Peter Gowan

Eastern Europe, Western Power and

John Lloyd’s article is helpful, above all, in revealing more fully his
forms of thought. He appears to think my article was a piece of Marxist
economics. Unfortunately it was entirely pre-theoretical: an attempt to
introduce the claims of neo-liberals like Lloyd to some pertinent facts,
with the aid of standard techniques of policy analysis.
Thus, my article included a refutation of Lloyd’s earlier central justification for Shock Therapy: his rather aggressively asserted claim that neoliberal institutional engineering is needed in Eastern Europe because we
live in a world dominated by globalized production.1 My criticism was
simply based on published oecd research indicating that Lloyd’s ‘globalized production’ stagnated during the 1980s. unctad research covering the 1970s as well suggests a decline in such production. Milton
Friedman has also attacked the brand of globalization ideology which
Lloyd espoused.2 So has Lloyd’s own former newspaper, the Financial
Times.3 Attempts to dismiss all this as Marxist economics won’t do.
Lloyd now says my criticisms on this point are ‘worth refuting’. But he
doesn’t refute them. He thus lets his earlier justification for Shock
Therapy pass.4 He tries to explain away his silence by saying the matter
was not central to my argument. True, but it was central to his earlier justifications for the miseries of millions who have lived through Shock
Therapy, or what Lloyd prefers to call Economic Reform, in the first half
of the 1990s.
Lloyd is upset because I suggest only at the end of my article that the
concept of imperialism should be explored for understanding the facts I
have laid out. He portrays me as if, at the end of a civilized discussion on
1 John

Lloyd: ‘How to Make a Market’, London Review of Books, 10 November 1994. This
article attempted to ridicule those on the Left who failed to appreciate the supposed reality of ‘globalized production’.
See Milton Friedman, ‘Internationalization of the us Economy’, Fraser Forum, February
See Martin Wolf, ‘The Myth of the Global Economy’, Financial Times, 13 February
But he does shift his ground: in his earlier article he said we live in a world of globalized
production. Now he claims that he said we are moving towards a world of globalized production. Although I cannot welcome this as a representation of his earlier position, I do

a Moscow street-corner, I had opened my cloak under the lamp-light to
reveal the badge of the Red-Brown coalition and stuck a dagger into an
unguarded Western investor! I apologize for giving him such a shock: I
should have been more sensitive to the fact that after four years of Lloyd’s
Economic Reform, Moscow can be a pretty scary place. But I put the
point at the end precisely because though my piece was not about theory,
my conclusion tried to introduce theoretical explanation.
Lloyd is also so shocked by the word ‘imperialism’ that he wants to
solemnly banish me to the camp of the so-called Red-Brown coalition.
This is surely precipitate, since he used to use the word himself, back in
1992, when speaking of the International Monetary Fund’s role in
Russia. If I may quote him:
James Morgan, writing in the Financial Times, described the Fund and the
[World] Bank as ‘the new imperialists’ spreading the new gospel [or, if you prefer, Cargo Cult]—the ‘Structural Adjustment Programme’...The evolution of
such programmes has involved total integration of the imf and the World Bank
into the life of the target countries.’ This is what is happening now in
Russia...This phenomenon has gone largely unnoticed in the rich countries...but
it is a fact of life...More than that, it is a determining element in their politics.’

For, as Lloyd also wrote: ‘From being a system as far as possible impervious to foreign intervention, the Russian government has become one of
the most porous in the world.’5 This was Lloyd back in early 1992, a long
time ago. Since then, much has changed not only in Russia but, it seems,
also in Lloyd.
I will return to the issue of imperialism below. I will also look at salient
features of Lloyd’s own neo-liberal thought. But first I will take up the
few, rather peripheral criticisms Lloyd makes of my analysis of what is
usually called Shock Therapy (st).

