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Foreign Policy

A blast that continues to echo two decades later

Discussion on the anniversary of the fall of the Berlin Wall reveals its impact on the current global crisis

STF/AFPThe Berlin Wall fell 20 years ago, but the real impact has only been heard now. Although the Wall is a symbol of socialism, its fragments ultimately hit another “wall” in the last few months – namely, Wall Street, the symbol of capitalism. Revolution 1989: the fall of the soviet empire (Random House, 480 pages, US$ 30) by Victor Sebesteyn, is a book fundamental for the understanding of the entire context of all these changes. The book has just been released in Europe and in the United States. In fact, it was launched at a historical moment during which two facts overlapped, as economist Joseph Stiglitz pointed out in his recent interview to Spain’s El Pais newspaper. It is necessary to analyze that, even though the demise of socialism generated widespread enthusiasm among the followers of capitalism, it has also given rise to major questions on how this has worked over the last few decades. “When Stiglitz said that the financial crisis had affected the fundamentalism of the market with a devastating force comparable to the impact of the fall of the Berlin Wall on Communism, he failed to add that the connection of the two episodes is more than merely symbolic,” explains diplomat and economist Rubens Ricupero, director of the College of Economics and Administration of the Armando Álvares Penteado Foundation (FAAP) and former secretary general of the United Nations Conference for Trade and Development (UNCTAD). In his opinion, the current financial crisis, which has brought to the forefront previous discussions on the role of the state in a market economy, is the result of the overthrowing of the socialist icon. “Actually, the disappearance of the counterbalance that socialism represented helped release the forces that gave rise to the financial excesses that, in turn, unleashed the speculative system’s meltdown over the last few years.”

The diplomat points out that in 1990, after the triumphalism that followed the fall of the Berlin Wall, UNCTAD was the only sensible voice to be heard. In its annual report, UNCTAD predicted that the late 80’s and the 90’s would be characterized by the frequency, intensity and destructive power of financial and monetary crises. “The root of the problem was the rising speed of the tendency to eliminate any external and internal control on the unrestricted flow of capital. These are the reasons why one can predict how the American 21st century will end: in uncurbed financial freedom and excess love of greed,” says Ricupero. “The powers in Washington have not been under the control of the military-industrial complex for a very long time; they are now dominated by the financial-political-military complex, and this is how this world will implode, as T. S. Eliot prophesized: “not with a bang but with a whimper.” The economist warns us about the excessive concentration of analyses on the recent crisis, focusing only on its financial aspects, where politics sometimes appears as a frame of reference in the background and very few people talk about how sectors linked to the financial industry achieved such a strong hold on the American political system. The fall of the Berlin Wall was followed by another equally powerful fall, when it comes to the progress of capitalism based on its current foundations: that of the twin towers on September 11, 2001. “This was the start of a sudden and continuous strengthening of the power of the State, its growing status vis-a-vis the market and society at large,” he points out.

“One of the corollaries of change at that time is that politics and strategy had regained – as was the case during war time – total priority over the economy. After the terrorist attacks, however, the impression was that the market, thanks to the State’s massive injections of resources into the system, which improved the economy, had recovered its autonomy from politics. Once the early impacts of the attacks had been deflated, economic expansion bounced back vigorously after 2002,” he analyzes. In the professor’s opinion, the movement experienced by the market after the fall of the Wall intensified: “The demise of socialism was a political tsunami. The ideological vacuum and the resulting imbalance of forces made it possible for the financial markets to achieve absolute hegemony and to indulge in the excesses responsible for the current collapses, something that was previously inconceivable.” The ruins of the Wall had put concepts such as “left” and “right” in a delicate position. “The fall of the Wall, the end of the Soviet Union and general re-democratization depleted the left’s social energy and proposals. These factors were the detergents of ideologies,” pointed out political scientist Leôncio Martins Rodrigues, from the State University of Campinas (Unicamp). The “third way” preached by Giddens and practiced by Tony Blair gained momentum. “His ideology was a combination of globalization and liberalization – globalization being understood as the unification of markets on a global scale, especially for finance, and liberalization being understood as the elimination of everything that might constrain business opportunities. The general belief was that supervision would be conducted by the markets’ alleged self-regulatory capability.” However, the diplomat adds, what people did not realize was that the role of the State would become increasingly permanent as a factor of stabilization in an economic situation with growing internal and external instability.

“The 1929 crisis was a market crisis, whereas the 90’s crisis was a crisis of the State. From this point of view, the issue of this crisis of the State is who is going to settle the credits of individuals in relation to the collectivity – credit that demands resources and for which the State, now weaker, even in its capacity to provide social welfare, is very clearly necessary,” says Celso Lafer, full professor of the Department of Philosophy and General Theory of Law at the University of São Paulo.

