Collapse of Socialist Bloc and Transition Economies

Capitalism is a mode of production that depends on private property and accumulation of profit through market exchanges.

It is a structure of medieval societies,where the land owner lords controlled the political and economic relationships of society by giving protection to peasants serves and exploiting their labor.

It is a form of government, in which a single ruler holds all political power over the society. Monarchs change through a hereditary rule, mostly in a single family.

To end private property’s power over social relationships.

It generally refers to the sections of society and their political, economic activities, which are independent from government.

It is an economic system that is characterized by social ownership of means of production and workers self-management.

  In terms of transition to a free market economy, Yeltsin and his main aid Gaidar applied what economists called shock therapy to the Russian economy in order to finish this transition period as soon as possible. This unrelentless trade liberalization in Russia entailed first, fast privatizations of more than half of state enterprises, which benefited former communist party bureaucrats and their new oligarch friends as the value of these enterprises were not calculated on any feasibility report but mostly determined by the corrupt dealings of the new state elite and former managers of those industrial enterprises. Mafia economy and primitive accumulation of capital through illegal means were widespread in the early years of transition.

 Secondly IMF program requires from Russia,legalization of land ownership and ending inefficient agricultural subsidies of former Soviet regime. Also what accompanied to those measures was the rapid removal of price controls and letting market demand and supply rules replace government controls on light consumer industries. To totally unprepared society that brought speculation,corruption and rampaging inflation as most of the industrial and agricultural production of Russia decimated. Growth numbers for the former Eastern bloc countries during 90’s were pretty negative, for example Belorussia lost 35 percent, Georgia 70 percent, Ukraine more than 60 percent of their previous industrial activity. Russian growth rates hovering around 2 percent in the collapsing days of the USSR, first declined to minus 6-7 percent in the first years of shock therapy and then stabilized around 1 percent just before the Russian debt crisis in 1998 (Gerber & Haut, 1998: 1-50).

  Russia lost most of the knowledge based capital intensive production in the transition as brain drain to abroad and the collapse of state structures greatly decreased skilled workforce and capital investment in high technology areas. Increasing inflation numbers encouraged people to demand foreign currency as nobody has any confidence in local currencies. In some parts of Russia bartering became a new way of sustaining life as unemployment and lack of consumer goods force people to exchange their belongings in new free markets. As an example of this collapse in living standards, Russian male life expectancy drop from 64 years to 58 years in that decade. Fertility rates of the country declined around 35 percent within a decade. Most of the privatized industries did not bring intended industrial growth since new oligarchs, who bought these factories a lot of times in illegal ways, did not bother to reinvest profits in country’s infrastructure or potential areas but prefer to evade taxes and smuggling money to offshore financial centers (Gerber & Haut, 1998: 1-50). 

Automation of work and institution of hierarchy among workers fed the increasing authoritarianism and bureaucratization of Soviet political life. 

Protest movements mainly questioned the feasibility of Soviet model in their domestic societies. Issues like collectivization of agriculture, power of secret police, productivity of Soviet factory
management system, restrictions on art and culture, all were controversial topics that protesters raised in 1950’s.

After Mao’s death the ruling party had factional fightings and at last Deng Xiaoping became the
leader of the ruling party and in 1978 he signalled to implement a series of pro-market reforms.
Ping argued that those measures of opening up the China to global economy will provide much needed technology and industrial capital to the country. He did not think self-sufficient autarkic
model of Mao would work in the future. Chinese market was opened to foreign investment under strict supervision of the party after 1978. Peasants were let free to lease private land up to 30 years and given a chance to privately accumulate through production for markets. These measures inevitably brought more weight for the markets and their price signals in demand and supply conditions. Chinese state also gave permission for opening of private and collective enterprises in county and towns.

Since 2001 when China entered into WTO ( World Trade Organization) most economists in the WTO
classified Chinese enterprises as not different from private corporate entities in terms of decision
making autonomy. That means these state owned corporations usually decide production and marketing according to the market price signals. In property laws these state corporations are also accepted as equals to other private property owner individuals. Thus, China mainly accepted most of the basic rules of market capitalism since 2000’s.

Serfdom is the status of peasants and lower class people under feudalism, in which they
were forced to work for lord’s manor with little rights.

Adoption of Western institutions in the East created foreign educated new elite and military bureaucracies, who started to question their absolutist monarchies.

Economic crisis that started peasant and worker demonstrations against the regime
coupled with defeat of Russia in the RussianJapanese war in 1905 pushed the regime to accept
limited parliament and legal reforms for citizen rights. That period was called the 1st revolution in
Russian history in 1905 (Dukes, 1997: 180)

Absolutist monarchy as the head of lords as a form of government gradually weakened in
the West as well as its ideology of absolute divine right of kings. Since division of power among
various classes and liberating towns and markets strengthened power of commercial capitalists
against those absolutist monarchs, more liberal ideas in terms of government spread further around
Western Europe.

Workers and peasants, can only be saved by overthrowing the centuries old Russian
tsarism and capitalist property relations through a working class led revolution. He called this working class party model “vanguard party”, a party that can lead workers in political struggle.

The most important reasons for Soviets’ emerging as an alternative forms of power were first, soldiers predominantly protested the conditions in the war front. Second, peasants demanded more equal land distribution and third workers wanted more just working conditions and better pay.

Soviet Union officials aimed to promote heavy industry as opposed to consumer goods because it was seen as a way to surpass the enormous requirements of capital accumulation (Carr & Davies, 1969).

Soviet invasion of Hungary was a sign to its allies and the Western world that USSR will not tolerate a complete break from the Warsaw Pact security system. But at the end these protest movements gave Polish and Hungarian governments more maneuvering field when negotiating with Soviets (Kolankiewicz & Taras, 1979). For example, Polish catholic church increased its public presence after those protest movements and later years independent trade union Solidarity led by Lech Walesa continued their activities in that tradition. These protest movements mainly questioned the feasibility of Soviet model in their domestic societies. Issues like collectivization of agriculture, power of secret police, productivity of Soviet factory management system, restrictions on art and culture, all were controversial topics that protesters raised in 1950’s.