Eastern Europe’s Market System and the Changes of 1989

  • Print

After 1989, when the Communist world began to crumble, the old neo-Stalinist economic system of Eastern Europe was subjected to reforms. The quality of economic reform varied from country to country as the rule of law was unevenly established throughout. While it is true that many economies of Eastern Europe moved away from all-pervasive government controls, most East European market economies have remained in the hands of former apparatchiks, criminal mafias and “former” secret police officials. Thus, economic freedom did not take hold throughout the region.

Why were the market reforms in Eastern Europe disappointing on so many levels? “It is not what people think,” says filmmaker Robert Buchar, who has released his long-awaited documentary The Collapse of Communism: The Untold Story. I spoke with Buchar [click here for audio version] about his documentary to ask what he learned from interviewing key participants in the events of 1989, including CIA director Robert Gates. One of the more interesting tidbits came from Buchar’s attempt to interview one of the top Czechoslovak Communist Party leaders in 1989, Rudolf Hegenbart, who refused to say anything on the record. “Havel’s people warned me not to speak, or I would end up at the bottom of the lake,” Hegenbart told Buchar. Afterward, Buchar sent Hegenbart a copy of his book (based on the documentary) which shows how the changes in Eastern Europe were deceptive and misunderstood, especially in the West. “Yeah, you are right pretty much in everything that is in that book. We were taught all of this in Moscow when we were studying there,” Hegenbart admitted.

Buchar was born in communist Czechoslovakia and currently teaches at Columbia College in Chicago where he is head of the faculty’s cinematography program. “I was from a bourgeois family,” Buchar explained, “as my father was an entrepreneur. He had his own company and employed sixty people.” Of course, entrepreneurs were criminals under the old communist regime and the sons of entrepreneurs were denied opportunity. Buchar went from his home town to Prague where people didn’t know his background. “I got into a school in Prague, and when I moved to Prague my [secret police] file didn’t move with me…. I had no past,” Buchar mused. But his past eventually caught up with him. “Later, around 1972, when the Russians tightened their grip on everything … because I wasn’t in the [Communist] Party I couldn’t work in the media.” When it became impossible for him to work, he found his way to freedom in the West.

Buchar’s documentary presents testimony from former Czech secret police officials who say the events of the Velvet Revolution of 1989 were orchestrated on orders from Moscow. The body of testimony on this subject is large and credible, says Buchar. “Not just … [the] guys that are talking in my film; there are many other people I talked to that refused to talk on record about this … because they fear for their lives…. There are many documents – it is very well documented that it was a prepared plan … to change the regime and the Russians were working on it for decades….”

Buchar interviewed an officer of the secret police who staged a key event in the 89 revolution. “He was just a little piece in the big puzzle,” says Buchar. “He pretty much did what he was told to do…. He was in charge of creating the students’ organization. The objective was to penetrate dissident movements … and organize the demonstration on November 17, 89 which triggered … the revolution. And at the end of this demonstration he played a dead student … killed by riot police. Of course it was a fake.”

The Soviet Union and its satellites may have changed their economic system in a presentational sense, but most of the former Soviet economic space remains under indirect (if not direct) government control. This new form of control relies on financial intermediaries, agent networks and organized crime. Using crony capitalism, together with underworld money-laundering deals, the post-Soviet economic system is spreading everywhere. It may even be colonizing the West’s market system, contaminating the whole.

If the Cold War was a struggle between economic freedom and repression, how can anyone now say the Soviet side lost? “No,” says Buchar, “the West lost tremendously….” As anyone can see, the free market system is not consistently defended in the West. We assume the market is going to triumph, but we don’t have a plan. The other side definitely has a plan. “If you watch my documentary you will see that Robert Gates gives the official CIA version of events,” said Buchar. But this is not the real story, or the whole story. “Vladimir Bukovsky is a pivotal point of my project because he got hold of documentary proof from the Communist Party Soviet Union…. Nobody can deny these documents….”

It is doubtful that Moscow’s plan worked in all the former bloc countries. Today the Czech Republic is rated by the Heritage Foundation 2012 Index of Economic Freedom as “moderately free,” ranking 30th. Of course, this does not reflect the secret levels of control which may operate through mafias and officials connected to the old system. More obviously, some East European countries have remained overtly repressive, like the former Soviet Republics of Belarus, Ukraine, Moldova and Uzbekistan. Others, like Azerbaijan, Moldova, and Russia are rated as “mostly unfree.”

Freedom seems to have prevailed, however, in the Soviet Republics of Estonia (ranking 16th) and Lithuania (rating 23rd), which are considered “mostly free” by the Heritage Foundation Index. These, of course, were among the smallest and least significant of the Soviet republics; and perhaps they were the most sophisticated in making use of the opportunities presented by the fall of the Soviet Union. In the last analysis, however, we must view the collapse of the communist bloc as equivocal. This truth is indisputably brought forth in Buchar’s documentary. And as Buchar warned at the end of my interview with him, “Many people today are wondering what’s going on in the United States and how it happened…. Nobody is really looking at it from this big picture that it’s actually not an internal problem; it’s an external problem. Whatever happened here is not just because of us; but it’s because of other forces pushing things on a global scale.”

CLICK HERE to subscribe to the free weekly Best of Financial Sense Newsletter .

About JR Nyquist