I. Lloyd’s Critique
I argued that st was not principally concerned with either helping or
harming economic activity. Nor was it about introducing capitalism as
such. Its aim was to engineer sweeping institutional changes in the
internal structures of these political economies to open them up to maximal Western penetration and influence.6 We can all speculate on the
long-term consequences of this intervention and we can debate the
extent to which the West has succeeded in attaining its institutional
goals. But what I insisted upon was that the implementation of this policy did immense, unnecessary damage to economic life in the whole region
during the first half of the 1990s.
The main forms of damage can be briefly summarized:
applaud it as a retreat from his earlier view.
5 John Lloyd, ’Comrades in Monetarism’, London Review of Books, 28 May 1992.
6 It was, above all, a us government policy backed by the uk and, in large part, by the
German government. The French government resisted it but was defeated and the Japanese, who would undoubtedly have rejected the economic rationale for it, kept as far out of
the whole business as it could.

1. A severe slump caused by the shattering of the region’s economic
links, a shattering actively encouraged by the imf and justified by Sachs
as beneficial.
2. Severe domestic slumps deliberately engineered by the imf.
3. These slumps were engineered in conditions where developed financial
markets did not exist, and thus enterprises, without access to domestic
credit, would have to turn to privatization into foreign hands for survival.
4. An attempt to revive these economies by export-led growth directed
towards the ec when the us government knew perfectly well that the ec
would seek to resist such an export surge.
5. Continued domestic deflationary measures imposed upon target governments thereafter by the imf at a time when the revival of these
economies could only be achieved through domestic, demand-led growth.
6. Successful pressure at the start of st to dismantle the trade-protection
regimes of target countries with very damaging effects on domestic producers facing strongly subsidized export drives by West European companies.
7. Attempts by the World Bank to block effective national micro-economic strategies in target countries, with damaging consequences for
some potentially important sectors.
8. A system of negative and positive incentives to force maximum privatization into the hands of foreign companies, often with very negative
effects on potentially or actually strong sectors.
9. A refusal to engage in serious debt reduction, except in the case of
Poland, and a general approach of using debt problems as an instrument
of leverage for domestic institutional engineering.
10. A severe weakening of r&d and educational infra-structures and
efforts to remorselessly attack social protection systems.
11. A form of fdi which was geared more towards market control in the
target country than to technological upgrading and production expansion, with many of the high-profile fdi deals having damaging consequences.
12. Very severe consequences for the health and well-being of the populations of the region.
13. A very grave shattering of the social tissue of these societies and enormous strains upon their political systems as a result of a deliberate choice
of strategies to defeat social and political opposition to the goals of institutional engineering.
Crisis Management or Long-Term Strategy?
Lloyd is silent about most of these particular points and says that some,
unspecified, things I say are true. Fine. Nevertheless, he clearly intensely
dislikes my drift and does criticize some of the points I have listed. I will
take each of his counter-points in turn:
1. There was a largely improvised response to domestic economic crises.
Lloyd now seems to abandon attempts to justify the st strategy, claiming instead that there was no strategy at all, just economic crisis management. He says that st was ‘as much a series of desperate measures to stem
the total collapse of the state finances’ as a freely chosen strategy. He
asserts ‘the overwhelming importance of the pressures of particular
crises’—domestic economic crises.