Ricupero also draws attention to the fact that the crises in the 90’s (which hit Mexico, Argentina, most of the Asian countries in 1997, Russia and Brazil) did not teach the system a lesson. “Far from benefiting from some irresistible tendency derived from the nature of things, financial proliferation was the official policy that was vigorously pursued and imposed by the US Government, by the creators of the Washington Consensus, by most of the organizations and international banks led by the IMF and by the World Bank,” he analyzes. “In the United States, as a result, the financial sector leaped from 10% of total corporate profits in 1980 to 40% in 2006, even though it generated only 5% of the jobs.” This is why Ricupero is upset – and rightly so – by the absence of a political and ideological analysis of the current crisis, an analysis that should include a historical retrospective extending back to the demise of the Berlin Wall. “All these transformations did not occur through spontaneous combustion. They were the product of political choices, of determined activity and of the decisions of the US’s Executive and Legislative branches. They were the result of political action at the service of the interests of influential economic sectors, especially the financial sector. Ideological manipulation, however, engaged in a big effort to make people believe that the evolution was merely an irresistible imposition of economic globalization.” Nikita Kruschev, wherever he is, is probably laughing about the fact that he invented such a monstrosity as the Wall, which, even after being demolished, has proved to be an anti-capitalist time bomb.

GERARD MALIE/afpThe fall of the Berlin Wall 20 years ago: enthusiasm that led to the current crisisGERARD MALIE/afp

Concurrently with the modifications that reinforced, in the USA, the convergence between the government and the financial sector, the collapse of real Communism and the shifting winds in China provided the necessary conditions for the strengthening of the rising model. The first model eliminated the division of Germany, Europe and the world into two ideological, militarily incompatible blocks, making the global unification of financial and trade markets possible,” says Ricupero. “The second model gave birth to the process that ensured 25 years of accelerated growth in China.”

“Effectively, unless the correlation of forces is radically changed, it is difficult to imagine that the US Government will accept any kind of reform that will significantly reduce its power. Like the temporarily weakened financial sector, the United States will have no choice other than accepting the intrusive presence of the State for some time,” Ricupero adds. The fall of the Wall, however, was first hailed as the beginning of a new and better era in terms of relations among nations. “That was an interesting period, because it brought together global leaders who focused on a left-of-center political stance concerned with values, as well as with financial architecture. This networking was affected by the end of the terms of these leaders: Bill Clinton, Schroeder, D”Alema, Jospin, Fernando Henrique Cardoso, Tony Blair. They attempted to establish the post-Cold War agenda, and the beginning of these new times was the fall of the Berlin Wall,” he analyzes.

“The overall expectation was that it was necessary to build a more Kant-like, more cosmopolitan, more humane global order. All of this found itself in a quandary after September 11 and everything changed in the aftermath.” In the article Questões para a diplomacia no contexto internacional das polaridades indefinidas [Questions for diplomacy within an international context of undefined polarities], Lafer and diplomat Gelson Fonseca Jr. formulate a diagnosis of the future of the international system, based on the end of the Wall. In their opinion, the predominance of centripetal forces was the outstanding feature of the first post-Cold War period, which lasted from the fall of the Wall to the 1990/1991 Gulf War. In this time, say the authors, international transformations underwent an optimistic and euphoric analysis, which pointed to the advent of an “international community” rationally guided by the market and by democracy. There had been recurrent talk about a “new international order,” which would be “everybody’s construction,” a movement that would generate the re-enhancement of the United Nations. The general belief was that the United Nations, once freed from the constraints that had kept it from fully functioning during the Cold War, would be able to fulfill its function as an instrument of universal security.

The aftermath of this euphoria, Lafer and Fonseca continue, was the emergence of centrifuge forces of the “second post-Cold War” period, which began with the defeat of the USSR and the end of Yugoslavia. It was the end of the belief in the victory of universal illuminist values and the re-birth of ethnic, religious and cultural conflicts, which proved to be a major obstacle to globalization. “The Berlin Wall was the great symbol of reality that turned international politics into something contiguous to war, based on the criterion of friend/enemy antagonism. Hence the realism of the Cold War’s power rationale. The demise of the Cold War generated positive expectations about the possibility of the construction of a new, more peaceful and more cooperative global order. This belief was not maintained, because the world changed again,” Lafer points out. The Wall also changed Brazil’s foreign policy.

“I used to say that the Brazilian Foreign Office had been devised from the point of view of the East-West relationship, viewing the North-South relationship as something articulated within the gaps of the first relationship. The end of the East-West relationship meant that the North-South relationship had to be reassessed in the light of the transformation of the international system’s operating structure rather than in the light of a new situation. My view was that the world kept changing and that we were caught between centripetal and centrifugal forces. Centripetal forces led to globalization and centrifugal forces to fragmentation,” Lafer points out. Future problems and the end of Utopias – the democratic ones, this time – were shielded behind the collapse of a built structure. “It is the poetic intuition of Camões at play, the inception of globalization that stemmed from discoveries, upon returning and finding his motherland ‘immersed in the love of greed and in the roughness of a dour, lifeless and vile sadness’,” says Ricupero.