The War Against the Working Class

by Will Podmore

  In Bosnia, a Saudi-US-British alliance fostered Islamism, corruption and crime. Between 1995 and 2000, the US government and the EU gave Bosnia $5 billion, $1 billion of which Bosnia’s leaders simply stole. The Saudis paid for 150 new Wahhabi mosques. In October 2002, the EU Special Representative for Bosnia and Herzegovina, Lord Ashdown, fired Munir Alibabic, head of Bosnian state security, who opposed Islamist extremism. Ashdown backed Islamists against reformers and secularists. In August 2005, the EU Force commander, Major General David Leakey, denied there were any mujehadin in Bosnia, yet in 2006 there were still 1,200. The EU, the US Treasury, the IMF and the World Bank imposed the standard destructive ‘austerity’ package.35 Through privatisation, companies were sold for a few euros and the new owners mostly did nothing with them. By 2013, the unemployment rate was 44.3 per cent and growth was 0.8 per cent.

  The 2009 study by the United Nations Development Program (UNDP), ‘Privatisation of State Capital in Bosnia-Herzegovina’, named corruption and ethnic divisions between Bosniak Muslims, Croats and Serbs, ‘entrenched in their entities’, as the main reasons for Bosnia’s economic disaster. It had even higher youth unemployment than Greece. Like Montenegro, Kosovo and Croatia, Bosnia became ‘a hostage state’, whose rulers let mafia gangs make profits ‘through corruptive transactions with public officials and politicians in power’. The US firm Dynocorp hired US police officers to serve in the UN’s International Police Task Force. For years, this UN body connived at the sex slave trade there.36

  In February 2014, workers at Tuzla demanded an end to privatisation. So did workers in Zenica, Bihac, Mostar and Sarajevo. The EU Representative, Valentin Inzko, threatened EU military intervention if the protests continued.

  Counter-revolutions

  Before the events of 1989-91, not all Eastern Europe’s countries were suffering crises, budget deficits, shortages, debts, inflation and collapses in production. Czechoslovakia, in particular, was stable. Yet its Czech and Slovak leaders, with no popular mandate, still split the country in two.

  The events of 1989-91 are often called ‘revolutions’, but were really counter-revolutions, attacks on the working class. The capitalist classes of Eastern Europe gained; the working classes lost out. The US government and the EU turned Eastern Europe’s countries back into colonies of the West. The ‘newly-independent’ countries became new protectorates, with German employers and US occupiers. Foreign investors cherry-picked the most profitable firms and stripped their assets.

  Wages in Central and Eastern Europe were cut more than in any country during the 1930s Great Depression. In 1990-92, they were cut by 22 per cent in the Czech Republic and by 27 per cent in Slovakia in 1989-93. Hungary’s wages were cut by 20 per cent in 1990-94 and again by 18 per cent in 1995-96. So across the region, poverty increased from around 4 per cent in the late 1980s to 45 per cent in 1993-95.37 Education and R&D budgets were cut; school enrolment rates and literacy rates fell.38 The stress of rising unemployment and poverty caused rising death rates and falling marriage and birth rates.39

  Under Eastern Europe’s countries’ huge privatisation programmes, firms were sold for next to nothing to asset-strippers, speculators and criminal groups who got rich by looting publicly-owned assets.40 Profits were privatised and losses nationalised. It was all too easy to strip national assets and transfer wealth abroad.

  The new governments did not even back their own new domestic capitalist firms, giving most help to foreign companies.41 Banks, foreign and domestic, provided little finance for investment, instead promoting parasitic activities that enriched the few at the expense of the many. The EU’s expansion into Eastern Europe gave West European banks and well-connected insiders windfall profits as they loaded big mortgages onto previously debt-free East European properties. But it was a de facto tax on the mass of the people who had to take on huge mortgages to get housing.42

  As even the European Commission admitted, “corruption, fraud and economic crime are widespread in most candidate countries, leading to a lack of confidence by the citizens and discrediting the reforms.”43 Poland suffered ‘a veritable explosion of economic crime’.44

  After the counter-revolutions, all Eastern Europe’s countries suffered crises, budget deficits, shortages, debts, inflation and collapses in production. In 23 of the 25 countries in Central and Eastern Europe and the former Soviet Union, real GDP in 1999 was still lower than in 1989. The new governments’ policies worsened the slump.45 In Hungary, for example, the ‘structural adjustment’ of 1988-95 destroyed more economic assets than did World War Two - 20 per cent of GDP and 1.5 million jobs. By 2013, 10.5 per cent of Hungarians were unemployed, 14 per cent were below the poverty line and growth was just 0.2 per cent.

