“Justice” for a billionaire, none for the state he ripped off

There has been much cheering across the corporate media about the Permanent Court of Arbitration in The Hague ordering the Russian government to pay more than US$51 billion as compensation for confiscating the assets of Yukos, yet silence concerning the original theft of the company by Mikhail Khodorkovsky.

The basis of the decision by the arbitration court was that the assets of Yukos, seized for alleged non-payment of taxes, were sold for US$9 billion, well below the estimated value of the company. Conveniently left out of this picture is that Mr. Khodorkovsky purchased the assets for $159 million seven years earlier in a rigged process that he controlled. He did so as one of seven oligarchs who bought deeply unpopular former President Boris Yeltsin a second term and were handed control of the country’s vast natural resources as a reward.

This is a story that can not be separated from the fall of the Soviet Union and the looting of its assets, with a handful of newly minted oligarchs, mostly former black marketeers who became bankers, coming to control post-Soviet Russia’s economy. Estimates of the size of the assets that came to be owned by the seven biggest oligarchs (Mr. Khodorkovsky was one of them) in the late 1990s range up to one-half of the Russian economy. This at the same time that the Russian economy shrank by 45 percent and an estimated 74 million Russians lived in poverty according to the World Bank; two million had been in poverty in 1989.

Siberian mountain formation (photo by Irina Kazanskaya)

Siberian mountain formation (photo by Irina Kazanskaya)

An important factor in the failure of Mikhail Gorbachev’s perestroika was that working people saw the reforms as coming at their expense. A 1987 reform loosened job protections in exchange for enterprise councils that were to have given workers a voice in management, but the councils were largely ineffective or co-opted by managements. The law had also been intended to eliminate labor shortages. It didn’t, and a 1990 reform was stealthily passed to reduce employment and eliminate the ability of working people to defend themselves. Enterprises would now have private owners with the right to impose management and ownership shares could be sold.

Exhaustion from years of struggle also were a factor in the lack of organized resistance to the elements of capitalism that were introduced in the last years of perestroika and to the shock therapy that was imposed on Russia at the start of 1992, days after the formal dissolution of the Soviet Union and the assumption of uncontested power by President Yeltsin. Shock therapy wiped out Russians’ savings through hyperinflation and state enterprises were sold at fire-sale prices, or sometimes simply taken.

Connections allowed him to set up businesses

Mr. Khodorkovsky used his connections as an official within the Communist Youth League to found a company that imported and resold computers and other goods at huge profits and engaged in currency speculation. The proceeds were used to buy companies on the cheap and found a bank. His bank, Menatep, earned large fees by providing credit when it was in scarce supply during the post-Soviet collapse.

When President Yeltsin was up for re-election in 1996, he faced a daunting challenge as his popularity rating was well below 10 percent — tens of millions of Russians had been plunged into poverty and the economy had contracted for several years in succession. The president admitted in his memoirs that he was about to cancel the election. But he was presented with a plan by the seven oligarchs, the scheme that became known as “loans for shares.”

These seven oligarchs offered President Yeltsin a bargain: In lieu of paying taxes, they would make loans to the government so it could meet its expenses, such as actually paying its employees. In return, the government would give the oligarchs collateral in the form of shares of the big natural-resources enterprises that were soon to be privatized. (Other state enterprises had been quickly privatized upon the implementation of shock therapy.)

If the loans were repaid, the bankers would give the shares back. If not, the oligarchs would hold auctions to sell the collateral. The government had no ability to pay back these loans, but President Yeltsin issued a decree sealing the deal in August 1995.

The oligarchs used their own banks to conduct the subsequent auctions, and, through a mix of rigged terms and conveniently closed airports, won them all at prices that were small fractions of the enterprises’ reasonable market value. These enterprises represented Russia’s enormous reserves of oil, nickel, aluminum and gold, and a minority share in the dominant gas company, Gazprom.

These seven oligarchs all became billionaires through the “loans for shares” scam. The oligarchs, who owned almost the entire Russia mass media, spent 33 times the legal limit on the election and provided 800 times more television coverage of President Yeltsin than was provided to his opponents.

