Commentary: Transition in context - II

SKOPJE, Macedonia, Dec. 23 (UPI) -- The process of transition in Eastern Europe informed us that markets, left to their own devices, unregulated and unharnessed, yield market failures, anomies, crime and the misallocation of economic resources. The invisible hand must be firmly clasped and guided by functioning and impartial institutions, an ingrained culture of entrepreneurship and fair play, classes of stakeholders, checks and balances and good governance on all levels.

Wealth, behavioral standards, initiative, risk seeking -- do not always "trickle down." To get rid of central planning, more central planning is required. The state must counteract numerous market failures, provide some public goods, establish and run institutions, tutor everyone, baby-sit venture capitalists, enhance innovation, enforce laws and standards, maintain safety, attract foreign investment, cope with unemployment and, at times, establish and operate markets for goods and services. This omnipresence runs against the grain of Anglo-Saxon liberalism.

Moreover, such an expanded role of the state sits uncomfortably with complete political liberty. That capitalism is inextricably linked to democracy is a well-meaning fallacy -- or a convenient pretext for geopolitical power grabs. East Europe's transition stalled partly due to political anarchy. China's transition, by comparison, is spectacular -- inflated figures notwithstanding -- because it chose a gradual approach to liberalization: first economic, then political.

Last but not least, pure, "American," capitalism and pure Marxism have more in common than either would care to admit. Both are utopian. Both are materialistic. Both are doctrinaire. Both believe that "it's a jungle out there." Both seek social mobility through control of the means of production. Both claim to be egalitarian forms of social engineering and are civilizing, millennial, universal, missionary pseudo-religions.

The denizens of the nether regions of central and eastern Europe have been the victims of successive economic utopias. They fear and suspect ideological purity. They have been conditioned by the authoritarian breed of socialism they endured, really little more than an overblown conspiracy theory, a persecutory delusion which invariably led to Stalinesque paranoid backlashes. Indeed, Stalin was more representative of communism than any other leader before or after him.

The Economist summed this mass hysteria neatly thus: "The core idea that economic structure determines everything has been especially pernicious ... The idea that ... rights have a deeper moral underpinning is an illusion. Morality itself is an illusion., just another weapon of the ruling class. As Gyorgy Lukasc put it, 'Communist ethics makes it the highest duty to act wickedly ... This is the greatest sacrifice revolution asks from us.' Human agency is null: we are mere dupes of 'the system,' until we repudiate it outright. What goes for ethics also goes for history, literature, the rest of the humanities and the social sciences. The 'late Marxist' sees them all ... not as subjects for disinterested intellectual inquiry but as forms of social control."

Many in Europe feel that the above paragraph might as well have been written about Anglo-Saxon capitalism. Reduced to bare-bones materialism, it is amoral, if not immoral. It upholds natural selection instead of ethics, prefers money to values, wealth formation to social solidarity.

Predators everywhere -- Russian oligarchs, central European cronies, Balkan kleptocrats, east European managers -- find this gratifying. All others regard capitalism as yet another rigid and unforgiving creed, this time imposed from Washington by the International Monetary Fund and multinationals rather as communism was enjoined from Moscow by the Kremlin.

With eight of the former communist countries about to become members of the European Union -- albeit second rate ones -- transition is entering its most fascinating phase. Exposed hitherto to American teachings and practices, the new members are forced to adhere to a whole different rule book -- all 82,000 pages of it.

European "capitalism" is really a hybrid of the socialist and liberal teachings of the 19th century. It emphasizes consensus, community, solidarity, equality, stability and continuity. It places these values above profitability, entrepreneurship, competition, individualism, mobility, size, litigation and the use of force. Europeans firmly believe that the workings of the market should be tampered with and that it is the responsibility of the state to see to it that no one gets left behind or trampled upon.

European stakeholder capitalism is paternalistic and inclusive. Employees, employers, the government, communities and suppliers are partners in the decision making process or privies to it. Relics of past models of the market economy still abound in this continent: industrial policy, Keynesian government spending, development aid, export and production subsidies, trade protectionism, the state-sanctioned support of nascent and infant industries. Mild corporatism is rife and manifest in central wage bargaining.

For some countries -- notably Estonia -- joining the European Union would translate into a de-liberalized and re-regulated future. Others would find the European Union's brand of the market a comfortable and dimly familiar middle ground between America's harsh prescriptions and communism's delusional model. The European Union's faceless and Kafkaesque bureaucracy in Brussels -- Moscow revisited -- should prove to be a relief compared to the IMF's ruffians.

The European Union is evolving into a land empire, albeit glacially. The polities of central and eastern Europe were always constituents of empires -- reluctantly or by choice. In some ways they are better suited to form an "ever closer union" than the more veteran members.

(Part 1 of this commentary appeared Monday. Send your comments to: svaknin@upi.com.)