Eastern Europe: The Bitter Fruits of Capitalist Restoration – Czech Republic

By Petr Jindra, Editorial Board of Budoucnost, CWI Affiliated Newspaper in the Czech Republic 

The central European countries of Poland, Hungary, Slovakia and the Czech Republic are portrayed by Western imperialism as a “shop window” of how the market economy is working well and creating growth and prosperity.

The government in the Czech Republic has over the years praised itself for its successful economic policy. The Czech ruling class clearly regards their success as guaranteeing the country first place in the queue to join the European Union and NATO.

The government actually believed its own extremely optimistic propaganda. Therefore the general election result in June 1996 came as a big shock. The optimism of Klaus, the Prime Minister, changed after he saw the first election results where Social Democracy went up from 6 percent in the last elections to 26 percent, just 3 percent behind the ruling ODP. But it was not only the ruling class who were shocked by the election results – even the so-called left wing parties were very surprised. They used the slogan “Vote for us so that the Right Wing does not get a two thirds majority”. A majority of this size would have allowed the right wing to make changes to the constitution. It was the aim of the left parties to get at least one third of seats in Parliament. The elections resulted in the former government party having only 99 seats out of 200 and it is now in a minority. The cynicism of the ruling class! They portray themselves as the best defenders of Czech national interests but when they saw the results of the elections they panicked and started to sell the Czech currency – the crown. Foreign investors who came to the Czech Republic to speculate bought up the millions of crowns being sold on the financial markets. The Czech banks and investors faced a nightmare situation because they saw the possibility of a currency crisis. The Czech crown collapsed not because of foreign capital, but because Czech capitalists sold the crown and bought hard currencies.

Generally these elections represented an important shift in consciousness in society – demonstrating a rejection of the neo-liberal, naked form of capitalist restoration the country has faced since 1989. It also represented a shift to the left in terms of wide sections of society returning to the idea that the state has to provide protection to the most impoverished in society and in support of the welfare state. These processes were not necessarily visible on the surface but represented important changes that had been gathering strength over a period of time. The main illusion in the market was the idea that privatization would open the way to massive foreign investment and to the implementation of new technology. When the CWI’s Czech group produced the first issue of its paper nearly six years ago it was the only political group who explained that privatization was no solution; it would not bring any significant investment which could improve the old economy of the Czech republic. That was met with outright disbelief by everyone, including the more thinking workers.

However, this election represented a massive protest against privatization and its failure to bring new technology, better production techniques and better working conditions. It was a protest which indicated the correctness of the position of Czech socialists six years previously. The Czech ruling class through the ODP had run a relentless propaganda campaign ever since their election to government about the necessity and desirability of economic neo-liberal measures. This was essential to maintaining support for these ideas amongst the Czech working class. One concrete development they used to back this up was the growth in the Czech economy. There was a certain truth in this claim. For the last year and a half there was economic growth of 5 percent and this year it is expected to be 6 percent. But workers have had no share in this growth and they know they have seen nothing from it.

Half of the growth is accounted for the increase in the building trade. However, this property boom is for the super-rich elite in society and the tourist trade. The main areas of building are hotels, reconstruction of houses into office, and villas for rich families. This has happened at the same time when there has been a loss 20 000 flats a year in the Czech Republic which were used by Czech workers. Recent figures show that 55 percent of growth was financed by private consumption. However, this was not spending by the majority of working class people who have seen the real value of their wages falling and the costs of transport and rents increasing. The increase in private consumption was caused by a handful of people who enriched themselves rapidly as a result of their positions in the elite of the old Stalinist society. Sections of more conscious workers understood that the very people they were fighting against in 1989 were profiting from the new capitalist regime.

The discontent of the working class was reflected in the general elections in the vote for the Social Democrats. Workers in effect said: “No more to ‘speculation’ (privatization) which does not bring us anything”… “No more to the reactionary right who accuse us of just drinking and not working hard enough and who say the only trouble with the Czech economy is the Czech workers”.

The Social Democrats and that section of the ruling class (industrial managers and investors) that has turned to Social Democracy used slightly different arguments in these elections than the proponents of naked neo-liberal capitalist policies did before. They exploited the growing feeling against nonsensical privatization and speculation. Their main argument was that a new government should fight for “genuine investment”. Their idea was one of semi-protectionist or state interventionist investment to protect industry.

However, in many ways, this was just propaganda. Within two weeks of the elections Social Democratic economists confirmed that Social Democracy would never nationalize privatized industries or attack new property rights.