Mr. Khodorkovsky’s bank, Menatep, was put in charge of the auction of Yukos. It avoided competitive bidding, enabling his holding company to buy it for $159 million, only $9 million above the starting price. As long as Boris Yeltsin was president, the oligarchs could steal all they wanted. Nor did Western authorities complain about this; President Yeltsin’s bombardment and illegal disbanding of the Russian Parliament in 1993, resulting in more than 500 deaths, was celebrated as a democratic triumph. Indeed, the World Bank’s chief economist for Russia declared, “I’ve never had so much fun in my life.”

Corporate lawyers as arbitrators

The Permanent Court of Arbitration that handed down the $51 billion judgment is one of the international tribunals that hear investor-state disputes behind closed doors. As is customary with these bodies, the arbitrators are corporate lawyers appointed by governments.

In the Yukos case, each side could choose one of the three panelists who hear the case. The deciding panelist was Yves Fortier, a former chair of one of Canada’s biggest corporate law firms and of Alcan Inc., a mining company since bought by Rio Tinto, and a director of several other companies.

I see no sense in denying that politics were behind Mr. Khodorkovsky’s prison sentence and his loss of Yukos. But there can be no dispute that politics and shady dealing earned him his fortune in the first place. The gangster capitalism in which he excelled in the 1990s, cheered on by the West, was without mercy. Are there going to be outpourings of sympathy for the tens of millions of Russians immiserated so that the country’s Khodorkovskys could become billionaires? I think we already know the answer.

The humanity of resistance can’t be erased by a Pinochet or a Friedman

I have long felt haunted by the fate of Chile. I can’t help but feel a strong attachment because the people who were involved, and “disappeared,” tortured and killed, were me and many of my friends and fellow activists.

Not literally, for I was a boy in 1973 and lived on another continent. But if I were then, and there, who I am now, I would have shared the fate of Chileans who believed a better world was possible.

Today is the 40th anniversary of the Pinochet coup. The first “9/11.”

La Moneda 9-11-73I continue to be struck by the fact that participants in the government of Salvador Allende freely apologize for their mistakes. It is no revelation to say President Allende’s Popular Unity government was not perfect. It was full of people who previously had been shut out of political participation — is it reasonable to expect perfection from them? But contrast their thoughtful reflection with the behavior of the coup plotters and those who took up posts in Augusto Pinochet’s murderous 16-year reign.

No apologies. Nothing.

It is to the credit of those who reflect on what they could have done better, who are moved to publicly acknowledge mistakes, particularly in actions or speeches that, intentionally or not, served to throw up barriers to participation by those in mild opposition or sitting on the fence. Their humanity is there for us to see. Where is the humanity of those who killed, those who tortured, those who willingly served a régime that inflicted casualties in massive numbers and hurled millions more into poverty?

The Pinochet coup was the first application of “shock therapy.” The intellectual author of this shock, Milton Friedman, repeatedly used the word “shock” in advising General Pinochet to apply a maximum of pressure, helpfully reprinting a letter he sent to the dictator in his book, Two Lucky People: Memoirs.

Friedman needed believers just as he needed the dictator to implement his ideas. That such ideas need force is exemplified in a revealing interview conducted by Patricia Politzer in her book Fear in Chile: Lives Under Pinochet. In a 1984 interview, an enthusiastic supporter of the régime and self-proclaimed “Chicago Boy” estimated that 80,000 to 100,000 had been killed — a figure, amazingly, he found acceptable because of the dictatorship’s “honest principles that I shared.” This Pinochet supporter declared that “sometimes democratic regimes suffer from too much freedom” in explaining why he applauded the ouster of the elected Allende government, later saying that “freedom ought to be restricted.”

Let us not dishonor those to whom the shock was applied by forgetting. Another story told by Ms. Politzer is that of a communist woman repeatedly arrested, beaten and tortured, as was her husband. One day in prison she was dragged into a torture room, where her husband had cold water thrown on him so that he would regain consciousness and the torture could be resumed. She recounts these grisly details from one session:

“They applied the electric prod to [her husband’s] penis, to his anus, to his eyes. … it was terrible. I knew what was happening from his awful screams and the way he was moving … every scream went straight to my soul. But I didn’t move or express anything. I was suffering enormously, as if they had my heart and they were squeezing and squeezing it. … The only prayer I had was that they wouldn’t go too far with the torture. That he wouldn’t die.”

