What point has the economic crisis reached? Crisis and class struggle in the Eastern Bloc

Recession, inflation, debt, growing poverty for the working class: in the Eastern bloc, as in the West, the crisis is getting worse. The old Stalinist and Trotskyist refrain about the "socialism" of some or all of the Eastern bloc countries is collapsing in the face of reality. Given the relative under-development of its economy, not only is the crisis particularly harsh in the Eastern bloc, the development of the class struggle clearly reveals the bourgeois and anti-working class nature of its regimes. Their social and economic crisis demonstrates that they are an integral part of world capitalism.

In the previous issue of the ICC's International Review (no.49), our regular column on the economic crisis dealt with Russia; in this issue, we continue our survey of the Eastern bloc, to deal with the other members of COMECON[1].

The economic weakness of the Eastern Bloc

After Russia, the six East European countries (East Germany, Poland, Czechoslovakia, Hungary, Bulgaria and Romania) are economically the most powerful countries in the bloc. This gives an idea of its profound weakness in relation to its Western rival: the six East European countries' combined GNP ($507 billion. in 1984) is hardly greater than that of France ($496 billion), and considerably less than West Germany's $616 billion.

	GNP ($ billions)	GNP/inhabitant ($)
East Germany	145	8680
Poland	160	4370
Czechoslovakia	100	6485
Hungary	20	1902
Bulgaria	43	4790
Romania	39	1750
USSR	500	5500

COMECON's total GNP (including Vietnam and Cuba) amounts to $2020 billion, which is slim indeed compared with the rival economic alliance regrouped in the OECD, which totals $8193.4 billion -- 4 times greater. In 1984, the GNP of the EEC alone amounted to $2364 billion, well above that of all COMECON put together.

Moreover, these figures should not be taken literally, since, as certain studies have shown[2], they are, for propaganda purposes and due to different accounting methods, over-estimated by 25% - 30%, with the exception of Hungary, which belongs to the IMF and voluntarily understates its estimations by 50%, in order to gain access to the credits reserved for poor countries!

The Eastern bloc is thus certainly not ready to confront its Western rival on the economic level. For the USSR, the only way to maintain the independence and unity of its own imperialist bloc is by a draconian subjection of its entire economic potential to the demands of its war economy. Arms production, necessary to the strengthening of its military potential, is the only level at which it can compete with, and confront, the power of the opposing bloc. Ever since the end of World War II, the advance of the Russian army and the Yalta agreements have sealed the submission of the East European nations to the demands of Russian imperialism, and this is the reality that fundamentally determines their economic situation.

The East European countries have paid dearly their integration into the Russian bloc, in terms of their own development. Their real situation is very different from what the over­blown statistics churned out for decades by Stalinist economists would have us believe.

The dismantling, immediately after the war, of the most competitive factories in order to export their machinery to Russia, the 180 degree reorientation eastwards of all the traditional lines of communication and commercial circuits, forced "collectivization", systematic pillage, and the imposition of an international division of production within the bloc following the demands of Russia's war economy, all weigh heavily on East European countries' real growth rates. Czechoslovakia is a good case in point: in 1963, while agricultural production was still below that of 1938, its industrial decline was even clearer, in a country renowned before World War II for the quality of its products. In 1980, a Czech institute carried out a survey of 196 supposedly "top-quality" products destined for export; 113 were unsaleable in the West, being below required quality standards. The Russian leaders themselves have protested officially at the poor quality of imported Czech goods.