  In Poland, Solidarity’s 1987 programme demanded wage cuts, job cuts and welfare cuts. Its 1990 ‘shock therapy’ cut real wages by 30 per cent in just one month. US economist Jeffrey Sachs, the shock therapist-in-chief, urged in 1990, “Western observers should not over dramatise lay-offs and bankruptcies. Poland, like the rest of Eastern Europe, now has too little unemployment, not too much.”46 Poland’s unemployment rose from zero to 16 per cent in 1993-94, 18 per cent in 2002 and 10.3 per cent in 2013. GDP was slashed by 8 per cent. Poland’s poorest people had a life expectancy 15 years lower than the richest. Abortion was made illegal in 1993. A third of health care jobs disappeared between 1995 and 2003. There were 1,553 child care centres in 1989, by 2006 just 371. As American historian David Ost observed, “[W]hen Solidarity won, Polish workers lost.”47 Solidarity’s membership fell from 10 million in the early 1980s to 400,000 in 2013. By 2013, just 2.1 million workers, 8 per cent of the population, were members of a trade union.

  In 1990-92, the Czech Republic’s real GDP fell by 13 per cent and Slovakia’s by 23 per cent.48 Unemployment in Slovakia rose from 39,603 in 1990 to nearly 500,000 in 1999. From 1999 to 2005, there were 9 per cent unemployed in the Czech Republic. In 2012, the Czech economy contracted by 1 per cent and by 0.7 per cent in 2013; 7.1 per cent were unemployed. In Slovakia, growth was just 0.8 per cent in 2013 and 14.4 per cent were unemployed.

  Bulgaria’s GDP fell by a quarter between 1989 and 1994. By 1997, pensions were $2 a month and 90 per cent of people were below the poverty line of $4 a day. In 2013, 11.6 per cent were unemployed.

  Albania’s economy grew by just 0.7 per cent in 2013, but only through ‘buoyant earnings from drug smuggling, arms dealing, money laundering and people trafficking’.49 16.9 per cent were unemployed and 14.3 per cent were below the poverty line. Criminal gangs trafficked Albanian men, women and children for sex. The government cut back its trafficking investigations and punished trafficking’s victims, not its agents. Gangs also increasingly trafficked money, arms, contraband and Afghan opium.

  The GDPs of Georgia, Tajikistan and Moldova in 2008 were just 60 per cent of 1989’s. In 2013, Georgia had 15 per cent unemployed, Tajikistan 2.5 per cent (officially, but, as the CIA noted, the real rate was far higher) and Moldova 5.8 per cent.

  Eastern Europe’s countries depended on vast imports of capital from the West, but when the 2008-09 crash hit, the capital inflows dried up. Between 2007 and 2012, their GDP rose by only 11 per cent in total.

  By the mid-1990s, 40-60 per cent of the peoples of the Baltic states were in poverty. Pensions and savings were slashed. Suicides and murders increased. These states too depended on imports of foreign capital, so in the 2008-09 crash Estonia lost 17 per cent of its GDP, Lithuania 15 per cent and Latvia 20 per cent.

  In June 2009, Latvia’s government cut spending and raised taxes. It cut public sector wages by almost 40 per cent and pensions by 10 per cent, and increased health care fees.50 Unemployment rose to 21.7 per cent in 2010, the highest in the EU. By 2013, it was 12 per cent, even after its population fell by 7.6 per cent between 2007 and 2012.

  In 2013, unemployment was 10.9 per cent in Estonia and 17.5 per cent of the people lived below the poverty line. Growth wa
s just 1.5 per cent.

  Lithuania played an increasingly large part in global money laundering and tax evasion. It became hugely unequal. In 2010, wages were cut by 11.3 per cent and by another 6.7 per cent by late 2011. Unemployment fell from 17.8 per cent in 2010 to 12.4 per cent in 2013, but again, only because of increased emigration. Its population fell by 10.1 per cent between 2007 and 2012.

