...somewhere. To someone.
"It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way – in short, the period was so far like the present period, that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only." – Charles Dickens: A Tale of Two Cities
I apologize for adding to the overuse of this now cliché-like quote. But perhaps it is the destiny of great thoughts that they become so oft-repeated that they lose their original meaning and intent, and become trivialities rather than true passages of wisdom on the lips of the many. The same can be said of various expressions and verses of Scripture (of ALL religions), ‘philosophy quotes’ and even the generational/epochal knowledge contained in legends, folk tales, fables and oral classics like the Iliad. We tend to our history less and less with each passing generation, it seems.
The period around 1989 was yet another era, and Eastern Europe was the yet another place where the turning wheel (spiral?) of history served up Dickensian circumstances in spades. Every single word of the famous passage applied, as the established order of society creaked and crumpled about the ears of the inhabitants. There was no collapse, per se – the ‘backbone’ of social structures remained intact (in fact, to a much greater degree than would have been preferable). Regardless of the calamities of the reverse-domino-effect of communist regimes losing their erstwhile iron grip one after the other, it was never chaos. Despite the queues in front of empty gas stations, and demonstrations over energy and food prices which of course rapidly outpaced wages in rapid sprints of (hyper)inflation, despite actual revolutions, almost all countries in the region managed to hold onto a semblance of rule of law and kept society from unravelling at the seams. Yugoslavia may need to be treated as an exception to this blanket statement, though the case could be made that its individual member states maintained their structural integrity, and proceeded to wage war against one another. Bosnia-Hercegovina lost badly, due to a multitude of factors. In many ways all involved lost a lot there.
A previously existing, artificially constructed and maintained economic system that depended on cheap energy and cheaply manufactured goods, held together by military force and multiple generations of state-controlled propaganda was undercut by insolvency of the sponsoring power (does any of this sound familiar?) – yet there was no mass holocaust, no descent into anarchy.
None of this is to indicate that the ‘transition’ was even remotely easy or pleasant. Several of the currencies in the region experienced (near) hyperinflation, all of them went through painfully high inflation at one point or another. Certain classes of goods became scarce for longer periods than previously endured, as trade agreements broke down or high energy costs made transport and/or production prohibitively expensive. Many countries lost generational wealth as savings evaporated (though of course those who had REAL wealth kept little in local currency, so only the little people were affected). All of this made for a social experiment that I found unique and interesting. My home town, along with many other larger cities in my region at the time, became host to an old-school physical represenatation of a real COMECON market. The Council for Mutual Economic Assistance was the USSR’s trade block, established in 1949 by Stalin. A mere 40+ years later, as the hrivnya became even more worthless than the ruble it split off from, when a lei would buy a fraction of what it once did, the enterprising serfs of these utopian kingdoms took matters into their own hands.
Imagine an open-air market, with steel-framed seller’s stands – row upon row of these covered with tin siding or tarps, alongside a few more permanent market halls. Mostly tarps and siding roofs, though. Within a few hundred square yards on any given weekend, you could find at least one citizen of ALL (at that point) formerly communist European states (and some bolder Vietnamese or Chinese merchants to boot). The reserve currency was the Deutschmark, less frequently the USD – but local fiat was utilized as transactional currency. The East Germans hawked optics and furniture, the Poles brought textiles, the Ukrainians generally had hardware and tooling. The latter were always amusing, as Soviet-made items (whether electric drills or saucepans) often had the price stamped into the steel… During the few frantic months when the Red Army FINALLY did an about face and marched back east, popular rumor had it that entire T-62’s were dismantled and sold for scrap (mainly for copper). Getting your hands on a nice selection of the late Mr. Kalashnikov’s namesakes was rather easy, as both local and neighboring mobsters quickly discovered. I actually saw the private collection of an industrial magnate (mini-oligarch, I guess) which included an older-model Soviet fighter and several (functional) pieces of mechanized armor.