Eastern Europe's industry is growing on the basis of the declining quality of its products, and increasing technological backwardness, which means that most of its commodities are considered outdated by international commercial standards, and thus cannot be sold on the world market outside COMECON. Eastern Europe's technological backwardness appears, not only in the obsolescence of the productive apparatus (outdated machine tools, high manning levels to compensate for inadequate automation), and what it produces, but also in the waste of the energy required by this production:

	Energy consumption (*)	Energy consumption per unit of GNP
East Germany	86	0.61
Poland	114	0.71
Czechoslovakia	69	0.69
Hungary	28	1.35
Bulgaria	37	0.90
Romania	70	1.57
(*) in millions of tons of oil-equivalent

If we examine the energy necessary to produce one unit of GNP, the most efficient country of Eastern Europe is hardly at the level of Portugal (0.60), behind Greece (0.54), and far behind West Germany (0.38) or France (0.36). And here again, we should examine these figures in the light of what we have said above concerning the estimation of GNP, in other words increase them by 25% - 30%. This expresses perfectly the intolerable industrial backwardness accumulated by the Eastern countries in relation to their West European rivals during decades of post-war "growth". Since World War II, the Eastern bloc countries have developed in a situation of permanent crisis.

The convulsions of capital in crisis, and the reactions of the working class

Since the end of the 1960's, the crisis in the Eastern bloc has taken on less "dynamic" and spectacular forms than in the West, which is the epicenter of the crisis of generalized over­production. During the 70's, the crisis on Eastern Europe has been marked by an overall slowdown in growth, and for the weaker countries (Poland, Romania), by a growth in debt aimed at modernizing an economy still characterized by a large and backward agricultural sector. The crisis' acceleration in the 1980's had serious consequences for all the Eastern bloc countries: declining East-West trade, sources of credit drying up, falling prices for raw materials, the collapse of the "Third World" market, aggravated competition on the world market and the intensification of the arms race, all threaten to strangle COMECON's economy.

The bourgeoisie's attacks on the working class already precarious living conditions are increasing daily. Discontent is growing, and the echo of the workers' struggles is beginning to pierce the wall of silence imposed by the Stalinist bourgeoisie.

Romania

After being forced to interrupt its payments in 1981, Romania has accelerated the repayment of its foreign debt, which has fallen from $9.9 billion in 1981, to $6.5 billion in 1985. This result has been achieved at the cost of brutal rationing and a violent increase in exploitation imposed on the whole population.

In two years (1984-85), household electricity consumption has been halved, heating in homes and offices is limited to 12 degrees centigrade; light bulbs of more than 15 watts are banned, TV programs have been reduced to 2 hours per day. The list of bureaucratic measures imposed by police terror is endless: private cars forbidden in Bucharest to save petrol, drastic rationing of food to save imports and increase exports; faced with a housing crisis in late 1986, Ceausescu "requested" the old-age pensioners of Bucharest to move to the country; confronted with popular resistance, he announced during the summer that "certain categories" of pensioners would be refused medical treatment if they did not.

Although carefully hidden by the bourgeoisie, the death-rate is increasing and famine spreading. In December 1985, starving peasants in Banat tried to seize the grain silos, revealing the deep-seated discontent of the population. The workers are subjected to a violent exploitation: abolition of the guaranteed wage in September 1983, obligation decreed in June 1985 for those who do not "give" a day's labor to the state, to pay the equivalent in cash. Industrial "accidents" have increased in the mines, while the huge Volga canal project has cost hundreds of workers' lives.

Working class discontent has broken out in the months-long strikes in the coal mines and the petrochemical industry during 1983-84. After a bloody repression, the militarization of labor was decreed for these sectors; a measure which has since been extended, in October 1985, to power station workers. Scattered strikes broke out in November 1986 in several Transylvanian towns against the new wage system. In early 1987, leaflets were circulating in Bucharest calling for a general strike to overthrow Ceausescu.

Poland

The Polish economy is plunging into the abyss. The national income fell by 30% between 1978 and 1982; it is still officially 10% below the 1979 level. The positive growth rates announced since 1983 should be treated with caution: in 1983, for example, the growth rate was officially announced at 5.9%, but estimated by the OECD at only 0.7%. The Polish economy is in the midst of recession.