  In 2013, Latvia’s GDP was still 9 per cent below its pre-crisis peak. Lithuania and Estonia were back to where they were, after suffering huge slumps. Latvia’s cumulated loss between 2008 and 2013 was 89 per cent of the country’s pre-crisis annual output, Lithuania’s was 43 per cent and Estonia’s 39 per cent.

  By 2007, unemployment among Eastern Europe’s young people was 40 per cent. So millions of these new EU citizens voted with their feet and left their countries to find work abroad.51 Two million Poles (one in 20 of the population) emigrated, 700,000-1,000,000 of them to Britain. More than a million Albanians (one in six), 1.9 million Romanians (a tenth) and 750,000 Bulgarians (a tenth) emigrated.

  This huge migration helped to cut the wages of the worst-paid workers wherever they went. For example, immigration led to wage reductions for the worst-paid fifth of British workers.52 A 10 per cent rise in the proportion of immigrants working in semi-skilled and unskilled sectors like care homes, bars and shops, led to a 5.2 per cent pay cut in the sector.53

  But across the region, there were signs of resistance to the EU ‘austerity’ measures: workers went on strike in Slovakia in 1991, Slovenia in 1992 (defeating a wage freeze), Hungary in 1990, when drivers struck successfully against a 65 per cent rise in the price of petrol, and in Latvia and Romania in 1999. In Slovenia, trade unions were still well organised and relatively strong. In 2005, they organised the largest trade union public protest in Slovenia’s history against the government’s proposed flat tax rate. In 2010, Hungary’s government refused to enforce the cuts in wages, pensions and public spending demanded by the IMF.

  In Poland in 1990, transport workers and miners went on strike; in 1991, workers in industry, education and agriculture struck. On 13 January 1992, Solidarity declared its first strike against the government: a one-hour strike against a proposal to raise energy prices. Another, two-hour, strike took place on 14 December. In 1992-93, the number of strikes rose to some thousands a year, many in education, as teachers demanded higher pay and more funding for education. In 2013, steelworkers and rail, mine and health workers in Silesia struck for better job security, higher pensions and better health care.

  Across Eastern Europe’s countries, most people rejected the capitalist counter-revolution. The American magazine USA Today wrote in 1999, “When the Berlin Wall crumbled, East Germans imagined a life of freedom where consumer goods were abundant and hardships would fade. Ten years later, a remarkable 51% say they were happier with communism.” In 2010, 72 per cent of Hungarians said they were worse off than before the counter-revolution. A 2013 CBOS poll found that just 33.4 per cent of Poles thought that the free market was better than a planned economy; 85 per cent thought that the government should provide jobs and 85 per cent expected free health care.

  The Belarus exception

  After the collapse of the Soviet Union, Belarus suffered greatly. In 1989-93, GDP was down by 14 per cent and real wages by 85 per cent. Between 1991 and 1994, $15 billion fled the country.

  But then Belarus chose a different route. In July 1994, 80 per cent of the people voted for Alexander Lukashenko to become President. The new government at once rejected IMF policies. President Lukashenko said, “First of all, we need to support our domestic manufacturers.” 80 per cent of industry stayed state-owned. Collective farms produced food for the people.

  Belarus largely avoided the crisis that hit the other former Soviet states. Entry and exit were relatively simple, but there was no mass exodus to its free market neighbours. In 2001, more people moved into it than left, unlike every other East European state.

  In 2004, the World Bank reported, “overall health expenditures are progressive, in the sense that the poor benefit relatively more than the better off. … Pensions are found to be the most adequate benefit, in part as a result of the policy of indexing pensions to real wages. Child allowances are also found to provide adequate protection. … Belarus can be justly proud of the elaborate system of social services it provides to its population. The ability of households to access quality education, health and social protection services makes a large difference to their living standards in the present, and their prospects for the future.” It summed up, “The poverty reduction and inequality performance of Belarus is impressive.”54

  GDP in 2008 was 160 per cent of 1989’s. In 2013, the economy grew by 2.1 per cent, poverty was below 2 per cent and just 1 per cent were unemployed. State pensions from the Soviet era were still paid on time. It was the most equal country in the world: the highest income was only five times the lowest. It had free education and health care. Male life expectancy in 2011 had risen to 65.6 years, female to 77.4. Its adult literacy rate was 99.7 per cent, according to the UN.

