Red phoenix rising? Communist resurgence in Eastern Europe.

• Author: Fontaine, Roger W.

Boris Yeltsin may have defeated the communist candidate in 1996's presidential election in Russia, but the party is experiencing a renaissance elsewhere in the former Soviet bloc.

The sudden collapse of communism in Eastern and Central Europe gave rise to a euphoric belief that, with the aid of Western governments and international financial institutions, the struggling new democracies' path to prosperity seemed clear. First, a unified Germany would revive the area occupied by the old German Democratic Republic (GDR) through a massive transfer of wealth and the inclusion of the former East Germany under the legal system of the prosperous and well-governed German Federal Republic. Czechoslovakia, the most advanced republic in Eastern Europe even before World War II, would come next, followed by Poland and Hungary, which had begun the reform process in the 1970s. Romania, Bulgaria, and Albania, according to that scenario, would follow in time.

Meanwhile, Latvia, Lithuania, and Estonia (the most progressive of the 15 republics that had composed the old Soviet Union) would receive large amounts of foreign aid., particularly from the Scandinavian countries. Several other Soviet republics--including Russia, Ukraine, and Belarus--possessed massive natural resources that would hasten their transition to capitalism. The republics of the Caucasus--Georgia, Armenia, and Azerbaijan--presented bigger problems, but they, too, seemed to have sufficient human talent and natural resources to achieve success in time. The Central Asian nations would take longer, but win secular, democratic Turkey as a model, they also could be expected to join the community of free-market democracies eventually.

That was the hope. The reality has been considerably more complex and, on balance, disappointing. The transition to democratic capitalist societies has proven more difficult and erratic than most Western experts anticipated in the immediate post-Cold War period. Assorted communist, reformed communist. and neocommunist parties have exploited the problems of the economic and political transition throughout Central and Eastern Europe to gain power or at least mount serious challenges to noncommunist reform factions.

Estonia. Despite its ties to Finland and the economic support of the other Nordic countries, Estonia remains haunted by the past. The market-liberal-oriented government elected in September, 1992, pushed hard at economic reform and succeeded in creating a stable currency, attracting foreign investment, and setting the stage for modest rates of economic growth (five percent in 1995 and a probable four percent in 1996) through extensive privatization of state-owned industries and adoption of free-trade policies.

In March, 1995, though, Estonians went to the polls and shifted from a market-liberal to a more social democratic government largely because of heavy support for leftist candidates among pensioners and peasants, who mostly have not shared in the prosperity generated by capitalism. The new Prime Minister, Tiit Vahi, leader of the Coalition Party and a former Soviet-style factory manager, formed a coalition with the Rural People's Union and slowed down the pace of reform, especially in the agricultural sector. Still, Vahi consistently rejected the "former communist" label and, upon assuming office, insisted, "Estonia needs rightwing economic policies."

Vahi's first government lasted seven months. It was undermined by a wiretapping scandal involving one of his coalition partners, the Center Party. Vahi then formed a coalition with the market-oriented Reform Party and a bloc of parties that represent rural and pensioner interests that have, in the past, acted as a drag on reform. Not surprisingly, that somewhat unlikely coalition disagreed on the pace of reform. In early 1996, however, it succeeded in forging an agreement on privatization, providing for the sale of four state giants--energy, gas, telecommunications, and ports. Despite some unsettling developments, there seems to be little danger of a communist return to power in Estonia.

Latvia. A peculiar mix of forces has kept neighboring Latvia from fully embracing the market and establishing a stable democracy. Despite its small population (2,700,000). Latvia has a fractured political system in which nine parties won seats in the 1995 parliamentary election; six form the present government. The top three parties have a nearly equal number of seats, and each was given a chance to form a cabinet. After two failed efforts, parliament finally agreed on a prime minister in December, but Latvian politics is so fractious that the man chosen, Andris Skele, belongs to no political party and is not even an elected member of the Seimas (parliament).

Skele is an entrepreneur whose priorities are reducing a growing budget deficit and accelerating privatization (which, so far, has been slow and piecemeal) to attract much-needed foreign investment. The new ruling coalition, though, includes the left-wing Democrats, who may not share those objectives. Without a party, Prime Minister Skele has no reliable following in the parliament. Focusing on the economy may be difficult because many Latvians and Latvian parties, such as the newly formed Movement for Latvia (which, with 15% of the vote, was one of the most popular parties in the last election), prefer Moscow-bashing to a serious approach to reform.

Lithuania. Latvia's sluggish pace of reform seems no worse than that of Lithuania, the largest of the Baltic states. Lithuania, faces many of the same problems as Latvia and Estonia, but was the first former European Soviet republic or satellite to turn out a noncommunist government in favor of a restyled communist party, the Lithuanian Democratic Labor Party (LDLP).

In the February, 1993, presidential elections, former communist Algiridis Brazauskas won 60% of the vote. Once in office, Brazauskas said there would be no return to the past, but that the march to the market would be slow and deliberate. To his credit, inflation has dropped, thanks to tighter fiscal and monetary policies; agriculture has revived somewhat; and foreign investment has begun to trickle in. Even the pace of privatization has picked up, albeit with mixed results. Lithuania enjoyed a five percent growth rate in gross domestic product in 1995.

It has not all been clear political sailing for the neocommunists. The government severely was embarrassed by the collapse of the country's two largest commercial banks at the end of 19945, insolvencies made worse by the revelation that Prime Minister Adolfias Slezevicius had the good fortune to remove his deposits from the Innovation Bank two days before its failure. That bit of communist insiderism was minuscule by Russian standards, but in Lithuania it caused an uproar, thanks to the country's rambunctiously free press, and 80% of Lithuanians wanted Slezevicius dismissed.

Slezevicius' replacement is another reformed communist, Mindaugas Stankevicius, who has pledged to continue economic reforms. Pres. Brazauskas has managed so far to limit the political damage done to himself, but the LDLP may not escape so easily, trailing the private-sector-oriented Christian Democrats and Landsbergis' Conservatives in public opinion polls. Parliamentary elections may initiate a new pattern--the defeat of the neocommunists.

Belarus and Ukraine have had a more difficult time shedding their communist past than have their neighbors. Even now, each has greater economic problems and more poverty than Russia--no minor feat.

Belarus. Post-Soviet Belarusan parliaments (still called the Supreme Soviet) have been dominated by old-line communists, who hold 87% of the seats and who have changed little in either ideology or practice.

Belarus' economy is in terrible shape. Fewer than 10% of the country's enterprises have been privatized, and almost nothing has been accomplished since the July, 1994, election of "independent" Alexander Lukashenko to the presidency. Lukashenko, a...