TRANSITION TO MARKET ECONOMY

 


Tom Palmer on
the Collapse of Socialism in Eastern Europe


by Richard Jue, April 2002
 

 

“Why Socialism Collapsed in Eastern Europe” was written by Tom Palmer  in 1990 at the beginning of the transition from a socialistic to capitalistic society in Europe. Tom Palmer believed that the most important reason of all for the reforms and changes was due to the “Gorbachev Factor.” At the beginning of Perestroika, Gorbachev attempted to revive socialism through the law of unearned income, which tried to remove any existing free markets from the Soviet Union. However, these attempts to remove the free markets from the economy proved to be failures, and Gorbachev and his Central Planning Board learned of the importance of market forces in order for an economy to succeed. Gorbachev learned that it was not possible to have a market without property rights. This led to the economic, political, and social restructuring of Perestroika and the dismantling of the Marxist-Leninist-Stalinist socialistic state. Palmer believed that Gorbachev did not just all of a sudden become a “nice guy”, but was basically forced into making these changes seeing that there was a serious crisis in the Soviet Union created by communism.

 

The eastern European empire was too expensive to maintain and the Soviet Union just could no longer afford to do so. This was due to the exhaustion and decline of capital stock. According to Palmer, under socialism, no factory was ever to be closed down so factories. Factories, some over one hundred years old, were still even running under the same processes as before. Over the years, the Soviet Union showed a higher growth rate than much of the rest of the world, however there was no increase in the standard of living for the people. This was due to “conspicuous production” –production for the sake of production. For example, “Steel was produced to make a factory to make more steel to make more factories, but the whole process never produced any real consumer goods.”

 Palmer went on to discuss the creation of the proletariat class as the working class in the Marxist system. The proletariat class was supposed to be the class that would replace all other classes, and would prevent the capitalistic exploitation of the workers. Palmer discussed how this class was previously nonexistent and how the Soviet Union failed to create this class. He used an example describing how in Romania, they killed off all the horses because in a modern society, they believed no one would need them and they would be replaced by tractors. However, tractors failed to be produced and the people were forced to breed horses in secret.

 

Palmer talked about the collapse of the ecological system due to socialism and how the Central Planning Board and lack of property rights led to higher pollution and very high birth defect rates in many areas. This was due to the fact that the Central Planning Board did not have the best interest of the land or the people. He gave an example of the cotton farms, and how if they were forced to meet direct quotas, they would spray herbicides all over the land in order to meet those quotas if they felt it would help them, regardless of how it polluted the earth.

The final factor for the collapse of socialism was the, “the virtual collapse of socialist ideology and of the legitimacy of the ruling class.” Under the Marxist society, the rulers under the central planning board were created for the benefit of the proletariat. However, the rulers were corrupt and did not actually help out the proletariat class. Instead, they fought for their own power and privileges. Over time however, the working class people began to see just how corrupted the rulers were; the people stopped believing in them, and weren’t willing to make any more sacrifices for the government.

Through TV, radio, and other forms of information transfer and communication, the people were able to see just how much higher the standards of living were in the western capitalistic world, and that changes were needed to be made. Palmer said that the illusion was gone that the government was going to help out the working class, and the people just stopped believing in them.

 

Tom Palmer states that the promise of socialism was supposed to bring three main promises: equality, fraternity, and prosperity. Socialism however was unable to bring about any of these goals. Under socialism, there was no such thing as equality. It was possible to see that there was much greater income distribution than under any western country. He gave examples of the differences in standards of living, from the twenty-two palaces of the Ceaucescu family in Romania to the sports complexes in Bulgaria that were only for members of the Zhivkov family or to the dachas of the Soviet party elite as compared to the rest of the people.

 Fraternity was supposed to be where everyone lived under “one roof” as a happy family so to speak. However, this was never created; instead, “after waiting in line for hours for a bar of soap, clothing, shoes, and so on, would-be consumers in Moscow would get to the front of the line only to have the window closed on them and be told, ‘Go away; we have no more.’”As for prosperity, the only thing socialism was able to bring about was mass poverty.

 

Palmer considers the ideology of socialism/communism as dead in Europe. Instead, it is replaced by two other ideologies, nationalism and liberalism. Nationalism is where the people of each country just want to be left alone and rule their own country. Liberalism as an ideology follows along the works of Friedrich Hayek who always believed that communism would fail and lead to tyranny and serfdom. He believed that capitalism would succeed over socialism/communism with, “liberty, a market economy, prosperity, and the rule of law.”

 Overall, this article was very interesting because you can see Tom Palmer’s strong opposition to socialism, and it is very hard to argue against him with the specific examples of the harsh conditions of life that the people actually had to face. In the example of steel production, it showed that production was only just for the sake of production however, it never met the needs of the consumers and the people. It showed that you need market forces to drive the quantity produced through a market equilibrium rather than being decided by the central planning board because of the inefficient decision making of the board. The example of killing the horses in Romania also showed the government’s inability to make efficient decisions, especially seeing now that to this day, most of the travel throughout Romania’s countryside is through horseback. There was poor standards of living, pollution, poverty, high inequality of income distribution, but worst of all, the people had lost faith in their government and socialism/communism.

 

References

Palmer, Tom. “Why Socialism Collapsed in Eastern Europe.” http://www.openrepublic.org/policyanalyses/SocialismVs.Capitalism/19901001_

WHY_SOCIALISM_COLLAPSED_IN_EASTERN_EUROPE_CATO.htm 1990.

 

 

 

 

 

 

 

 

OK Economics was designed and it is maintained by Oldrich Kyn.
To send me a message, please use one of the following addresses:

okyn@bu.edu --- okyn@verizon.net

This website contains the following sections:

General  Economics:

http://econc10.bu.edu/GENEC/Default.htm

Economic Systems:  

http://econc10.bu.edu/economic_systems/economics_system_frame.htm

Money and Banking:

http://econc10.bu.edu/Ec341_money/ec341_frame.htm

Past students:

http://econc10.bu.edu/okyn/OKpers/okyn_pub_frame.htm

Czech Republic

http://econc10.bu.edu/Czech_rep/czech_rep.htm

Kyn’s Publications

http://econc10.bu.edu/okyn/OKpers/okyn_pub_frame.htm

 American education

http://econc10.bu.edu/DECAMEDU/Decline/decline.htm

free hit counters
Nutrisystem Diet Coupons