this remains something like a soft Occidentalism. It also means that the book’s title is slightly misleading, as the text does not comprehensively address all of Europe.

That said, Ther’s depth and insights on the topics he does take on are impressive. It is clear the author is passionate about Central and Eastern Europe and the occasional references to his own recollections from travels in the region before, during, and after the collapse of communism give the book added personality. Ther, a professor at the University of Vienna, probably could have included even more of these without detracting from the book’s academic rigor. Though Ther clings to a direct writing style, there are a few places where something like a knowing sarcasm seeps through. “Berlin and Brussels may try to create a national and European identity on the basis of a myth of ‘peaceful revolution,’ but scholarly inquiry must go further,” he writes at one point. It is possible more of this comes across in the native German original, but as a leisurely reader, I would have enjoyed more charismatic flourishes like this.

Ther ends the book trying to spin things forward, a dangerous game for the historian but one that is unavoidable given the breakup of Europe’s post-89 consensus in recent years. Neoliberalism looks to be dead, but there is no general agreement on what comes next, and this leads to a schizophrenic approach. “While the German government is consolidating the welfare state internally, it is prescribing a debilitating austerity policy to Southern Europe,” Ther writes. Greece, Italy, Spain, and Portugal could benefit from a development plan comparable to the structural funds that have flowed into Central and Eastern Europe in recent decades, but there is little political ap- petite for providing such aid. Amid a crisis of political legitimacy and the splintering of mass parties, consolidating public opinion around a new way forward looks complicated. “But before the continent’s future is left to ‘the markets,’ the wealthier countries of Europe should conduct an open political debate about potential consequences,” Ther writes.

It is hard to recall any similar such debate occurring about neoliberalism, making it all the more important now. Though Mr. Michnik may well have been right that the average Pole in 1992 had little desire to learn about the long-term benefits of flexible labor markets or the intricacies of austerity, bypassing that discussion contributed to the rise of the Law and Justice party decades later. Today, it risks undoing the good of political and economic reforms along with the bad.

Such supreme confidence has bred plenty of unintended consequences, or as the American writer Mark Twain once put it: “It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.”