Of all the innovations that have shaped our lives in recent years, none has been more influential than the destruction of the Berlin Wall. The Wall did not fall as is often described. It was taken apart stone by stone by?people angry about their enslavement behind it in the so-called German Democratic Republic. It was the final curtain on the ridiculous notion of people?s democracy and the pretence that Bolshevism was the future. It was the best example? of creative destruction as Schumpeter labelled the innovations of capitalism.
The destruction of the Wall ended the sad history of an experiment that lasted 75 years during the 20th century. It was an experiment in devising an economic system that promised to do better than capitalism in terms of both bread and equality. Much of the debate during that time had intellectuals, especially in the colonies, climbing on the Soviet Union bandwagon and hoping to ape its policies as and when they had the chance to do so. Pandit Nehru was the most prominent among them. The prestige of the Communist Party of Great Britain and later of India was enormous. They had ?history? on their side.
The stranglehold of the Leninist model on economic imagination has now been loosened everywhere else, except in India. The Mahalanobis model was India?s offering to the Soviet model, and it mired the Indian economy in stagnation for 30 years. Only after the Wall fell was it possible for Manmohan Singh to break out of the old prison of Soviet style planning models with command and control.
But it was not just India that benefited though,?indeed to this day, there is some nostalgia for the old USSR. The Eastern European countries, havens of socialism (which were recording a 5% per annum growth for many years according to the UN Economic Survey of Europe)? chose to abandon their economic system with indecent haste. China had begun the process in 1978 but it had the choice as it did not come under the USSR?s yoke.?In the case of Poland, the policymakers such as Balcerowicz preferred massive loss of output as the price for total restructuring. No ?Socialist? country in Europe stuck to that model. The?subject known as Economics of Socialism, that is, trying to make sense of the economic trends in Eastern Europe and USSR, disappeared.
If the generations of the 1930s to 1960s looked upon Soviet Union as an example to emulate and perhaps the beacon of anti-Americanism, the generations of the 1980s and 1990s find it hard to believe that such a system could ever exist. It is forgotten more completely than the workings of Feudalism. There were two competing systems between 1945 and 1989, if not between 1917 and 1989. Now there is only one game in town and it is capitalism. Even during the latest crisis no one flew the flag for? a return to Soviet-style planned economy. People had seen the Emperor had no clothes and would not change their minds.
Globalisation began its latest phase with technological changes in transport and telecommunications?Comsat, for example, and computing. But its reach was still partial until the late 1980s. The Wall was literally a barrier to the spread of globalisation. Its removal meant that across Europe markets would define the logic of? economic life. Citizens were free to move for jobs, free to make money and dispose of it as they chose and prosper, rather than live under spartan conditions. Once Europe was conquered, even ramshackle African dictatorships, which pretended to be Socialist, lost their subsidies from the USSR and had to come to terms with their responsibilities. Who now recalls that Ethiopia was to be a Marxist haven?
Globalisation has just been through its first global crisis and come out of it. Capitalism has the capacity to renew itself and advance from strength to strength. It can do so because it is not a monolithic system. No one ?runs? capitalism. Only the fevered imagination of its detractors see a conspiracy by Imperial powers or some secret cabal of Multinationals as running it. Once Western Europe and America had the lead in capitalism. But Asia has just shown that it can play the game even better. There are no religious or racial preconditions for success in capitalism.
That is why it was after China abandoned the silly Soviet model and India also lost its illusions that the largest drop in the number of people living in poverty occurred. It was not Soviet Socialism but good old capitalism that delivered growth and a promise to end poverty. The collapse of the Wall brought to an end a wasted half century of human misery.
?The author is a prominent economist and labour peer