But the market fulfilled a simple set of needs of daily life: it provided a lifeline of ‘hard currency’ to the sellers, and distributed goods otherwise unavailable or unaffordable to the populaces who had access to them. It, and its counterparts region-wide also served as part of the relief valve around the embargo/sanctions Yugoslavia was later put under, allowing for a means for thousands of families to be fed. There was no government gesture of humanitarian relief, or an opening of the borders to accept refugees (except to a token degree) – it was the old ladies who bicycled the 15 miles with their large bags filled with cartons of cigarettes and cheap distilled spirits who made the money to put food on the table.
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It was possible to buy anything from tractor transmissions to wedding dresses, stereo systems to pickaxes. Chinese vendors bought containerloads of clothes or electronics, and eventually simply sold out of the opened containers. Ordinary folks from surrounding capitals or small villages would sell the items no longer being made or shipped, as well as sometimes awesome quality handmade items and antiques as well. Think a massive, impromptu Craigslist, with items new and old, valuable and tawdry alike. It was a parody of a modern free marketplace due to its lack of sophistication and technology, but at the same time was also the epitome of supply meeting demand without coercion (if one looks past the twisted currency policies of the countries that made this possible and necessary in the first place). Like in any good bazaar, haggling was expected, indeed almost bad form not to do. It was depressing and life-affirming at the same time.
To greater or lesser degree, the process by which all of this came to pass was just that – a process. Yes, there were milestones along the way, surely there were very specific, significant events that marked the decline of the non-convertible ex-Communist currencies. And in many if not most countries there were significant devaluations in a single day. But in general, for the region as a whole, the theft of wealth and living standards was a process that was drawn out over months and years (and of course continues to this day). Just like Kristallnacht did NOT just materialize out of the blue one November evening, there is always a cadence that seems to be kept to with these things.
Some general, observational points:
- The drastic income reducing/cost increasing step imposed by the government on the populace is ALWAYS a last resort, adopted only to avoid an even worse outcome. Relieving countermeasures to ease the 'pain of transition' are always immediately offered, or at least confidently forecast for the near future.
- BUT cops and other security personnel ALWAYS got a substantial raise before major inflationary events
- Eastern Europe DID live in de facto police states until 1990 or so (and of course some of these are being/have been reestablished) – the effect of economic collapse on the enforcement mechanism was simple: the enforcers needed to feed and clothe their kids too. Yes, corruption and graft became rampant everywhere – but a large part of it was ‘existential corruption’. In any case, the grip of the governments (temporarily, in many cases) slipped and relaxed a bit. Mobs were built, and then entrenched.
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- Bleeding a patient is ALWAYS done gradually. They won’t announce a 10% devaluation, they will do 4%, then follow up later with 6% more.
- Currency controls work, to a point – they keep the large masses of people from moving wealth, but never those who have substantial amounts of it. Also, when an entire populace becomes incentivized and handsomely rewarded for circumventing said controls, they become very creative and difficult to anticipate.
Even with a collapse as seemingly monumental as the loss of superpower status for the USSR and the ‘cutting loose’ of its satellites, trains were kept running (if not on time), people by and large were free to move about (if anything, slightly freer, though still bound by lack of funding).
A collapse, no matter how epic, is always a process. Freefall can be engineered in standalone single buildings, perhaps, but the steel beams in the case of the current global monetary regime crisscross too far and wide to pancake all at once. The good news is that we may have some time (Days? Weeks? Months?) between plainly obvious, explicit monetary collapse events. The bad new is that the obvious, explicit ones are still yet to come, and are liable to be nasty, if the endgame truly approaches.
But the capacity for human society to regenerate and spontaneously organize is also truly remarkable. And our keepers, no matter how fearsome and powerful they may appear, are not ALL-powerful or omniscient. And they certainly will not have permanent grip on said power. No matter WHAT they would like us to believe.
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