This is not a sustainable argument. First, in the matter of state finances,
before the introduction of st, there was a fiscal crisis in Poland. st made it
worse. There was no crisis of state finance in Hungary and Czechoslovakia
in 1990 before imf Economic Reform. The fiscal crisis came after. The
Soviet budget was in a crisis as the ussr collapsed, though the scope of
purely Russian budget problems at the start of 1992 is not clear. But Gaidar’s policy turned a bad fiscal crisis into catastrophe by the end of 1992.
Second, the policy orientation of the st teams: was it strategically goaldirected, or reactive and pragmatic? None of those involved would claim
the latter: Balcerowicz initially legitimated his plan as a means of financial stabilization but he and his colleagues are proud of their strategic
conception. They were precisely criticized by other Polish economists for
not confining themselves to stabilization.7 And although the programme
was launched in January 1990, a number of alternative, detailed versions
of the strategy were already completed by the summer of 1989, before the
Mazowiecki government was even established. There was far more preplanning for the strategy, and over a longer period, than is usually the case
in normal times in the West. The Gaidar group and its Western backers
were united for months before they assumed power with a strategic vision
of Russian transformation that had nothing to do with improvised reaction to economic imbalances. As Lloyd once explained to us, Gaidar and
his foreign advisers were ‘producing plans and laws and programmes
which are, in effect, the basis of the new Russian order.’8 Of course, these
were all people in a hurry and they had to improvise much of the detail.
But the goal was there to guide them. Lloyd explained the hurry in
Russia: ‘the present Russian government is very well aware...that they
are embarking on a period of democracy with a programme and practice
no democratic electorate would tolerate for half a year.’9
Lloyd now says that I pretend the post-1989 governments had ‘limitless
scope to choose between a range of possibilities’ in their strategies. I do
not claim limitless options, just more options than one which, in Lloyd’s
words, no democratic electorate would tolerate. The Hungarian government elected in the Spring of 1990 had a programme at variance with st.
So did the Czechoslovak government elected at the same time. The Polish
and Hungarian governments had plans in the early 1990s for industrial
development strategies. All these were abandoned under political pressure.
2. The Collapse of Comecon: Lloyd says that Comecon collapsed in January
1990. This is wrong. The Sophia meeting set up a group to overhaul the
regional trading system and that group worked through 1990 to do so.
The failure of this reform effort was the result, especially of the hostility
towards it of Klaus and to some extent also of Balcerowicz. But it was also
the result of strong hostility from the imf and other Western actors.
Lloyd says I offer no evidence for my claim that Sachs was responsible
for the collapse of Comecon. He is quite right: it would be ludicrous to
suggest that Sachs had destroyed Comecon. He simply expressed the

Tadeusz Kowalik was prominent amongst such critics.
John Lloyd, ‘Comrades in Monetarism’, London Review of Books, 28 May 1992.


Anglo-American hostility to an attempt to set up a regional replacement
to Comecon, claiming that such an attempt would harm the economies
of the region. He offered the prospect of replacing Comecon links with
the opening up of the ec’s trade regime, massive transfers from Germany
and swift entry to the ec—an enticing chimera.
In response, I pointed out what everyone who has examined the crisis of
the early 1990s agrees upon: that the fragmentation of the region had disastrous economic consequences. Perhaps more controversially, I argued
that the enormous structural power of the Western states could have been
used—building on both Soviet and French positions—to have preserved a
regional identity. I argued that the Anglo-Americans, and probably the
Germans pushed in the opposite direction. The result was each state in
the region adrift on its own and consequently in a desperately weak bargaining position with the Western powers and ifis. As for the carrot of
opening up the ec’s trade regime, this was unrealistic, though it served
us policy to exert pressure on this matter: the us government, led in this
by Vice-President Quayle, tried to use the resulting plight of the
Visegrad economies as a diplomatic weapon in its drive to open up or split
the eu in the run-up to the Uruguay Round dénouement.
Economic Vandalism
3. The dismantling of trade regimes in 1989–91 and the subsidized
West European export drive. Lloyd claims I argued that the countries of
the region were reduced to sucking in imports because the West had
destroyed their own industries. I actually made two other points: first,
Western insistence on the dismantling of import barriers at the start of
the process, combined with very large West European subsidies for their
exports to the region did serious damage to domestic industries and agriculture. The evidence for this is overwhelming for the period 1990–92
and, for agriculture, beyond. Second, I presented evidence showing that
imf-induced demand collapse and credit crunch produced a downward
restructuring of industry which seriously weakened the industrial base;
and this weakening was reinforced by the World Bank’s ban on a government or state development bank help with restructuring state industries.
Lloyd presents no evidence to contradict me on the import issue. Instead
he says it would have been a politically unacceptable constraint of people’s freedom if imports of Western goods has been restricted. This is fiction. In Poland, Walesa denounced the predatory Western export drive
and imposed restrictions. Similar tightenings of trade regimes eventually occurred elsewhere. Western tncs like General Motors, which had
bought into the Polish market, or Volkswagen in the Czech Republic,
were often eager to promote such protectionism to shore up their domestic market control.
Lloyd says that trade deficits can be beneficial if the imports are of capital
goods for upward restructuring. This is true, provided the exchange
costs can be met. But it is irrelevant for the period we were discussing.
Significant imports of capital goods began later.
4. The absence of a significantly developed financial system when st was