The 25% fall in the price of coal in 1986 (Poland is the world's third largest exporter) and the irradiation of the harvest by the Chernobyl disaster have seriously affected exports to the West, which had already fallen by 3.8% in 1985. Despite successive devaluations of the zloty (the national currency was devalued by more than 30% during 1984-85) to increase export competitivity, and a drastic decline in imports, the resulting trade surplus was not even enough to pay off the interest on the national debt, which itself is growing in leaps and bounds: from $29.5 billion in 1985 to $33.4 billion in 1986, and well on the way to $35 billion in 1987.

Inflation is raging, and price increases come in quick succession: in March 1986, staple food prices rose by 8%, public transport by 66%; on 7th April 1986 gas and electricity rose by 30%; in August, meat prices increased 8%. Between 1982 and 1986, the price of bread has risen from 3 to 28 zlotys.

In the same way, wages have come under attack with the "new company autonomy" reform. Weekend work, abolished by the 1980 Gdansk agreements, has been reintroduced for "vital" sectors like the mining industry.

Faced with growing discontent, the Jaruzelski government has adopted Gorbachev's orientations: successive amnesties have followed repression, the bourgeoisie is trying to present a more "liberal" image, Solidarnosc is tolerated; but all this is only to make the attacks on the working class "acceptable".

Bulgaria

Bulgaria is also hit by recession. Whereas the official estimates of growth in GNP were 4% in 1982 and 3% in 1983, the OECD places them at -0.7% and +0.2% respectively. In 1985, farm output fell 10% and electricity 7%, instead the forecast 4.1% rise. The growth rate has been officially revised downwards: 1.8%, the lowest level since the war. Prices are rising faster: in September 1985, household electricity costs rose by 41%, petrol by 35%....

To save electricity, power cuts are common, and rationing has been imposed: for collectively heated households, electricity consumption has been limited to 350 kw hours per month, to 1100 kw hours for the others; shops shut two hours earlier, lighting is limited to 60 watts in the sitting room and 45 watts in other rooms. In cases of disobedience, electricity is cut off.

To divert the rising discontent onto the question of national minorities, the bourgeoisie has savagely repressed the Turkish minority to make it a scapegoat, and strengthen nationalism. The black-out has been broken by the yet to be confirmed echo of strikes during the winter of 1986-87.

Hungary

Hungary, Eastern Europe's "liberal" showpiece, is also sinking faster and faster into the crisis. The official growth rate of 0.3% in 1983 rose to 2.8% in 1984, only to fall back to -0,6% in 1985; it will probably remain below 1% in 1986.

In 1986, exports to the West stagnated, and the outlook for 1987 is poor. Hungary is essentially an exporter of farm produce; this year's harvest has been rendered unsaleable in the West by the fallout from Chernobyl, while Spain's entry into the Common Market has diminished its main western market.

The official rate of inflation is 7%, Price rises come pell-mell; in 1985, public transport rose by 100%, postal tariffs by 85%, and the tendency accelerated in 1986, constantly eating away at workers' and pensioners' living standards.

The attack on working class living conditions is getting worse: in December the council of ministers decreed a freeze on basic wages, new criteria of quality and productivity control were imposed which had the effect of reducing workers' wages. Workers can maintain their living conditions only by taking two jobs and doubling their working hours.

The relatively well-to-do    model is an exception in Eastern Europe that has now reached its limits, a chimera base on a level of debt per inhabitant higher even than Poland. The attack on the working class can only continue to intensify, which will aggravate the population's growing discontent. The miners' strikes in the Tababanya region reveal the tendency of the working class in Hungary to take up once again the road of class struggle.

Czechoslovakia and East Germany

Czechoslovakia and East Germany, the two most developed East European countries, and those which have stood up best to the crisis' devastating effects. However, the signs of the crisis shaking them are increasingly clear: growth is stagnating and a recession is on the way. For the Deutsche Democratische Republik, official figures put growth, at 2.5% in 1982 and 4.4% in 1983: according to the OECD, these should be 0.02% and 0.8% respectively. The official rate of 4.8% for 1985 is equally largely over-estimated. Similarly, the official figures for Czechoslovakia of 0% in 1982 and 1.5% in 1983 (the latter revised downwards to 0.1% by the OECD) show that this country, weaker than the DDR, has already entered the recession.

