25 years after the fal of the Berlin wall.

, economics editor of The Guardian writing in today’s edition of the paper, has a nice description of what happened in the West once the communist threat receded. 

 As it turned out, the end of the cold war was not unbridled good news for the citizens of the west. For a large part of the postwar era, the Soviet Union was seen as a real threat and even in the 1980s there was little inkling that it would disappear so quickly. A powerful country with a rival ideology and a strong military acted as a restraint on the west. The fear that workers could “go red” meant they had to be kept happy. The proceeds of growth were shared. Welfare benefits were generous. Investment in public infrastructure was high.

There was no need to be so generous once the Soviet Union was no more. What was known as neoliberal economics was born in the 1970s, but it was not until the 1990s that market forces reigned supreme. The free market spread to poorer parts of the world where it had previously been off limits, expanding the global workforce. That meant cheaper goods but it also put downward pressure on wages.

What’s more, there was no longer any need to be inhibited. Those running companies could take a bigger slice of profits because there was nowhere else for workers to go. If citizens did not like “reform” of welfare states, they just had to lump it.


According to Elliott after Soviet Union’s collapse;

What the world needed more was a vigorous opposition to neoliberalism and the misguided notion of the end of history. What it got was the collapse not just of communism but also of social democracy, which is why there has been so little fundamental change since the global financial crisis. An ideological vacuum was created when the Berlin Wall came down and it is slowly being filled. But it is being filled by nationalism, environmentalism and religion.

My only quibble with that is that I believe that the “ideological vaccum” was already there well before the Soviet Union fell. We must remember that the West welcomed the fall of the Soviet Union not because it thought its ideology was flawed because it thought all ideologies were flawed.