The authorities had concocted false charges against the couple; the torture was intended to force a false confession.

The obligation of a poet

Let us remember Pablo Neruda, whose house at Isla Negra was ransacked by soldiers and some of his manuscripts destroyed immediately following the coup. He died only two weeks later, apparently silenced via a poison administered by an agent posing as a doctor. The opening of his poem, “Poet’s Obligation,” perhaps provides us one clue as to why the great poet was seen as a danger:

“To whoever is not listening to the sea
this Friday morning, to whoever is cooped up
in house or office, factory or woman
or street or mine or harsh prison cell;
to him I come, and, without speaking or looking,
I arrive and open the door of his prison,
and a vibration starts up, vague and insistent,
a great fragment of thunder sets in motion
the rumble of the planet and the foam,
the raucous rivers of the ocean flood,
the star vibrates swiftly in its corona,
and the sea is beating, dying and continuing.”

Let us remember Victor Jara. The popular singer and songwriter suffered repeated beatings in a sports stadium turned into a concentration camp, then had his hands mangled and his guitar thrown at him by the guards as they sneered “Let’s see you play now.” He did play, so enraging the ignorant shock troops of fascism that they killed him with dozens of machine-gun rounds. He could do nothing else but play. From the last song he wrote before he was murdered:

“Yes, my guitar is a worker
shining and smelling of spring
my guitar is not for killers
greedy for money and power
but for the people who labour
so that the future may flower.
For a song takes on a meaning
when its own heart beat is strong
sung by a man who will die singing
truthfully singing his song.”

Victor Jara’s songs live on. The singer and songwriter Holly Near celebrated his memory in her song “It Could Have Been Me”:

“The junta broke the fingers on Victor Jara’s hands
They said to the gentle poet ‘play your guitar now if you can’
Victor started singing but they brought his body down
You can kill that man but not his song
When it’s sung the whole world round.”

The spirit of life in the face of death

Salvador Allende captured that essence in his last speech. Speaking at the La Moneda presidential palace on the morning of September 11, the coup in progress and not in doubt of what his fate would be, he said:

“Placed in a historic transition, I will pay for loyalty to the people with my life. And I say to them that I am certain that the seed which we have planted in the good conscience of thousands and thousands of Chileans will not be shriveled forever. They have strength and will be able to dominate us, but social processes can be arrested neither by crime nor force. History is ours, and people make history. …

Workers of my country, I have faith in Chile and its destiny. Other men will overcome this dark and bitter moment when treason seeks to prevail. Go forward knowing that, sooner rather than later, the great avenues will open again where free men will walk to build a better society.”

Of what were the rulers of capitalist societies — those in the U.S., those in Chile, those elsewhere — so afraid? Why would an elected government determined to provide concrete reality to the word “democracy” by enabling all citizens to become real participants in the functioning of their society engender such frenzied reactions? Ariel Dorfman, in his memoir Heading South, Looking North: A Bilingual Journey, told the story of “Juan,” a factory worker who was being driven out of the country into exile with him in the aftermath of the Pinochet coup:

“[Allende’s] policies had created an economic boom: increased salaries and benefits led to skyrocketing consumption and that led, in turn, to a major increment in production. So, more goods sold and a better life for Juan and his co-workers, right? Not at all. The owner of the factory, opposed to the revolution, even if it did not threaten his property, had decided to sabotage production. … The workers had watched this class warfare patiently for months and, finally, when the owner had announced he was shutting down the whole operation, they had taken over the premises. It was the only way to save their jobs and keep producing the food that Chile needed. Allende’s government intervened in the conflict, negotiated compensation for the owner, and put the workers in control. Juan had been elected to head the council that, for a couple of years, ran that factory, and in spite of inevitable mistakes, it had been a successful venture.”

Professor Dorfman’s conclusion?

“[T]he Chilean revolution had given him a chance to prove his dignity as a full human being, had dared to conceive through him and millions of others the pale possibility of a world where things did not have to be the way they had always been. That is why the rulers of the world had reacted with such ferocity.”

Equality or dominance. The ability of everybody to develop their full potential and be full participants in societal decision-making or a minuscule elite hoarding wealth and dictating to everyone else.

Which do you want?