launched. Lloyd says that I failed to mention the burden that the absence
of banking and financial sectors placed on the new governments. I’m
afraid he missed my remarks on this subject (pp. 14, 32–3). But he gives
me the opportunity to repeat them: to launch st in such conditions was
inexcusable economically but it was central to the institutional engineering desired by the supporters of st. Without a developed credit system
to tide over enterprises facing collapsing domestic markets, the state
enterprises could seek only one path to salvation: linking up with
Western private capital through privatization into Western hands. The
architects of st must have been very well aware of this. At least Lloyd
was, back in early 1992, as the Russian st programme began to bite,
when he reported that ‘fundamental change may now be beginning as
enterprises run out of credit’.10
5. The West wanted to lend more but there were no projects to spend the
money on. Lloyd says the head offices of the imf, wb and ebrd wanted to
disburse more funds for projects but were unable to find suitable projects. This is true, and he thinks it catches me in a contradiction. But
that is simply an example of Lloyd’s neo-liberal blinkers. There could
have been any number of projects for developing public infrastructures
and modernizing state enterprises. But the imf/wb were against any such
projects. They wanted only projects involving private capitalist development. That is why finding projects was hard work. As for the ebrd,
Atalli’s initial conception and desire was for it to engage in just such big
public infrastructure projects. But he was blocked by the us and then
levered out of the bank altogether by the Anglo-Americans. And, while
he was in charge, he faced us-dictated terms of reference which made it a
miracle he found any projects to fund at all: the overwhelming bulk of
ebrd funds had to be for the private sector and to be on commercial
lending terms; but at the same time, the ebrd was not allowed to lend to
any projects that could be funded by Western commercial banks!
6. Picking winners. As I explained in my article, the most damaging,
unnecessary cost of st was the shattering of the regional network and the
creation of deep dependency structures between isolated Eastern economies and very powerful and highly mercantilist Western forces. The second unnecessary damaging feature was the domestic slumps demanded
by the imf. I went on to explain the debating tactics of the supporters of
st. They invite us to ignore the slump and its causes and to ignore the
micro-economic damage and choose between the different countries
growth rates as they emerge from the slump.
I am gratifyingly proved right by Lloyd’s response, for he precisely asks us
to choose between Poland and Romania or Hungary. I wrote (p. 55) that
Romania’s growth rate should not ‘be erected as some sort of superior strategy to that of Poland. Since 1989 the Romanian people have probably suffered more than the Poles’. I went on to say that Poland and Romania had
one thing in common: they lacked Hungary’s crippling debt burdens—
Poland, alone in the region gaining a big debt reduction. The second point I
made was that the differences in growth rates after the slump could not justify any claims for the superiority of the st strategy of open-door



