Democracy hurts for Europe's new jobless

Capitalism is still on trial in Eastern bloc states, writes Adrian Bridge

A banner held aloft by striking workers in the Polish city of Gdansk yesterday bore the simple slogan: "Commies, hands off the shipyard!"

It was a neat encapsulation of the irony of the situation. On the one hand the strikers, under the umbrella of the Solidarity trade union, were claiming that the decision to close the yard was politically motivated: the latest dastardly deed of a government made up of the successors to the old Communist Party.

At the same time, despite the "hands off" slogan, the protesters, who called off their strike yesterday, are calling on the same government to bale the shipyard out of trouble.

The irony has not been lost on Poland's rulers, who have pointed out gleefully that the Gdansk workers are simply falling victim to the market forces they unleashed.

Indeed, as the Polish Prime Minister Wlodzimierz Cimo szewicz himself put it:: "[Solidarity] wants the government to take money out of its pocket to save the shipyard. They do not seem to have noticed that something has changed in Poland."

Last weekend's decision to force the shipyard to file for bankruptcy underlines the extent to which the economies of Poland and the other former Eastern bloc countries have had to adapt since 1989.

Under the old Comecon system, the Gdansk shipyard was one of the main producers of ships for the former Soviet Union. Similarly, the Bulgarians specialised in fork-lift trucks; the Slovaks produced tanks and Hungarians made buses. In return they received raw materials and energy supplies.

But when communism collapsed so, too, did the old way of doing business. "The Comecon market was totally artificial," says Henryka Bochniarz, head of the Warsaw-based Nicom consultancy firm and a former minister. "Goods were produced en masse for guaranteed markets with no regard for quality. But when those markets disappeared, nobody wanted to buy them."

In the aftermath of the change, most east European countries suffered dramatic falls in productivity, with slumps in gross domestic product averaging 15 to 20 per cent. Unemployment rose soon afterwards: at its worst reaching more than 16 per cent in Poland and Slovakia.

For those thrown out of work, the reaction has been one of incomprehension - and bitterness. "Life has only got worse under democracy," said Edit Baranyai, a former clerk in a Hungarian textile factory that shut down in 1993. "Ordinary people like me have simply become poorer and weaker."

Like many Hungarians, Mrs Baranyai expressed her anger by helping to ensure victory for the former communists in the 1994 elections. Almost every other country in the region has witnessed a political backlash against the centre-right parties that were responsible for introducing market reforms.

But while many feel they have lost out, there are plenty who feel they have gained.

Eva Kulikova, who owns a coffee shop in Prague, is one of millions who have seized the new opportunities. "Under the old regime, I would never have been able to set up my own business," she said. "Now people like me who are prepared to work hard can reach a good standard."

Prague is perhaps the best example in the region of where the future is already working. With millions of tourists visiting each year, the city was bound to undergo an enormous expansion.

The main growth area in the Czech Republic has been in the service sectors: shops, banks, plumbers and hundreds of small-scale enterprises stifled during the communist era.

According to the central statistics office, while 19 per cent of the country's gross domestic product was generated by the service sector in 1990, the corresponding figure for 1995 was 29 per cent.

In Hungary, where the workforce is just under 4 million, there are now estimated to be close to a million small entrepreneurs."In the old days it was impossible to find a taxi in the street or a decorator to come and do up your home," said Istvan Racz, a regional specialist for CS First Boston Bank in Budapest. "Now we only have to look in the Yellow Pages."