An important aspect in determining future political and economic perspectives is the extent to which capitalist restoration has taken place and what is the nature of this restoration. The Czech Republic has probably seen capitalist restoration going furthest out of all other Eastern European countries except in Eastern Germany. For the vast majority of the economy there was legal restoration of capitalism on paper and ownership rights passed over to individuals or firms. But this paper restoration does not represent the practical reality or the difficulties facing capitalist restoration. In many cases investment firms and individual owners do not run the companies on a day-to-day basis.

This is shown by the mergers of some of the investment funds set up to take advantage of privatization where new owners are not prepared even to take over the running of enterprises on a day-to-day basis. For example, the newly-created investment group called ‘Daventry Investment’, which came from a fusion of the American Stratton Investment Company and one of the big Czech investment funds which controls many enterprises but never intervenes in the management of different enterprises. In fact, they have recently announced that they will move their investment to countries like Poland, Russia and other markets.

The ruling class and sections of manufacturing industrial capitalists are very concerned about the potential chaos in industry. The ruling class is no longer as united as it was when it formed the ruling elite in the period following the collapse of Stalinism, composed as it was of the pro-capitalist layer, managers of state industry and Stalinist state functionaries, who were drunk on victory believing: “Yes, now we are going to be champions”. Now the ruling class is split into at least two parts. The more “far-sighted” sections have seen that the previous arguments used to bolster working class illusions in capitalist restoration no longer work and they can no longer expect an acquiescent work force. This part of the ruling class is now trying to whip up new support from the workers for their slightly changed ideas of increased investment, an end to speculation and a return to “reasonable politics”. It is this section which is politically represented by the Social Democrats. On the other hand the government party (ODP) and other sections of the ruling class representing finance capital now see the way forward as joining the European Union and NATO and sees much closer links with Western capitalist economies. In both cases a certain weakness of the ruling class is demonstrated. One section feels it needs support from the working class to introduce its demands, whereas the other feels it needs international support for its policies. Neither section of the ruling class is able to play a leading independent role in society.

An example of the new type of politics the ruling class is prepared to adopt is shown by the case of a steel factory near Prague, originally employing 40 000 workers before 1989. The privatization of the factory by splitting twenty different sections into independent companies, very much reliant on each other, drove the entire enterprise to the edge of bankruptcy. The director gave a day’s holiday to the entire work force and took them on a march to Prague. Five thousand workers demonstrated against the government, with the director leading the way, opposing the method of privatization. The demonstration ended with the director calling for vote for the Social Democrats.

The anti-government mood that developed amongst the working class in the run up to the elections will not simply disappear. Anti-capitalist tendencies will crystallize as workers see that the new bourgeois claims about investment are not true and it is not able to solve their problems. But the development of an anti-capitalist tendency will bring with it dangers as well, because there is no existing political force which can capture this mood and develop it in a socialist direction in a mass way at the moment. The working class has protested against the effects of capitalism and the Social Democrats are the party which has captured this mood but it cannot become a long lasting answer for the working class.

The Communist Party will not be a formation which workers will seek out to provide answers. It is very sectarian and in fact blames the workers for it not being in power. There is a common belief amongst the CP leadership that when workers are completely impoverished, they will turn back to the Communist Party and wish to go back to the old regime. This is obviously a utopian view. However, what is more important is the feeling of the working class after the elections. This feeling is: “Well we have been able to defeat the government; we will be able to get something at last.” There is a mood that has been developing over the last year which opens big opportunities for the Czech group of the CWI and for a renewal of the workers’ movement and its traditions. There are conflicts looming about reforms of the health service and education. There will be conflicts about the plans for the privatization of energy, transport and banks. There already exists huge opposition against privatization of the health service, education and transport.

Regional campaigns against the effects of neo-liberal policies and even campaigns like last year’s long fight of the doctors against the government will create the conditions where things will objectively be much more positive for the growth of socialist ideas. Also the conditions will materialize under which the Czech group of the CWI can convince increasing layers of workers and youth of the need to create a new workers’ party.

The Czech group of the CWI was responsible for initiating one of the biggest campaigns against attacks on the education system since 1989. This was the campaign against cuts in education grants. This campaign was the only one which succeeded in defeating the government in the period since November 1989. As activists amongst the youth, the Czech group of the CWI has gained a big authority even in the trade unions and amongst workers. It is interventions like this that will lead to a mass basis for socialist and Marxist ideas amongst the whole of the working class in the future.

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