Mirror images and ideological straitjackets on the path from Solidarity to sellout

For much of the 20th century, there was a curious mirror effect between orthodox Soviet and Chicago School ideologies — both saw the other as the only other possible economic system. Although both time and the ongoing global crisis of capitalism has begun to chip away at such a ridiculous binary, to a maddening degree this ideological straitjacket continues to assert itself. A straitjacket that does not spontaneously materialize but is crafted for the maintenance of power.

The effects of this mirrored duality are still very much with us, and are a crucial factor in the path the countries of the former Soviet bloc have traveled. The usages of this ideological construct are obvious enough in the capitalist world, distilled into “there is no alternative” by the just departed Margaret Thatcher. Less obvious were the usages further East; perhaps the nearest equivalent of the prime minister’s “TINA” is Leonid Brezhnev’s declaration of the Soviet system as “irreversible.”

When the general secretary’s formulation began unraveling in the late 1980s, what was a Soviet bloc economist to do? For many, the answer was to pick up a copy of a book by Friedrich Hayek or Milton Friedman, and jump through the looking glass. And when their new mirror seductively told them to apply shock treatment to their own countries, they did — the mirror told them there was no alternative.

There is always an alternative, Polish economist Tadeusz Kowalik reminds us in his book From Solidarity to Sellout: The Restoration of Capitalism in Poland.* Professor Kowalik, drawing on his decades of experience as a reform socialist often on the outs with the communist authorities for his willingness to challenge orthodoxy, his work as an adviser with the Solidarity trade union and his personal knowledge of the key players, reminds us that Poland — and, by implication, the Soviet bloc as a whole — had an opportunity to create a different economy, one built on cooperatives and democratic participation in the economy.

Solidarity to Sellout coverSuch an outcome was widely desired by Poles, and the outlines of such a system emerged in the “Round Table” negotiations held between Poland’s communist authorities and representatives of opposition groups, led by Solidarity, from February to April 1989. Economic democracy was already an established concept, embodied in the “Self-Governing Republic” program of Solidarity, adopted at its first national congress in 1981. In it, Solidarity, which consciously identified itself as a labor union and a broad social movement, declared:

“In the organization of the economy, the basic unit will be a collectively managed social enterprise, represented by a workers’ council and led by a director who shall be appointed with the council’s help and subject to recall by the council. The social enterprise shall … [work] in the interests of society and the enterprise itself.  … The reform must socialize planning so that the central plan reflects the aspirations of society and is freely accepted by it. Public debates are therefore indispensable. It should be possible to bring forward plans of every kind, including those drafted by social or civil organizations. Access to comprehensive economic information is therefore absolutely essential.”

Solidarity’s program forgotten, but the looking glass not on agenda

Although Solidarity’s original program was tossed aside, the Round Table negotiators envisioned significant changes without any “leap” into a capitalist market. The two sides did not have serious disagreements, ultimately agreeing in principal, on the political side, on pluralism, freedom of speech and freely elected local governments. On the economic side, there was agreement on facilitating employee ownership, for employee control of state-owned enterprises and a uniform policy toward enterprises, regardless of ownership form. Summarizing the agreement in Solidarity to Sellout, Professor Kowalik wrote:

“Of primary importance here are the provisions concerning protection of labor and employment, written out in ten settled upon and two contentious points. All these detailed settlements distinctly show that the participants of the agreement had no such thought in mind as a ‘leap’ into a market economy.” [page 60]

Yet a particularly harsh brand of capitalism was instituted; “Thatcherism” or “Reaganism” in the parlance of then and “neoliberalism” in today’s vernacular. Professor Kowalik cites several factors leading to the imposition of shock therapy in contradiction to popular opinion, negotiated agreements and pre-existing platforms:

  • The centralization of Solidarity while underground during the period of martial law during the 1980s converted it into a top-down organization with a severe cut in membership and an isolated leadership that drifted to the Right.
  • The grabbing of state property by the nomenklatura (the bureaucracy managing enterprises and overseeing that management from within the government) for themselves.
  • A blurring of Catholicism with socialism, particularly on the part of Tadeusz Mazowiecki, who would become the first non-communist prime minister, but also by other influential people.
  • The adoption of undiluted neoliberal ideology by the Polish economists who would become the architects of economic policy by becoming ministers and government advisers.