institutions over more autarkic approaches. As to his claim that I argued
that gradualism produces better results than Shock Therapy, I made no
such statement. And Lloyd’s attempt to explain away Hungary’s deep problems by saying that the Democratic Forum government from 1990–94 was
composed mainly of former communists has as much explanatory force as
attempting to explain Gaidar’s strategy by reference to the fact that he had
been deputy editor of the cpsu’s theoretical journal Kommunist.11
The Demon Sachs
7. The role of Jeffrey Sachs. Lloyd says that I demonise Sachs, present
him as a demonic force. I don’t understand why. I said he was a failure in
the region as an applied economist. Does that make him a demon? I said
he was naive about Western politics. But that is hardly a monstrous
crime. Lloyd even claims I argued that Sachs was manipulating the imf: I
sought, in fact, to demonstrate that he was manipulated by them.
I made only one claim about Sachs: that his writings on st do express its
main strategic conceptions, as worked for by him and others between
1989 and 1992. How highly Sachs was regarded by the real Western
managers inside the decision-taking black box I don’t know, since the
box is closed and no imf minutes are ever published. But as I tried to
explain, key aspects of what Sachs thought necessary were repudiated by
the imf/g7, and Sachs subsequently characterized the imf managers, in
my judgement inaccurately, as ‘bureaucrats’. If Lloyd, as an insider, says
we should give more credit for policy influence to Michael Bruno and
Stanley Fischer I am happy to do so!
8. Future living standards in the region. Lloyd’s figures are more hopeful
than mine. I simply used imf figures and those provided by Rollo and
Stern. If the imf figures were wrong, I am pleased and not at all surprised. But the suffering that millions of people have gone through and
that millions are still going through in that part of the world has still
been a scandal. Let me repeat myself: the consequences of st in terms of
human misery and economic devastation were not only in principle
knowable through our state of sociological and economic knowledge at
the end of the 1980s. They were also actually known and foreseen by
Western policy-makers, certainly when Gaidar began his work in Russia
at the start of 1992. The mechanisms of causation between, for example,
the Russian shock slump and human death and malnutrition are not
transparent. But they are easily traced. And, for anyone in the West with
a link to the heritage of the Enlightenment, they should raise disturbing
questions about the ethics of Western responsibility.

II. Imperialism, Classical and Neo-Classical
The word imperialism is out of fashion. But fashion isn’t everything:
conceptual power and clarity also have value. And imperialism has been
a perfectly normal part of our world for a long time. It refers to the political domination by the members of one state over populations outside
The Economist, by contrast, tries to explain away the Hungarian debacle by blaming it on
the Nationalist government.


that state. Lloyd’s reply assumes two models of imperialism: the juridical
imperia of the West European powers in the first half of the century; and
the German domination of Europe in the 1940s—with its quislings.
Both these models have in common imperial expansion via military conquest. The imperialisms of Britain, France, Belgium, Holland, Portugal
and Spain had the further feature that they usually abolished the juridical sovereignty of the dominated people.
The American imperial form is very different. Samuel Huntington brilliantly captured it as follows in an article back in the early 1970s.
‘American expansion has been characterized not by the acquisition of
new territories but by their penetration . . . The expansion of the American operational empire has thus not been incompatible with the multiplication of national sovereignties in the Third World. Indeed, in some
respects, the multiplication of sovereignties has facilitated the growth of
American transnational operations.’12 Lloyd can’t grasp this: he evidently thinks you have either imperial domination or juridicially sovereign states with ‘democracy and the free market’.
Huntington goes on to explain that the formal mechanism for this imperial expansion was agreement by the target government to provide access
to its territory for various American public and private business organizations. In Huntington’s words: ‘Western Europe, Latin America, East
Asia, and much of South Asia, the Middle East and Africa fell within
what was euphemistically referred to as “the Free World”, and what was
in fact a security zone. The governments of countries within this zone
found it in their interest: a) to accept an explicit or implicit guarantee by
Washington of the independence of their country and, in some cases, of
the authority of the government; b) to permit access to their territory to a
variety of us governmental and non-governmental organizations pursuing goals which those organizations considered important... The great
bulk of the countries of Europe and the Third World . . . found the advantages of transnational access to outweigh the costs of attempting to stop
it.’13 This captures well the situation facing East Central and East European governments in the early 1990s. They desperately needed access to
Western goods and capital markets, and the us government ensured that
the condition for such access was opening up their domestic arrangements to what Huntington calls penetration.
Soft Imperialism
But to understand the current forms of us expansion we must go beyond
Huntington’s analysis and accept the concepts of what Susan Strange has
called ‘structural power’14 or as Joseph Nye, Director of the Center for
International Affairs at Harvard, prefers to call it, ‘soft co-optive power’.
This is about creating rules and institutions within and around target
states that have the effect of getting the leaders of these states, in Nye’s
words, to ‘want what you want’.15 As Nye puts it: if the dominant state
12 Samuel