  These policies proved popular. Lukashenko held and won referendums in 1995 and 1996. He won presidential elections in 2001 with 78 per cent of the votes, 2006 with 82 per cent and 2010 with 79.65 per cent. The country also held parliamentary elections in 1995, 2000, 2004, 2008 and 2012 and local elections in 1995, 1999, 2003, 2007 and 2010.

  In the 2001 election, Gerard Stoudmann, the head of the Office for Democratic Institutions and Human Rights, of the Organization for Security and Co-operation in Europe [OSCE], said there was ‘no evidence of manipulation or fraud of the result’. The Association of Central and Eastern European Election Officials confirmed that the election had been ‘free and open in compliance with universal democratic institutions’.55

  In response to Belarus’ achievements, the NATO powers treated Belarus as an enemy. In 1995, the IMF suspended loans, on the grounds that Belarus subsidised its agriculture – as did the USA. President Lukashenko expelled the IMF commission, calling them ‘swindlers’. The US government accused Belarus of sex trade trafficking, but, as the International Office for Migration pointed out, “Belarus has been globally recognised as one of the world’s most resolute fighters against the slave trade.”56 US Senator John McCain said absurdly, “September 11th opened our eyes to the status of Belarus as a national security threat.”

  The USA passed the Belarus Democracy Act in 2004 demanding that Belarus introduce democracy - when Belarus had 18 registered political parties. The Act claimed that Belarus harassed its Jewish community, though Belarus’ chief rabbi said that he had ‘no qualms with any aspect of Lukashenko’s rule’ and the USA-based National Conference of Soviet Jewry noted that ‘long suppressed Jewish life has rebounded and is flourishing’.57 When Belarus’ government closed down two newspapers that regularly printed anti-Semitic articles, the US government accused it of stifling independent media - Belarus had 555 independent newspapers. In 2004, Belarus banned the White Legion, a fascist, terrorist group - the US government accused the government of infringing their human rights.

  At the 2004 meeting of the UN Commission on Human Rights Belarus and Russia tabled a resolution warning of the ‘resurgence and spread of neo-Nazism, neo-fascism and aggressive nationalism’. The majority backed it, but the US government and the EU member states voted against. In 2004, the US government called Belarus an ‘outpost of tyranny’. In 2006, President Bush ordered sanctions against the country and tried to isolate it. The Polish government called on the USA to bomb it.

  A 2006 poll paid for by the US Republican party found that the ratings of Alexander Milinkevich and other opposition leaders were in single figures.58 In 2006, the US government wasted $14.2 million on backing the opposition, in 2007, $27 million and in 2008, another $27 million.

  Ukraine: counter-revolution and war

  After the Soviet Union dissolved, Ukraine suffered a sharp
decline. Its governments cut wages and services. By 1999, wages were less than half 1989’s level. GDP in 1999 was 60 per cent below the 1989 level. In 2008, it was still 30 per cent below. Its governments built monuments to Stepan Bandera, the OUN leader, who joined the Nazi invasion of the Soviet Union. President Viktor Yushchenko declared Bandera and fellow Nazi Roman Shukhevych ‘heroes of the Ukraine’.

  The 2004 ‘Orange Revolution’ in Ukraine divided much of its economy from Russia, causing yet more decline. In 2009, GDP fell another 15 per cent, wages were cut by 10.9 per cent and unemployment rose to 9.6 per cent. The birth rate was very low and the death rate high. Government-backed persecution of Russians and Jews cut the number of ethnic Russians living in Ukraine from 11.4 million in 1991 to 8.3 million in 2001 and the number of Jews from 486,326 to 103,600.59 The population fell from 52.2 million in 1994 to 45.5 million in 2009.

  In 2009, it was estimated that 35 per cent of the people lived below the poverty line, while the fifty richest owned almost half the wealth. In 2010, the IMF demanded public spending cuts and a 50 per cent rise in gas prices. Most of the IMF $15 billion package of 2014 went straight out to Western banks to pay off loans.

  NATO wanted to seize control of Ukraine, to complete the hostile line of armed nations to Russia’s west, even though neutrality was part of Ukraine’s constitution.60 In April 2008, NATO stated that both Ukraine and Georgia ‘will become members of NATO’. The US government spent more than five billion dollars funding at least 65 pro-NATO, pro-EU NGOs in Ukraine, as Victoria Nuland, the US Assistant Secretary of State for European Affairs, admitted. In May 2008, the EU unveiled its Eastern Partnership initiative, to integrate countries like Ukraine and Georgia into the EU.