The Fall of the Wall

Outside Fortress Europe Excerpts
This Global Business Strategy Blog post is based upon unabridged excerpts from Chapter One, Ten Years That Shook the (Capitalist) World: 1988-1998, in Outside Fortress Europe: Strategies for the Global Market, published in 2018 by Strategic Management Think Tank. The second edition of this book is scheduled for publication in February 2020.

For details of this publication and the five BiteSized Fortress Europe Volumes derived from it please click/tap the Strategic Management Think Tank icon above/left (opens in a new tab/window).

 


Outside Fortress Europe Excerpt

The Berlin Wall Falls, Germany Reunifies, Comecon Unravels,
The Soviet Union Dissolves

You can resist an invading army, but not an idea whose time has come.
Victor Hugo (1802-1885), poet, novelist and dramatist.

In a timely book addressing the role of walls in geopolitics – both historically and in the current era – critically-acclaimed author Tim Marshall makes the following observation with reference to the Iron Curtain in the atmosphere of glasnost which was being created by the speeches (and actions) of Mikhail Gorbachev (Marshall, 2018):

In a thousand small ways society and politics opened up and people listened to each other. By late spring in 1989 the idea had spread so far that Hungary, behind the Iron Curtain, had begun to dismantle part of its border fence with Austria. That summer thousands of East Germans decided to take their summer holidays in Hungary.

As we will see in the paragraphs which follow, a common anti-communist mood was fermenting in Soviet vassal-states, each with quite different historical dynamics but there is no doubt that glasnost, perestroika and, separately, step-change communications such as satellite TV broadcasting contributed to the fervour. In Berlin where West and East faced-off physically (but through the wall) and in close proximity (a divided city), those in the East could see at close quarters the disparity in material well-being between themselves and West Berliners. In the context of events unfolding elsewhere in the East (discussed below), growing unrest in East Berlin led to the departure of the reviled East German leader Eric Honecker in October and what happened next sounds more like English farce than German precision. With the politburo in confusion, the propaganda minister on vacation and extremely mixed signals coming from Moscow, a dozy East German border guard ‘opened the doors of freedom’, the emotional consequences of which are captured perfectly by Marshall (2018):

At first the East German border guards refused to allow anyone out, but then, amid the confusion, they stamped a few passports and then stood back to allow the crowds to surge through. The scenes, which a year before no one had predicted, were amazing. West and East Germans embraced each other, champagne corks popped, and the ‘wall peckers’, ordinary East and West Berliners, climbed to the top of the wall with chisels, hammers and axes, and set to work levelling the great barrier. The word of the night was wahnsinnig – mind-blowing.

All historic moments-in-time have antecedents and consequences and in the paragraphs which follow we briefly review those country-specific factors which led to the scene which Marshall describes. Ahead of this, a brief note on a significantly huge milestone in the history of globalization is warranted: German reunification. The catalyst for this was rooted in Gorbachev’s policies and philosophies but these, in turn, were a direct function of the Soviet Union’s lack of competitiveness in both economics and ideology in an increasingly global ‘market’ for resources and ideas. Gorbachev didn’t introduce reforms out of philanthropy; they arose from necessity. As The Economist notes (Economist, 2017, September 2nd), “Dismantling the Soviet Union was the last thing Mr Gorbachev wanted; he came to save it, not bury it”. Nevertheless, following the breach of the Iron Curtain in Hungary and the increasingly overt ceding of Soviet hegemony in Eastern Europe, what became known as ‘The Peaceful Revolution’ took root in the German Democratic Republic (GDR), a series of violence-free initiatives, protests and demonstrations led by intellectuals and church figures and mirrored by huge numbers of people attempting to flee the country. In this context the GDR’s first free parliamentary election took place in March 1990. But, as the saying goes, it takes two to tango and support for reunification in West Germany was not assured, not least because of the huge financial implications for this fiscally prudent nation. Without the inspired leadership of the visionary West German Chancellor Helmut Kohl, reunification may never have happened and East Germany may have remained a sorry state under Soviet or Russian influence. However, on December 2nd, 1990, the first free, all-German parliamentary elections for six decades were held and the two Germany’s became one. Like most mergers, the marriage was not all plain sailing, as Marshall notes:

The wall hadn’t just prevented people from travelling, it had created deep gulfs – economic, political and social – that would prove harder to overcome than the physical barrier. So, after the tears of joy and declarations of brotherhood, the hard yards of reunification began. This was not a merger of equals.