P. Huntington, ‘Transnational Organizations in World Politics’, World Politics,
vol. 25, no. 3 (1973) p. 344.
13 Ibid., p. 343.
14 See Susan Strange, States and Markets, London 1988.
15 Joseph S. Nye, Bound to Lead: The Changing Nature of American Power, New York 1990.

‘can establish international norms that are consistent with its society...if
it can help support institutions that encourage other states to channel or
limit their activities in ways the dominant state prefers, it may not need
as many costly exercises of coercive or hard power in bargaining situations.’16 In Nye’s view, in the post-1989 world, possession of this soft cooptive power ‘is just as important as hard command power’. He adds that
the ability of the dominant power to develop and use multilateral institutions may be more important today than force.17
Nye cites in particular the co-optive power which us leadership of the
‘institutions governing the international economy’—he mentions the
imf and the gatt in particular—gives it. Lloyd seemed to grasp these
points in 1992, but now it appears that he has forgotten them.
The problem which the us faced in Eastern Europe was to implant institutional structures and rules within the states of the region that would,
once in place, make the leaders of these states ‘want what the us wants’.
These include foreign investment regimes, trade regimes, state–market
relations, appropriate freedoms for tncs, appropriate tax regimes, minimalist welfare states, deregulated financial markets, fully convertible
currencies, the absence of foreign-exchange controls, privatized utilities,
appropriate regimes for mass communications, appropriately organized
stock markets, the right kinds of definitions of intellectual property
rights and the appropriate forms of corporate property and governance,
appropriate forms of domestic ideology and politics, and so forth. In my
article I referred to these goals as the regime goals of the usa. Nye does not
mention the fact that these institutional structures must ultimately be
underpinned by distinctive social structures such that the dominant
social class will experience huge gains, as they have, paradigmatically, in
Mexico. These were the goals of Shock Therapy. These are the bottom
line. They are about ensuring that us power is strengthened in its dominance into the next century. It is what we might call, if you will pardon
the pun, neo-classical imperialism. This is the way the capitalist world
works: through empires of different species, rising and falling. Surely
Lloyd is aware of this.
There are, of course, many other issues of debate on imperialism. Some
may prefer the term hegemony—that is, dominance in the state hierarchy and world economy, but this concept, though necessary, is insufficient: it excludes the elements of strategic control and territoriality
contained in the concept of imperialism. Others may demur at my
emphasis on the us, arguing for a more inclusive g7 actor, but I do not
have the space to elaborate on these issues.
In the original article I tried to spell out some of the main mechanisms of
imperial enlargement in Eastern Europe in the early 1990s. Lloyd simply
ignores the substance of this discussion, attempting to claim that talking
about these power resources and the mechanisms of their use is a symptom of a fevered Manichean paranoia on the Left about ‘good’ versus
‘evil’. This is a pity, because Lloyd could, given his experience as a

Ibid., pp. 32–3.
Ibid., p. 197.

