Part 4 - Lost in Transition: Slamming the Door on History
Before the Berlin Wall fell, Lech Walesa became a labor hero in Poland and the West by defying the Moscow-controlled government and getting away with it. Solidarnosc (Solidarity) spread from its Gdansk roots to the country’s mines, shipyards and factories and within a year had 10 million members. They won the right to bargain but wanted more. They aspired to take over the state and institute their own alternative economic and political program. It’s radical centerpiece was to transform huge state-run companies into worker-run cooperatives so Solidarity members could be empowered in their own “socialized enterprise.”
Walesa objected, lost the debate, and he feared what then happened. The Jaruzelski government declared martial law, sent tanks to the streets and rounded up thousands of Solidarity members. By the late 80s, the crackdown subsided, the economy was in free fall, workers again struck and Mikhail Gorbachev’s reformist government was in power in Moscow. Solidarity was legalized, a Citizens’ Committee Solidarity wing was formed, its members stood in snap elections and won effective control of the government capturing 260 parliamentary seats.
It should have been the best of times, but with the economy in trouble, Poland needed aid including debt relief. With Chicago School alumni running IMF, none was offered except under Washington Consensus rules, take it or leave it. Enter Jeffrey Sach, the shock doc, with an even harsher plan than imposed on Bolivia. It included an immediate end to price controls, slashing subsidies, and privatizing mines, shipyards and factories. It short, it ran directly counter to Solidarity’s aim for worker-run industry.
Sachs promised Solidarity Poland could become like France or Germany under his plan. By swallowing shock therapy medicine first, taking the pain, the patient would end up cured and healthy - if he was right. After debate, the verdict was in and the treatment bought with predictable results. Sachs promised “momentary dislocations” but delivered a full-blown depression. Industrial production plummeted 30 percent after two years of “reforms.” Unemployment skyrocketed, and in 1993 hit 25 percent in some areas. It’s still chronic today with recent World Bank figures pegging it at around 20 percent, the highest in the European Union. For young people, it’s even worse with 40 percent of workers under 24 unemployed.
Most alarming is the number of people in poverty. From a 15 percent level in 1989, it rose to a startling 59 percent in 2003. Incredibly, the country, like Chile, is still cited as a free market reform model. It’s pure myth, angry Poles know it, but reports in the West ignore them as they do shocked victims everywhere.
They didn’t ignore “the shock of Tiananmen Square,” but didn’t report it accurately either. In the early 1980s, Deng Xiaoping was transforming his country economically while keeping rigid political control including iron-fisted repression when needed. Democracy was nowhere in sight nor is it now. While many of Deng’s reforms were successful and popular, others in the late 80s weren’t, and it provoked deep anger in the cities by people most affected. Price controls were lifted, corruption and nepotism was rampant, freedom minimal, job security eliminated, unemployment soared, and deep inequalities grew between “winners and losers in the new China.”
It came to a head with mass protests in 1989 in Tiananmen Square that Western reports characterized as a clash between old-guard Communist authoritarians and idealistic students wanting western-style democracy. It was pure propaganda. The protests were massive and threatened the government, but democracy wasn’t the issue. It was popular discontent from wrenching economic change raising prices, lowering wages, and causing “a crisis of layoffs and unemployment.” Protesters weren’t against economic reform. They were against the Chicago School version of it, but their efforts were costly.
Deng declared martial law May 20, tanks rolled in the square, indiscriminate shooting took place, and when it ended thousands were dead, many more thousands injured, and still more thousands hunted down, arrested, jailed, some tortured, and hundreds likely executed. Shock therapy rolled in China as in Chile - through the barrel of a gun and raw state terror. Following the crackdown, China opened to foreign investment, joined the WTO, and turned the country into the world’s largest low wage sweatshop for Wal-Mart’s “Always Low Prices.”
For foreign investors and party apparatchiks, it was a win-win arrangement with Klein citing a 2006 study showing 90 percent of China’s billionaires to be Communist Party officials. About 2900 “party scions” (called “the princelings”) control $260 billion, and Klein notes the “stark similarity between (China’s authoritarian rule) and Chicago School capitalism - a shared willingness to disappear opponents, blank the slate of all resistance and begin anew” using shock and fear to transform countries into free market paradises for the privileged.