Unlike many mergers, German reunification was ultimately a great success; it marked a significant turning point in the path of globalization and laid a strong foundation for the creation of the EU and its subsequent enlargement. Without the stability of this central German powerhouse, the country scenarios outlined in the following paragraphs could have led to quite different outcomes.

Poland (more accurately, the Polish populace) had a long history of non-conformity which reached a political milestone in September 1980 with the creation of a non-communist trade union under the leadership of Lech Walesa, a worker at the Gdańsk shipyard which carried the name of Lenin. By 1981 the Solidarity trade union had attracted ten million members, accounting for more than a third of working-age Polish people. The union had become a broad-based anti-bureaucratic movement which promoted workers’ rights and social change via co-ordinated civil resistance. There was an initial government backlash against the movement which involved a period of martial law and a sustained phase of political repression, but underground resistance and an odd mixture of financial backing from the CIA and the Vatican (then led by a Polish Pope) fuelled the Solidarity movement which emerged over the decade. In 1989 the first free elections since Soviet-imposed communism after the Second World War were held and a Solidarity-led coalition whitewashed the ruling communists, setting the scene for the 1989 revolutions we describe here. Walesa became President of Poland on December 22nd, 1990. A long-awaited triumph for liberal democracy arose in a region noted for decades of autocracy and often brutal repression.

In Czechoslovakia, meanwhile, a ’velvet (aka gentle) revolution’ inspired and led by the cerebral leader of the Civic Forum party, Václav Havel, led to the capitulation of communism in the country, the instruments of communist one-party rule being dismantled and mass resignations of communist politicians taking place in rapid order. There had been a previous phase of political liberalisation during 1968 known as the Prague Spring; it included decentralisation of the economy, broader democratisation and a loosening of restrictions on the media, speech and travel. But it ruffled Moscow’s feathers and was met by a huge invasion of the country by the Soviet Army and forces from Warsaw Pact allies. The uprising was suppressed, and clear signals were implicitly sent to other potential rogue states thinking of disturbing the communist equilibrium. That was then but this was now – 1989 – and the Soviet dominoes were falling fast. On December 10th the first non-communist government since 1948 was appointed by the departing Communist President Gustáv Husák. Václav Havel, who had agitated during the Prague Spring and afterwards – peaceful activities which led to numerous imprisonments – became President of Czechoslovakia on December 29th, 1989, and full democratic elections were held within six months. It was another triumph for liberal democracy. Similar peaceful revolutions leading to freedom from Soviet influence and control took place in Bulgaria and Hungry and by 1991 both countries had held free elections. From a political economy perspective, they could now comfortably be described as liberal democracies.

Less ‘gentle’ in this crumbling Soviet house-of-cards was the bloody toppling of the increasingly autocratic long-serving Romanian communist General Secretary Nicolae Ceaușescu following the violent Romanian revolution of 1989 in which thousands were killed or injured. Ceaușescu was put on a show-trial faced with charges which included ‘illegal gathering of wealth’ and ‘genocide by starvation’. Ceaușescu and his wife, Deputy Prime Minister Elena Ceaușescu, were executed by firing squad on Christmas Day, 1989 (a spiritual celebration they had brutally suppressed while in power). The National Salvation Front, a centre-left think tank which had used Radio Free Europe amongst other banned media to communicate atrocities in Romania to the ‘outside world’, took charge as an interim Governing Body after the executions, promising elections within five months. They reformed as a political party under the leadership of Ion Iliescu and won a landslide victory the following May, bringing in a series of economic, democratic and social reforms and shifting Romania’s allegiance towards the West. It was yet another triumph for liberal democracy but this time, for the first time in the series of revolutions described here, it followed a violent and bloodlust struggle. It was to be the last revolution against communist rule in Europe but, as we shall see, by no means the last gasp of communism as an ideology and vehicle for political rule on a massive scale.