leading ‘insider’ correspondent in the region, provide a wealth of material that would enhance our understanding of these mechanisms.
Nevertheless, we already understand a great deal about these political
mechanisms through the work done by American scholars and others on
the politics of ‘structural adjustment’ in the South—especially in Latin
America.18 Barbara Stallings stresses three mechanisms of transmission
of external influence: markets, linkage and leverage:
1. Markets: if target states are failing in international goods and capital
market performance they are vulnerable to external pressure. This was
an overwhelming problem for East Central European states once their
regional economic network collapsed, given the Cold War barriers to
their entry to Western markets and their debt problems. It was less of a
medium-term problem for Russia because of its export-earning capacity.
2. Linkage: this refers to the tendencies of domestic groups within the
target state to identify with the interests and outlook of the Western
actors. In the Eastern Bloc, the first such groups were intellectuals captivated by the beauty and elegance of neo-classical and Hayekian economics and offered handsome encouragement from the United States. Garton
Ash has chronicled the vigour of us help in this area in the 1980s.19
Some of these intellectuals were true believers in what Lloyd has called
the new gospel and what the nlr called the cargo cult. The honest and
ascetic Leszek Balcerowicz is surely archetypal here. Others were ambitious young people. And yet others were communist intellectuals seeing
what was happening and desperate to gain new credentials: the ‘cynical
cargo cultists’, in Lloyd’s phrase. But the second group was, through
slower to move, far more socially weighty: that large minority in the
region who could hope to become the new propertied class. In East
Central Europe they have come to see the Western powers and institutions as their champions and hoped-for future protectors through incorporation into Western institutions. This linkage has been much weaker
in the case of the aspiring capitalists of Russia. Obviously the role of the
Western and Western-owned media, with their word-smiths of Economic Reform, have helped to give shape to such groups.
3. Leverage: this involves the direct use of negative and positive incentives by Western actors on target governments. My earlier article dealt at
some length with this. A useful discussion of the instruments available
for such leverage is David Baldwin’s Economic Statecraft. Again, despite
what Lloyd wrote in his 1992 article to the effect that Russia has become
the most easily penetrated country, it has actually been far less vulnerable to leverage than the states of East Central Europe. It is, in fact, only
by appreciating how much less structurally open to Western influence
Russia has been, that we can grasp the obsession on the part of Western
governments with Boris Yeltsin.
For an excellent discussion, see Stephan Haggard and Robert Kaufman, eds, The Politics
of Economic Adjustment. International Constraints, Distributive Conflicts and the State, Princeton 1992. Barbara Stallings’s outstanding piece in this volume, which I unfortunately had
not read when I wrote my earlier article, should be required reading for policy makers in
Eastern Europe.
See T. Garton Ash, In Europe’s Name. Germany and the Divided Continent, London 1994.
He berates the German government for not doing enough in this area.


III. Neo-Liberalism and Liberal-Democratic Values
Lloyd quite properly links the analytical questions to political positions
and outlooks. He claims my analysis leads me into the politics of a Zhirinovsky–cprf club. I am here interested to see where his current commitment to neo-liberal ‘Economic Reform’ leads him both analytically and
politically. Many erroneously believe that neo-liberalism is a species of
liberal politics. In fact, it isn’t a political philosophy at all: it is a project
for institutional engineering which can be espoused by liberals, conservatives, assorted authoritarians or fascists. Historically many strands of
liberalism—especially Anglo-Saxon varieties—have promoted free markets. But it is a logical fallacy to conclude that all support for free markets entails a necessary commitment to liberal political values.
The peculiarity of Lloyd’s current thought is that his commitment to the
neo-liberal project seems to govern every dimension of his outlook. It
enters his very cognition. Thus, for Lloyd, the political landscape is
structured by where people stand on his project. Those who say it is good
are in one camp; and those who say it has been bad in Eastern Europe are
in another camp, namely the Red–Brown camp, led jointly by Zhirinovsky and the cprf.
Yet the Red-Brown coalition exists only in Lloyd’s mind. In actual
Russian politics, there is Yeltsin, whom Lloyd supports. And there is
Zhirinovsky, who declared at his party conference this year that he will
also back Yeltsin against the Communists. But would Lloyd wish me to
return his compliment by assuring readers that he is not an anti-Semite?
Meanwhile, in the real Eastern Europe there are people of every political
tendency, Left Right and Centre in growing numbers, on the streets, foreign offices, economic ministries and even central banks who have contempt for the project Lloyd has championed. Every serious observer or
even casual reader of voting results knows this.
I argued in my earlier article that Western neo-liberals have down-played
democratic and liberal political development in the East, urging us to banish concern about such matters until ‘Economic Reform’ is completed. In
essence, they have said that the success of their neo-liberal institutional ends
is the precondition for consolidating liberal-democratic means and procedures. With this form of thought, they have justified to themselves a largely
agnostic and Machiavellian attitude towards the political means to achieve
their institutional-engineering goals. It is a ‘dialectical’ style of thinking for
decollectivisation reminiscent of Stalinism in the days of collectivization.
Lloyd gives ample illustration of this style of thought. He believed in 1992
that st was a programme that ‘no democratic electorate would tolerate for
half a year. Yet if it fails there will be no democracy.’20 So, to give the
Russian people democracy, the West must undemocratically ram ST down
their throats. Furthermore: ‘In this system, Yeltsin is first and last and his
adherence to reform is, ultimately all that keeps it going.’21
Lloyd’s 1992 prediction that the electorate would repudiate the government’s programme was fully born out in 1993. In the spring of that year

