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Hist 106 Lecture 24.doc

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HIST 106
Paul Garfinkel

Lecture 24 – Europe Since 1989 [1] Why were reforms so painful in the post-1989 East? “The morning after” • State building is hard to do – nations had to rebuild like they did in 1919 or 1945 • Once you topple a government it’s hard to make a new one work and make it binding • Those who rose up had no experience • Civil society had to be made and re-made − How would welfare work? − How to create belonging? − What about minorities? • How do you make these changed work and get people to view the new system as legitimate Scale • In the free market economic productivity is down because government subsidies reveal the inefficiency of production − Unemployment at 15% in countries where unemployment was unknown • State building is different because there are no more controls and no more subsidies • Industry goes down because it’s privatized and most people remain poor, a few get rich. • Huge deficits and people need social benefits at the time when they are hardest to acquire. • Inflation goes up because governments have to borrow Economic chaos = political chaos • Governments fragment • Reformers jump ship – the rhetoric was easy but governing is difficult • In 1991 you could choose from 72 parties in Romania • Ex-communists are winning elections – the Polish president lost an election to and ex- communist official − People were hard up − Communists in the Balkans never really went away – they became “converts.” − People lacked a democratic heritage o In 1990 East Germans had not voted in 58 years − People wanted quick results The trends were pronounced in Russia – Yeltsin created “shock therapy.” • Privatization • Free markets without controls or subsidies − Health care collapses − Unemployment up and inflation up • Russian mafia emerges – organized crime becomes popular – there was no monetary or legal framework so profiteering was very easy • In 1994 the private sector was dominating industry – 62% of Russia’s GDP • Economy suffers, by 34 % by 1998 and the rubble is devalued 74% • Huge wealth disparity • 1990’s cynicism runs high. The market economy has come to equal corruption and impoverishment Was it democracy? • Yeltsin had limitless powers − Parliament destroyed in 1993 − A constitution in 1993 that created a presidential regime – the answer to problems was to dissolve parliament and get more central power − Parliament locks themselves into the White House − Yeltsin bombs the building killing his opposition − Becomes a presidential regime where the PM answers to the president, not the parliament Why hang on to this system? • Lure of capitalism strong enough to trump radicalism • No ex-communist regimes had turned extremist or went against free market principles • Czech. Republic and Poland had done well by joining the EU • There was a strong desire in the East to belong to the EU and capitalism • In January 2007 Romania, Bulgaria join the zone, making 27 countries, 17 of which
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