The Victims of Communism Foundation's Blog

Making the Transition to Democracy and Free Markets

Making the Transition to Democracy and Free Markets


After the fall of the Berlin Wall in November 1989, the former captive nations of Eastern and Central Europe faced a daunting challenge: Could they, after more than four decades under communism, make the enormously difficult transition from totalitarianism to democracy and Marxism to capitalism?

As they took stock of what would be needed, the enormity of the task stunned even those who had been part of the old Europe before the communists arrived and seized control. The captive nations were like suddenly released prisoners who had been in isolation for so long that their muscles and minds had atrophied and they could barely stand or speak.

They concluded they would need some if not all of the following to become viable free-market democracies:

  • Democratic institutions such as a multi-party legislature, an independent judiciary, and free and open elections.
  • The rule of law, not of a political party.
  • Principled and yet pragmatic leadership.
  • An acceptance of the profit-and-loss philosophy of capitalism.
  • An educated energetic populace
  • A military strong enough to discourage incursions by neighbors, especially Russia. (A concern of all the ex-captive nations from the beginning).
  • The political will to weather the inevitable ups and downs of the transition and not to give in discouragement or despair.

Today, some 25 years later, we can see that some once-captive nations, like Poland and Estonia, have successfully made the transition while others are struggling. What is the secret of their success? Why has Poland emerged as a leader in the European region? Why is little Estonia ranked second in Europe and eighth in the world in The Heritage Foundation’s 2015 Index of Economic Freedom?

We have selected two former captive nations—Poland, the largest, and Estonia, the smallest—and examined their political and economic history since 1989 to arrive at some answers. One key factor is their belief that, in the words of former Estonian prime minister Mart Laar, “freedom is not only a dream, or an excellent idea, it is also a very practical tool.” They believe that freedom works.

POLAND

With a population of 38.5 million, Poland is the largest and most homogeneous nation of Eastern and Central Europe. Its Roman Catholic religion reinforces its nationalism and gave it a doctrine strongly opposed to communism. The Polish people’s entrepreneurial spirit frustrated the communist plan to implement a command economy. As Zbigniew Brzezinski wrote, “almost everything in Polish society and in Polish history conspired against a communist system imposed on Warsaw from Moscow.”

As a result of its economic and political decisions over the last quarter of a century, Poland today is 19th in Europe and 42nd globally in the Heritage Economic Index. In Freedom House’s annual “Freedom in the World” survey, it has the highest rating in freedom, civil liberties and political rights. According to Freedom House, Poland is also among the countries with the most press freedom, ranked 26 in the world.

The European Bank for Reconstruction and Development (EBRD) has tracked economic reform in former totalitarian countries since 1989. In six categories, from large scale privatization to trade to competition, Poland observes the standards of an industrialized market economy.

In the area of national security, Poland joined NATO in 1999 and the European Union in 2004. With a flexible exchange rate, an IMF (International Monetary Fund) credit line, and healthy economic policies, Poland was the only country in Europe that had economic growth during the 2009 economic crisis. By reason of its size and prudent public policies, it is an accepted leader in Europe, with Jerzy Buzek serving as president of the European Parliament from 2009-2012, and Donald Tusk as the current president of the European Council.

Poland’s story proves that a once captive nation can overcome decades of Marxism-Leninism and serve as a model of free market capitalism and liberal democracy.

what is the secret of their succes?

ESTONIA

Regaining its independence from the Soviet Union in 1991, Estonia is today a stable multi-party democracy and among the 10 freest economies in the world. It joined NATO and the European Union in 2004 and the Organization for Economic Cooperation and Development (OECD) in 2010. The following year, Estonia became the first former Soviet state to adopt the Euro. As the Heritage Foundation puts it, “Estonia [with a population of just 1.3 million] is one of the world’s most dynamic and modern economies,” particularly in the field of electronics and telecommunications.

Like Poland, Estonia has the highest rating in political and press freedom as well as economic reform in privatization, trade and competition. It has strong trade relations with Germany, Sweden, Finland, and Russia, the latter a matter of increasing concern because of Vladimir Putin’s aggressive actions in Georgia, the Crimea, and Ukraine.

When Estonia, Latvia and Lithuania all joined NATO in 2004, members of the international community accepted their membership on the basis of psychological rather than actual physical security. But recent events in Ukraine have forced an acknowledgement that Putin’s Russia seems bent on expanding its sphere of influence throughout the region, with an eye on the Baltic states and perhaps even Poland.

When the nations of Eastern and Central Europe joined the European Union and NATO, it seemed as though the history of the region had come to an end. But it was in reality a beginning, the beginning of a new Europe composed of old democracies like Germany and France and new democracies like Poland and Estonia. Political and economic differences have surfaced, some of them serious, but Mart Laar has suggested that the biggest challenge of all may be the integration of the value systems of Western Europe and Eastern Europe. Both Europes went through the same stages of the Reformation and the Counter-Reformation, the Enlightenment and the rise of the nation-state.

But there is a major dividing line in their history. Western Europeans experienced only one kind of totalitarianism—Nazism. Eastern Europeans suffered under not only Nazism but Communism. As Laar has written, “Communist dictatorships and Communist crimes must be treated and condemned in the same way as Nazism and Nazi crimes.”

Until this is accepted on all sides, it will be difficult to create a unified Europe that can meet the inevitable political, economic and strategic challenges of this millennium. Fortunately, an important step was taken by the European Parliament in 2009 when it declared August 22—the date of the infamous Nazi-Soviet “Non-Aggression” Pact of 1939—as a day of remembrance of the victims of both Nazi and Communist totalitarianism. The parliament’s historic act confirmed that it is determined to carefully study the past so that it will not be repeated.