(Article written on August 14, 1999 and published August 30, 1999
in "Central Europe Review" volume 1, issue 10)
[The Rip van Winkle Institutions]
The West – naive, provincial and parochial – firmly believed that the rot was confined to the upper echelons of communist and socialist societies. Beneath the festering elites – the theory went – there are wholesome masses waiting to be liberated from the shackles of corruption, cronyism, double-talk and manipulation. Given half a decent chance, these good people will revert to mature capitalism, replete with functioning institutions. It was up to the West to provide these long deprived people with this eagerly awaited chance.
What the West failed to realize was that communism was a collaborative effort – a symbiotic co-existence of the rulers and the ruled, a mutual undertaking and an all-pervasive pathology. It was not confined to certain socio-economic strata, nor was it the imposed-from-above product of a rapacious nomenclature. It was a wink and nod social contract, a co-ordinated robbery, and an orgy of degeneration, decadence and corruption attended by all the citizenry to varying degrees. It was a decades long incestuous relationship between all the social and economic players. To believe that all this can be erased virtually overnight was worse than naive – it was idiotic.
Perhaps what fooled the West was the appearance of law and order. Most communist countries inherited an infrastructure of laws and institutions from their historical predecessors. Consider the Czech Republic, East Germany, Poland, Yugoslavia and even Russia. These countries had courts and police and media and banks long prior to the calamitous onset of communism. What the latter did – ingeniously – was to preserve the ossified skeletons of these institutions while draining them from any real power. Decisions were made elsewhere, clandestinely, the outcome of brutal internecine power struggles. But they were legitimised by rubber stamp institutions: "parliaments", "judicial system", "police", "banks", and the "media". The West knew that these institutions were dysfunctional – but not to which breathtaking extent. It assumed that nothing more than technical assistance was needed in order to breathe life into the institutional infrastructure. It assumed that market forces, egged on by a class of new and increasingly wealthy shareholders, will force these institutions to shape up and begin to cater to the needs of their constituencies. Above all, it assumed that the will to have better and functioning institutions was there – and that the only thing missing was the knowledge.
These were all catastrophically wrong assumptions. In all post-communist countries, with no exception, one criminal association (the communist or socialist party) was simply replaced by another (often comprised of the very same people). Elections were used (more often, abused) simply to queue the looters, organized in political parties. The mass devastation of the state by everyone – the masses included – proceeded apace, financed by generous credits and grants from unsuspecting (or ostrich-like) multilaterals and donor conferences (recall Bosnia). If anything, materialism – the venal form of "capitalism" that erupted in the post communist planet – only exacerbated the moral and ethical degeneracy of everyone involved. Western governments, Western banks, Western businessmen and Western institutions were sucked into the maelstrom of money laundering, illicit trading, corruption, shoddiness and violence. To perpetuate their clout and prowess, the new rulers did everything they could to hinder the reform of their institutions and their restoration to functionality.
In communist societies, banks were channels of political patronage through which money was transferred from the state to certain well-connected, enterprises. Bankers were low-level clerks, who handled a limited repertoire of forms in a prescribed set of ways. Communist societies had no commercial credits, consumer credits, payment instruments, capital markets, retail banking, investment banking, or merchant banking. The situation today, a decade after the demise of communism is not much improved. In most countries in transition, the domestic powers that be conspired to fend off foreign ownership of their antiquated and comically (or, rather, tragically) politicised "banks". The totally inept and incompetent management was not replaced, nor were new management techniques introduced. The state kept bailing out and re-capitalizing ailing banks. Political cronies and family relatives kept obtaining subsidized loans unavailable to the shrivelling private sector.
The courts, in the lands of socialism, were the vicious long arms of the executive (actually, of the party). A mockery of justice, law and common sense – judges were ill trained, politically nominated, subservient and cowed into toeing the official line. Of dubious intellectual pedigree and of certain unethical and immoral lineage – judges were widely despised and derided, known to be universally corrupt and ignorant even of the laws that they were ostensibly appointed to administer. This situation hasn't changed in any post communist society. The courts are slow and inefficient, corrupt and lacking in specialization and education. The legal system is heavily tilted in favour of the state and against the individual. Judges are identified politically and their decisions are often skewed. The executive, in many countries, does not hesitate to undermine the legitimacy of the courts either by being seen to exploit their political predilections, or by attacking them for being amenable to such use by a rival party. This sorry state is only aggravated by the frequent and erratic changes in legislation.