Unlike the Soviet satellite states discussed in the previous paragraphs, Yugoslavia was not a product of the post-second world war Soviet order: as a ‘nation’ it was established as the Kingdom of Yugoslavia at the end of World War One. After 1945 Yugoslavia, under Marshall Josip Broz Tito, mirrored the USSR federal model and established six ‘Socialist Republics’ to create the Socialist Federal Public of Yugoslavia with the federal capital being in Belgrade, Serbia. The socialist republics were: (i) Socialist Republic of Bosnia and Herzegovina; (ii) Socialist Republic of Croatia; (iii) Socialist Republic of Macedonia; (iv) Socialist Republic of Montenegro; (v) Socialist Republic of Serbia (with Socialist Autonomous Province of Kosovo and Socialist Autonomous Province of Vojvodina); (vi) Socialist Republic of Slovenia. The King was forced to abdicate; uncontested elections were held in each of the Republics and the Federation was run by the centralised Communist Party. Tito split from Stalin and the USSR in 1947 and subsequently sought (and received) non-Marshall Plan aid from the USA (see Chapter Thirteen for a brief reference to the role of the Marshall Plan in post-war European reconstruction).

In short measure following these 1989 revolutions (often described as the ‘Autumn of Nations’) there followed the collapse of Comecon, the Council for Mutual Economic Assistance, an organization founded by Joseph Stalin in 1949 to provide an economic framework under Soviet Union leadership, primarily made up of member (satellite) states of the Eastern Bloc but also including several communist states elsewhere in the world. It was effectively an economic organization to ‘compete’ with Western equivalents and, for the most part, provided a degree of economic stability between the two ‘trade blocs’ (East and West) during the Cold War. It ceased to exist in the autumn of 1991, shortly followed by the end of the great USSR experiment in December of the same year.

The Rise and Fall of the USSR: 1922-1991

Under mounting pressure on multiple fronts, the Soviet Union dissolved in December 1991 as eleven nation-states declared their independence: Armenia; Azerbaijan; Belarus; Georgia; Kazakhstan; Kyrgyzstan; Moldova; Tajikistan; Turkmenistan; Ukraine; Uzbekistan. The Baltic states of Estonia, Latvia and Lithuania had already regained their independence earlier in the year, in September. Albania and Yugoslavia rejected communism between 1990 and 1992 and the political system was dropped outside its European stronghold in Cambodia in 1991 and Ethiopia in 1990. The transition periods to market economies were rarely smooth and, perhaps predictably, the Balkan countries experienced multiple frissons, tensions, traumas and tragedies during the 1990s as the status quo ante played out, culminating in multiple United Nations and NATO interventions towards the end of the tumultuous decade.

Returning to the demise of Soviet communism as a more general theme, the last words on this extraordinary period of European history, in this Volume at least, go to Václav Havel, who had agitated for freedoms through two ‘revolutions’ in Czechoslovakia. The first, the Prague Spring, provided a political science suffix that defines significant events to the present day (the Beijing Spring, the Arab Spring etc.) and, although subdued by the threat of overwhelming Soviet force, led to humble humiliation but little bloodshed. The second, the Velvet Revolution, was more or less managed as a fait accompli and set a tone of persuasive transformation for other Soviet vassal states. Giving the traditional Presidential Address on January 1st, 1990, just two days into his presidency, Havel was speaking about the Czech experience but alluding to a wider world (reproduced in MacArthur, 2017):

The previous regime – armed with its arrogant and intolerant ideology – reduced man to a force of production and nature to a tool of production. In this it attacked both their very substance and their mutual relationship. It reduced gifted and autonomous people, skillfully working in their own country, to nuts and bolts of some monstrously huge, noisy, and stinking machine, whose real meaning is not clear to anyone. It cannot do more than slowly but inexorably wear down itself and all its nuts and bolts.

These were heady days for scholars and practitioners engaged in the study of international business and especially for proponents of the virtues of liberal democracy. And also for political scientists and philosophers trying to make sense of it all.

 

Outside Fortress Europe Excerpt References

Economist. (2017, September 2nd). Mikhail Gorbachev: the story of a good Soviet man. The Economist, 71-72.
MacArthur, B., ed. (2017). The Penguin Book of Modern Speeches (3 ed.). London: Penguin.
Marshall, T. (2018). Divided: Why We’re Living in a World of Walls. London: Elliott & Thompson Limited.

 


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