A spectre is haunting Europe—the spectre of Communism.
Karl Marx, The Communist Manifesto
One hundred and thirty-four years after Karl Marx wrote those lines, a specter is indeed haunting Europe. But it's the specter of the bankruptcy of Communism.
Events in Poland illustrate the depth of the Communist system's defects. The Party's claim to be the vanguard of history and the true representative of the working class has been demolished by the cold reality of the Communist world's first military coup.
Besides this political bankruptcy is the literal financial bankruptcy of the Polish state. With its total foreign debt ballooned to $25.5 billion (compared to just $1.1 billion as recently as 1970), and with no means to pay it back, General Jaruzelski's only hope was to persuade somebody to bail Poland out (which the Soviets did, to the tune of $2.5 billion in new hard-currency credits in January).
It's become obvious to everyone why Poland went bankrupt. Its socialized economy simply would not work. The generals can point the finger at Solidarity all they want, but the fact remains that the members of the independent trade union were reacting to the system's economic failure, not causing it. That cause lies in the futile attempt to centrally plan and direct the myriad decisions that make up what is called an economy.
Finally, it has also become increasingly clear that the Communist system, as exemplified in Poland, is morally bankrupt, as well. As everyone but its most die-hard adherents now recognizes, a system grounded fundamentally in envy and operating by means of force is not conducive to human growth and happiness. What it is well suited for is the consolidation of power of an elite that Milovan Djilas has termed "the new class." One of Solidarity's main goals was to curb the privileges of Poland's new class. The military coup represents the restoration to power of this Party elite.
The disastrous defects of Communism are being recognized around the world. In Eastern Europe, the economic health of the other satellite nations is directly proportional to the extent of their departure from Communist central planning—the extreme case being relatively prosperous Hungary, with its expanding private sector of entrepreneurs and service firms. Yugoslavia has for several decades demonstrated the relative advantages of decentralized "market socialism" compared with the orthodox central-planning variety.
Perhaps the most stunning repudiation of Marxism, though, is taking place today in China. That country's present leadership has taken major steps away from orthodox socialism, including the encouragement of private service businesses and private plots in agriculture, allowing factories to keep most of their profits and gear their production to the market, and even creating free-trade zones along the coast.
And while the Soviets and their Cuban and East German proxies have a strong hold on several African and Arab states, they've been kicked out of Egypt, Ghana, Guinea, and Somalia. Even today, Russians are despised and ostracized in such supposedly Marxist nations as Vietnam and Ethiopia. And the Soviets' disastrous war against Afghanistan has opened the eyes of many Islamic leaders.
How should the people and governments of relatively free societies react to the bankruptcy of Communism? In the specific case of Poland, there's a strong argument that in threatening force against Poland and coercing it into military dictatorship, the Soviet Union has violated Article VII of the Helsinki Accords. (In exchange for final Western acceptance of the 1945 Yalta agreement assigning Eastern Europe to the Soviet sphere of influence, the Soviets agreed at Helsinki in 1975 to respect human rights in those states.) By coercing the Polish government into massive new rights violations, the Soviets have invited sanctions by the other signatories.
What, specifically, should the US government do? Perhaps the most important action would be to cease bailing out the bankrupt Communist regimes. The total Warsaw Pact debt to Western banks and governments is between $70 and $80 billion and growing rapidly. While the government of a free society ought not to forbid private commercial transactions, it can certainly stop encouraging those transactions: by changing bank regulatory policies (which have fostered imprudent balance-sheet treatment of these risky loans), by making clear that it will not rescue banks from any defaults on such improvident loans, and by ending all subsidies for the trade that the loans finance.
Moreover, when such trade has direct military value, there's a case for the government to forbid it altogether. For example, advanced ball-bearing machines, approved for sale to the Soviets in 1972, have been used to produce bearings for MIRV warheads. Recently an illegal trade deal to supply the Soviets with precision mirrors usable in high-energy laser weapons was uncovered and stopped just in time. The Kama River truck plant—partially financed by Export-Import bank loans—produces not just military trucks but also armored personnel carriers, heavy assault artillery, and rocket launchers.
Finally, it's high time we discredited the myth of Communist inevitability: the implicit assumption that Communism is the wave of the future and that every Communist takeover is another irreversible entry in the ledger of history. In fact, as we've seen, Communism's bankruptcy is being recognized all around the world, at a practical level. That system cannot deliver the goods, and it is interested only in power. But what remains is to articulate and disseminate the case for the moral superiority of liberty.
It's high time we rewrote Marx's challenge, along the following lines:
Let the communist elite tremble at a libertarian revolution. The working people have nothing to lose but their chains. They have a world to win. Working people of communist countries, unite!
This article originally appeared in print under the headline "Red Ink".