One of the agreements arising out of the Round Table was that one-third of the seats to the Polish parliament (the Sejm) would be contested later that year (1989) in June. Solidarity won all but one of the contested seats — so sweeping was the rout that Solidarity became the effective government even though the communists still held a parliamentary majority. Mr. Mazowiecki became prime minister when the next government was formed three months after the election. Solidarity activists dominated the new government, although communists retained some portfolios, including the Interior and Defense ministries.

Critically, however, the new finance minister/deputy prime minister was Leszek Balcerowicz, a proponent of neoliberalism who was distant from Solidarity’s struggles and whose writings were of an abstract nature; “his interests were limited to pure theory,” according to Professor Kowalik. Prime Minister Mazowiecki’s leading economic adviser was Stanisław Gomułka, who converted to neoliberal ideology while at the London School of Economics. And Western advisers beat a path to Warsaw as they did to other Soviet bloc capitals; Jeffrey Sachs, who oversaw shock therapy in multiple countries, perhaps was the most prominent. The International Monetary Fund was also on the scene.

Abstract theorizing instead of examination of concrete reality

Other economists who had imbibed starry-eyed ideas of how market forces would shortly create paradise played roles as well; but the finance minister’s role was so important that Poland’s shock therapy became known as the “Balcerowicz Plan.” Professor Kowalik wrote of his obfuscating tendencies:

“Balcerowicz made great efforts to compromise — like the term ‘social interest’ — the adjective ‘social.’ … Such a standpoint was bound to lead him to extreme individualism, a negation of the role of the state as a general social institution, with only the interest of the authorities being important. Balcerowicz does not write this outright, but his reasoning resembles a lot the well-known view of Margaret Thatcher, that there is no such thing as society (and thus it does not exist). He rejects the very notion of social justice and often simply avoids this subject. … Balcerowicz’s knowledge, of course, remained theoretical, abstract, and distant from real economic policies.” [pages 112-114]

Such an approach and outlook dovetails with orthodox capitalist economics, as distilled through the wellspring of neoliberalism, Chicago School economics: highly abstract, built on mathematics and based on airy concepts such as “perfect competition” rather than on the real world. Firms and individuals are not seen as part of a social structure; factors such as wealth and property are taken as given. Production is alleged to be independent of all social factors, the employees who do the work of production are in their jobs due to personal choice, and wages are based only on individual achievement independent of race, gender and other differences.

Such is the underlying rationale for neoliberalism, which seeks to make “market forces” — the aggregate interests of the wealthiest industrialists and financiers as expressed through the power of the corporations they control — the sole arbiter of outcomes in all social spheres. Neoliberalism, as Henry Giroux recently put it, “construes profit-making as the essence of democracy, consuming as the only operable form of citizenship, and an irrational belief in the market to solve all problems and serve as a model for structuring all social relations.”

New laws accelerate grabbing of state property already in progress

Privatization, however, was already under way by the time the Round Table negotiators hammered out their agreement. A 1987 law enabled the creation of private businesses with the assets of state enterprises and a January 1989 law stipulated outright that state assets could be transferred to private individuals for conducting economic activity. Such transfers were not necessarily done with full value paid, and private firms were given preferential treatment. Professor Kowalik wrote in Solidarity to Sellout:

“[T]he players of the nomenklatura offshoot of privatization consisted of managers of various rank, government and party functionaries associated with them, along with their families. The process, commonly called ‘enfranchisement of the nomenklatura,’ deserves attention because it was then that the phenomenon of corrupt privatization, or arranged clientelistic privatization, developed. …

“The state sector shortly became a cash machine, which was made easier by the authorities through relevant legal regulations. … These laws sanctioned the plunder of the state sector earlier begun by its own managers. The state sector was highly taxed to maintain the entire state infrastructure and doomed to hopeless competition with the nearly tax-free private firms that were also paying infinitesimal customs duties.” [pages 204-205]

The pace was accelerated when the parliament, in late December 1989, hurriedly passed nearly unanimously a series of bills implementing the Balcerowicz Plan, with the plan going into effect on January 1, 1990. Noting the later contrition of the parliament speaker, who said Finance Minister Balcerowicz and Professor Sachs “plainly tricked us,” Professor Kowalik summed up the vote this way:

“Advantage was simply taken of the immense trust that the people had in the first non-communist government. There could be no serious debate, because without a general document presenting a synthesis of the systemic contents of eleven laws and the simultaneously ratified budget, such a discussion was not possible. The parliamentarians acted under the pressure of a race with time, imposed on them by the executive authorities.” [page 133]

One scheme for privatization was the creation of “National Investment Funds” — state companies disposed in this program were to be 15 percent owned by employees, 25 percent by the state treasury and 60 percent by the funds, with the public allowed to buy shares in the funds. Only a minority of privatized enterprises were disposed of this way (more were simply sold to foreign buyers), but the funds were a failure, Solidarity to Sellout reports, because inflation and a declining stock market caused the shares to steadily lose value; moreover, most of the public shares wound up in foreign hands.

What capital remained in Polish hands also became concentrated as, similar to the pattern in Russia, the nomenklatura-turned-privatizers were soon dwarfed by a new class of oligarchs.

Actual cooperatives faced consistent hostility from the government, which saw coops as a temporary “transition” to what it termed “real” privatization. Pre-existing cooperatives were simply  “administratively eliminated,” new coops had barriers placed in front of them and foreign capital, which soon controlled Polish banking, was also hostile. At the same time, state farms were immediately thrown into competition with subsidized Western European agricultural with all domestic subsidies removed at a stroke, devastating Polish farmers. This was in contrast to the buildup of Western European agriculture after World War II, which was nurtured through protective measures.

Results of shock therapy differ widely from promises

The results of the Balcerowicz Plan were devastating, in contrast to promises of a short-lived downturn followed by rapid growth and transition to Poland becoming a “normal” European country, a concept dangled by Western advisers skillfully playing on Polish antipathy toward Russia:

  • A 50 percent drop in real wages and a 30 percent drop in industrial output in the first month of the Balcerowicz Plan.
  • From 1996 to 2005, the percentage of Poles whose income was so low as to be insufficient for biological survival tripled to 12 percent even though the national income rose by one-third.
  • Wage inequality became the highest in the European Union.
  • The number of Poles living below the official poverty level ballooned to 58 percent by 2003; the statistics bureau then stopped publishing this figure.
  • Before entry into the European Union, the average unemployment rate was 16 percent, topping 20 percent during the early 2000s, more than a decade after the imposition of shock therapy; the rate declined after E.U. ascension due to a stream of emigration.

Having told this story in a somewhat idiosyncratic but nonetheless compelling style, Solidarity to Sellout ends, surprisingly, on an unimaginative note by championing the Scandinavian model of capitalism, seeing Sweden as the model for Poland to emulate. In part, the conclusion follows from Professor Kowalik’s acknowledgment that a lack of organized anger and the sellout by trade unions has allowed the Polish Right to flourish, and a tacit understanding that creating a cooperative economy is drastically more difficult in a privatized economy than it would have been when enterprises were in state hands. He writes:

“[I]t was enough for the trade unions to become involved in support of anti-employee systemic changes and the shock operation. That is why rebuilding he strength of the trade unions in Poland is going to be an extremely difficult task.” [page 298]

Professor Kowalik calls the Scandinavian countries “centers of economic excellence,” contrasting them to Poland’s “role of subcontractor.” The former model by any reasonable measure is superior to neoliberalism, but the professor has perhaps not fully considered that Poland, and the rest of the Soviet bloc, were destined by the dynamics of capitalism to become a source of cheap labor, akin to Latin America’s relationship to the United States. Nor are the more powerful capitalist countries likely to acquiesce to a subcontractor becoming a serious competitor.

Having become completely entangled in the global capitalist system, Poland can only transcend to a better system as part of an international bloc; it can’t be an island unto itself. Given the structural crisis of global capitalism, the aim will have to be higher than simply emulating Sweden, where capitalist pressures are not unknown and the European Union methodically imposes downward pressure.

But regardless of one’s opinion of the conclusion, Solidarity to Sellout provides an outstanding analysis of the capitalist restoration of Poland on neoliberal grounds, as could only be written by an economist with an intimate understanding of Poland, economics, the Solidarity movement and the key individuals in the process. Professor Kowalik’s book is well worth pursing by anybody interested in understanding the post-Soviet path of Central Europe, or, more generally, the dynamics of neoliberalism.