Lloyd, ‘Comrades in Monetarism’.

the Economist urged Yeltsin to respond by overthrowing the constitution.
This Yeltsin did in the autumn, provoking a violent response from some
parliamentary leaders. Lloyd still goes along with this. He says Yeltsin had
a plebiscitary mandate from the referendum. But he knows the referendum
result was vitiated by government fraud and in any case gave no authority
for overthrowing the constitution. Lloyd says the constitution was a
‘patched up version of the Soviet era constitution’, which did not clearly
demarcate the rights and duties of different instances of government. Both
these features are more typical of constitutions—take the us or France or
Italy—than atypical. You have a constitutional court to settle such matters. Yeltsin abolished that too. But Lloyd cannot grasp that this is a problem. The only salient issue for him is whether we support Rutskoi or
Yeltsin. The possibility of opposing Yeltsin’s coup without in any way
supporting Rutskoi’s tactics, methods or ideas seems inconceivable for
The Right to Interfere
The utter lack of respect shown by the international activists of neo-liberalism for the views and values of the local populations is now exacting its
electoral price. In response, some Western neo-liberals propose more
active Western intervention. Michael Ignatieff’s conclusion in the article
Lloyd seeks to defend proposes precisely that. As Lloyd says, Ignatieff’s
piece is mainly a review of Gellner. But the last two pages move onto
Western strategy. And Ignatieff calls unambiguously for bureaucratic
intervention by Western states in the internal political and civic affairs of
these countries: to fund the media, maintain ties with oppositions, give
aid to strengthen the courts, judiciary and police and to ‘search for partners outside the state’.22 This is quite simply the voice of someone who
has internalized the characteristic forms of what Huntington calls us penetration.
Lloyd says I must be claiming that the managers of the Western intervention in Eastern Europe after the fall of Communism are deeply cynical manipulators. But, thanks to Marx, Western social science has
become more sophisticated than that over the last hundred years. We
now have the sociology of knowledge and some understanding of the role
of ideology. There is artfulness in Lloyd’s reply but no trace of cynicism.
The earlier 1990s in Eastern Europe was not just a missed opportunity
for Europe. It was an ugly business. There was a sudden power vacuum in
the region and in the West, imperial impulses swept all others aside.
Great damage was needlessly done and Western policy makers are now
minded to blame the victims. At least the old juridical imperialisms had
to assume some responsibility for developments within their jurisdictions. Neo-classical imperialism promotes the juridical sovereignty of
nation states to escape responsibility for the power it exercises over their
political economies, and it cloaks its moves in the secrecy of decisionmaking within opaque, unaccountable multilateral organizations.
Lastly, it promotes the myth that the world is no longer governed by the
political power of imperial states but by technologically driven, modern22 Michael


Ignatieff, ‘On Civil Society’, Foreign Affairs, March–April 1995, pp. 135–6.

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