Although up to now, both countries have relatively successfully defended their exports on the world market, their future is hardly a bright one, given the perspective of a decline in the West European market, itself hit by the crisis, and which remains the main destination for their exports to the West. Czechoslovakia, whose manufactured products are increasingly outdated and difficult to export, has only managed to maintain its balance of trade by selling more and more semi-finished products, of lesser added value.

The DDR's increasing debt ($13 billion in 1985) towards the West, and Czechoslovakia's towards Russia (15 billion crowns) weighs heavily on both countries, and to balance their accounts they can only increase their attacks on working class living conditions.

Living standards in the DDR and Czechoslovakia are the highest in Eastern Europe; in 1984, their GNP's per inhabitant were respectively $8680 and $6485, comparable to those of Austria ($8685) or Italy ($6190). This "privileged" situation, in terms of material well-being, within Eastern Europe, coupled with a tight police and military control, has up to now made it possible to maintain a certain social calm.

However, this situation is only relative:

-- a true comparison with Western living standards would reduce the figures for GNP by 25% -30%. Moreover, GNP measures production, but not consumption, nor does it take account of the high cost and poor quality of consumer goods, nor of the wretchedness of existence in a police state, that does not appear in any index. Every day 150 East Germans cross clandestinely to the West, which means that every year 50,000 East Germans flee the "highest" living standards in Eastern Europe;

-- the perspective is one of economic decline, not only for Czechoslovakia, but also for East Germany which has proved more resistant up to now. The attacks on the working class will increase. The last party congress in the DDR announced 1 million redundancies. Given the chronic shortage of manpower, and obligatory re-employment, this will not create unemployment but it will make it possible to force workers to accept lower-paid jobs. Here again, double-working, the accumulation of jobs, is the only way for workers to maintain their living standards. Discontent is growing, and even if for the moment it remains mystified in the forms of democratic and religious "opposition" campaigns, it is a sign of class struggles to come.

Like the rest of world capitalism, Eastern Europe is plunging inexorably into the crisis. As in Western Europe, attacks on working class living conditions are increasing; living standards are falling to the level of the dark years of the war and immediate post-war period.

Everywhere, discontent is growing. In the East, the echo of the class struggle is getting louder. Although with difficulty, the East European proletariat is beginning to join the international recovery in the class struggle.

This is why the Russian bourgeoisie, with Gorbachev at its head, is trying to impose a fake liberalization - to break, the emerging thrust of the class struggle with democratic, religious, and nationalist mystifications. However, the still recent experience of the repression in Poland is there to remind workers that Gorbachev's version of Stalinist propaganda's "new course" is no less a lie than his predecessors. In Poland, the difficult process of learning from experience is under way, often this takes the form of defensive struggles on the class terrain against Solidarnosc's "political adventures" and its collaboration with Jaruzelski. Today, Walesa is openly contested and criticized. While the working class has suffered a defeat in Poland, its fighting potential remains strong and the repeated experiences of 1970-76-80 are a guarantee of the Polish proletariat's ability to develop its struggles in the future.

The perspective of the development of workers' struggles in Eastern Europe echoing those in the West, will more and more pose the question of proletarian internationalism and workers' solidarity against the world's division into two antagonistic military blocs, especially with the development of struggles in the most developed countries -- Czechoslovakia and above all the DDR -- in direct contact with the great industrial concentrations of Western Europe.

JJ. 9/05/81

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[1] These articles do not deal with the historic roots of Russian capitalism and its history, which determine the Russian bloc's present characteristics and specificities; we refer our readers to previous texts published by the ICC, in particular the pamphlet on the "Decadence of Capitalism", and the articles on "The Crisis in the Eastern Bloc" (International Review no. 23)

[2] "The Soviet Union and Eastern Europe in the World Economy", P. Marer.