* Tadeusz Kowalik, From Solidarity to Sellout: The Restoration of Capitalism in Poland [Monthly Review Press, New York, 2012]

The toll of privatization and the ideology of “there is no alternative”

No ideology lasts forever, and nothing of human creation lasts forever. Margaret Thatcher embodied the idea of stasis in thought and structure with her infamous statement that “there is no alternative,” which was given further form in her second most notorious utterance, “there is no such thing as society.”

There is no stasis, and five years and counting of economic crisis has chipped away at the idea that there is no alternative to present-day capitalism. It has perhaps also begun to undermine the former prime minister’s second quote, a stark encapsulation of the underlying ideology of everyone for themselves — that pitiless competition is the primary way that human beings relate to one another. Humans surely can be competitive. But they are at least as capable of cooperating, as the reactions to any natural disaster demonstrate.

Time plays its part as well. The bogeys of one generation fail to have the same effect on the next; now that two decades have passed since the disintegration of the Soviet Union, a powerful bogey is becoming less of a talisman for capitalists and the politicians who love them. Thus it is not surprising that polls show that young people are more open to socialism than their parents — the concrete realities of the debt-saturated, limited vistas that today’s economy offers them can not fail to grab their attention.

An often-cited April 2011 survey by the Pew Research Center found that the opinions of respondents in the United States ages 18 to 29 had virtually identical opinions of capitalism and socialism — both were viewed as favorable by 43 percent, while the unfavorable responses differed by one percentage point. An interesting aspect of this poll, much less noticed, is that among respondents who described themselves as Democrats, regardless of age, 44 percent had a positive response to the word “socialism” while 43 percent had a negative response. (Republicans and those who not identify with either major party responded strongly negatively.)

Opinions seem to be evolving, as a later poll, conducted in November 2012 by the conservative Gallup organization, found that 53 percent of “Democrats/Democratic leaners” were favorable to socialism (and 55 percent were favorable to capitalism). Perhaps most interestingly, 23 percent of “Republicans/Republican leaners” were favorable to socialism. Although three times as many of the Republican/Republican-leaning respondents answered positively to the word “capitalism,” nonetheless such a response would have been unimaginable a few years ago. Minds do seem on the move.

The toll from “shock therapy” is, well, shocking

If we are to believe “there is no alternative,” the result should be, if not paradise, then at least rapid improvement in countries in which capitalism was re-instated two decades ago, such as in Russia. But, alas, that has not been so.

Take, for example, a 2009 study published by The Lancet, one of the world’s leading medical journals and hardly a bastion of socialist boosterism. The study, conducted by a team of professors from institutions like Oxford and Cambridge universities, concluded that the mass privatization in the former Soviet bloc — a critical aspect of economic programs often referred to as “shock therapy” — resulted in one million deaths. If you haven’t heard of this study, that is not surprising as it received almost no attention in the corporate media after its issuance.

An Oxford University press release announcing the publication of the study (“The public health effect of economic crises and alternative policy responses in Europe: an empirical analysis”) said:

“The Oxford-led study measured the relationship between death rates and the pace and scale of privatisation in 25 countries in the former Soviet Union and Eastern Europe, dating back to the early 1990s. They found that mass privatisation came at a human cost: with an average surge in the number of deaths of 13 per cent or the equivalent of about one million lives.”

The study used World Health Organization mortality statistics corrected for a series of factors, including population aging, past mortality and employment trends, and country-specific differences in health-care infrastructure. The study found a definitive link between increased mortality and shock therapy:

“David Stuckler, from Oxford’s Department of Sociology, said: ‘Our study helps explain the striking differences in mortality in the post-communist world. Countries which pursued rapid privatisation, or ‘shock therapy’, had much greater rises in deaths than countries which followed a more gradual path. Not only did rapid privatisation lead to mass unemployment but also wiped out the social safety nets, which were critical for helping people survive during this turbulent period.’ ”

The whip was applied earlier than critics assert

Naturally, this sort of ideologically inconvenient research did not lack counter-studies. The Lancet, in January 2010, published “Did mass privatisation really increase post-communist mortality?,” which, this set of authors admit, was motived by an unwillingness to accept the study led by Professor Stuckler. The authors of the counter-study, led by Christopher J. Gerry, made, inter alia, the following complaints:

“[T]he data show that the health trends driving the association noted by Stuckler and colleagues pre-date the introduction of mass privatisation programmes in the post-communist world. … [T]he Russian privatisation programme, announced in December, 1992, and completed in June, 1994, cannot plausibly be claimed to have affected mortality rates at all in 1992 and at most weakly in 1993.”

Unfortunately for this argument, privatization began well before December 1992. Elements of capitalism were introduced into the economy of the Soviet Union as early as 1987, following the uneven adoption of Mikhail Gorbachev’s Law on State Enterprises, the net result of which was to impose wage cuts and other measures of market discipline on workers but not on managements or bureaucracies. A series of liberalization measures in the following years, including a 1990 law that institutionalized privatization, caused more job insecurity and increased shortages, unraveled the dense network of threads that bound together the Soviet system and cut the social safety net.

Moreover, shock therapy was implemented on the second day following the end of the Soviet Union — January 2, 1992 — with complete liberation of prices (except for energy), the concomitant ending of all subsidies of consumer products and for industry, and allowing the ruble to float against international currencies instead of having a fixed exchange rate. This was a strategy to reduce demand significantly, a devastating hardship considering that most products were in short supply already, and it would also lead to hyper-inflation, wiping out savings.

Privatizations and takeovers had already begun; that the government’s formal program, in which enterprises would be sold off at minuscule fractions of their value, did not start until months later is no argument that shock therapy was not already well under way.

The counter-study authors led by Professor Gerry goes so far as to conclude:

“If anything, there may be some evidence of a positive link between market reforms and health outcomes.”

Poverty, alcoholism and sexism as health indicators

The preceding statement seems to be based more on ideology than facts. By the end of 1998, Russia’s economy had contracted by an astonishing 45 percent. The World Bank — a powerful institution of the advanced capitalist countries — estimated that 74 million Russians were living poverty by then, as opposed to two million in 1989. Russia’s murder rate become one of the world’s highest. During Soviet times, we were assured by Western commentators that high levels of alcoholism were a sign of despair, yet alcohol per-capita consumption rates in 2007 were three times that of 1990. The toll on health from these factors can’t be separated from “market reforms.”

The breakdown of a society under the sudden onslaught of unbridled capitalism, neoliberal style, is exemplified in a study by University of Rhode Island Professor Donna M. Hughes, “Supplying Women for the Sex Industry: Trafficking from the Russian Federation,” in which she demonstrated how unemployment, skyrocketing levels of violence at the hands of male partners, the elimination of the Soviet-era social safety net, the pervasiveness of organized crime, and ubiquitous television and other mass media images glamorizing prostitution and the consumption of the rich of the West resulted in hundreds of thousands of Russian women trafficked into prostitution. Professor Hughes also noted the dramatic social shifts unleashed:

“A much reported 1997 survey of 15-year-old schoolgirls found that 70 percent of schoolgirls said they wanted to be prostitutes. Ten years before, 70 percent said they wanted to be cosmonauts, doctors, or teachers. Some people have claimed this finding is an indication of the decline in moral standards or the social acceptability of prostitution. This finding is more likely an indication of how the media has glamorized and romanticized prostitution.” [page 14]

The point here isn’t to suggest that the Soviet Union was some sort of paradise. It was far from that. But it is necessary to challenge assumptions, particularly when when those assumptions rest on ideological foundations. How could the larger social disintegration documented in Professor Hughes’ study, and other indications, not be indicative of a decline in health and well-being?

If market forces improve health outcomes as Professor Gerry believes, then we need only compare the country in which market forces drive health care more than anywhere else, the United States, with other countries. In an average year, 22,000 people die and 700,000 go bankrupt as a result of inadequate, or no, health insurance, while the U.S. is well below average in life expectancy and infant mortality in comparison to other developed countries. And the U.S. spends, by far, the most money on health care of any country.

When “market forces” are allowed to govern health care, then the result is that the system will be geared toward maximizing corporate profit, not providing health care. When society — social bonds — break down, we are reduced to a scramble for survival.

Surely there is an alternative. Crises are overcome with cooperation, not competition. Future alternatives won’t be anything like the Soviet Union, but the number of people newly open to socialism is a sign of the open-mindedness, and strong societies, the world needs.