Post Wall, Post Square: Rebuilding the World after 1989

Bush and Jaruzelski managed to turn their scheduled ‘ten-minute cup of coffee’ in the morning of 10 July into an extended and frank conversation that lasted almost an hour. Their tour d’horizon spanned Polish politics and economic reforms, US financial aid, superpower relations, the German question and Bush’s vision of ‘a united Europe without foreign troops’.[65] The president’s meeting with Prime Minister Mieczysław Rakowski – a veteran communist journalist until he was suddenly appointed premier the previous September – was similarly businesslike and also opened up some of the complexities underlying the glib word ‘reform’. Poland’s ‘chief problem’, Rakowski explained, was to ‘introduce reforms while avoiding serious unrest’. Privatisation would be an important step but he warned it would take ‘a full generation’ before Poles accepted the Western-style ‘stratification of wealth’ that would necessarily follow. What Polish people did not need, he added, was an American ‘blank check’ – in other words ‘untied credits’ from the West. Instead he hoped Bush could encourage the World Bank and IMF to display flexibility about the staggering of debt repayments. Rakowski conceded his party’s ‘economic errors of the past’ but insisted that these ‘constitute a closed chapter’ and that Polish leaders now understood the need to turn the page. Bush promised that the West would help but stated that he had no intention of supporting the radical, indeed frankly utopian, demands by the labour unions that would ‘break the Treasury’. In that way Bush stood closer to the aims of Polish communist reformers including Jaruzelski and Rakowski, who sought managed economic cooperation with the USA and the West, than to Wałęsa and the opposition, who wanted immediate and large-scale direct aid to ease the pain of transition and thus maintain popular support.[66]

The president did talk about economic aid when he addressed the Polish parliament on the afternoon of the 10th, but what was grandly described as his ‘Six-Point Plan’ received a mixed reception. To be sure, the need was clear: Poland’s debt to Western creditors in summer 1989 stood at around $40 billion, with the country’s growth rate barely above 1% while inflation was running at almost 60%. But although Bush promised to ask the US Congress for a $100 million enterprise fund to invigorate Poland’s private sector, he hoped that the rest of the aid package he proposed ($325 million in fresh loans and a debt rescheduling of $5 billion) would come from the World Bank, the Paris Club, the G7 and other Western institutions.[67] It was all a bit vague and certainly nothing like the $10 billion that Wałęsa, for one, had requested. Nor did it even come close to the $740 million in aid that Reagan, at the height of the Cold War, had offered the communist government before martial law was declared in December 1981.[68] That, of course, was prior to the USA’s foreign debt going through the roof as a result of Reaganomics – from $500 billion in 1981 to $1.7 trillion in 1989.[69] Certainly the public reaction in Poland was almost openly critical. ‘Very little concrete material’, a government spokesman complained, and ‘too much repeated emphasis on the need for further sacrifices by the Polish people’. So much for popular hopes in Poland of a ‘mini-Marshall Plan’. While Bush saw himself as being ‘prudent’, Scowcroft told journalists defensively that the value of the aid was ‘political and psychological’ as much as ‘substantive’.[70]

Next day Bush flew to Gdańsk to meet Wałęsa for lunch at his modest but cosy two-storey stucco house on the outskirts of the city. This was a deliberately informal, down-home affair. George and Barbara chatted with Lech and Danuta as ‘private citizens’, because the Solidarity leader had not stood for election and therefore had no official political role now. Looking around the rooms, the president was struck by the ‘lack of modern appliances and furnishings that most American families take for granted’. ‘Stylish waiters’ borrowed from a nearby hotel and a ‘fancy’ Baltic meal served on silver salvers did not cover up those realities. After more of what Bush described as Wałęsa’s ‘uncertain and unrealistic’ financial requests, backed by lurid warnings of ‘a second Tiananmen in the middle of Europe’ if Polish economic reforms failed, the president was happy to escape from their uneasy get-together and drive to the Lenin Shipyard to address 25,000 dockworkers. He considered standing outside the factory gate in front of the monument commemorating the forty-five workers killed by the security forces during the 1970 strikes – three anchors nailed to giant steel crosses – the ‘emotional peak’ of his Polish trip. Bush felt ‘heart and soul, emotionally involved’ as he spoke, with a ‘heady sense’ that he was ‘witnessing history being made on the spot’.[71]

Trumping Lenin in Gdańsk – Bush with Wałȩsa

His trip to Poland had been brief (9–11 July) but it underlined the magnitude of the political and economic problems that had to be surmounted. One presidential adviser told the press, it would ‘take hundreds of millions of dollars, from us and lots of other people, and even that won’t guarantee success’.[72]

That evening Bush arrived in Budapest during a heavy thunderstorm. He and Barbara were driven straight to Kossuth Square – named for the leader of Hungary’s failed revolution of 1848 and one of the centres of the 1956 uprising against Soviet rule. As the motorcade pulled into the square in front of the Parliament building it was greeted by a huge mass of people, some 100,000 strong – a crowd in an ebullient mood, full of expectation, despite being drenched by the rain. Bush, too, was very excited. It was the first ever visit of an American president to Hungary.[73]

The rain continued to fall while Hungary’s president Bruno Straub droned on for a full quarter-hour of plodding introductions. When Bush finally got a chance to speak, he waved away an umbrella, dispensed with his notecards and made a few extempore remarks ‘from the heart’ on the changes taking place in Hungary and on its reform-minded leadership. Just as he finished, the evening sun broke through the dark clouds. There was another special moment. Out of the corner of his eye, Bush noticed an elderly lady near the podium who was soaked to the skin. He took off his raincoat (which actually belonged to one of his security agents) and put it round her shoulders. The spectators roared with approval. Then Bush plunged into their midst, shaking their hands and shouting good wishes. Scowcroft noted: ‘The empathy between him and the crowd was total.’[74]

Next day, 12 July, Bush followed a similar script to his Warsaw visit. He was careful not to be seen associating with any opposition-party officials too closely. Indeed his meetings with both opposition and Communist Party figures were behind closed doors while in public he expressed his support for the communist reformers who now ran the government. Still, the difference in overall atmospherics between Budapest and Warsaw was clear: Hungary had enjoyed for two decades ‘more political freedom – nightclubs feature biting satirical sketches about the government – and more economic energy, with food markets piled high with fruits and vegetables, than the other Warsaw Pact countries’.[75]

In his talks with Bush, Prime Minister Miklós Németh emphasised his firm belief that the Hungarian Socialist Workers’ Party (HSWP) could ‘renew itself and will be able to, through electoral means, gain a dominant position in the coalition. The danger is that if the HSWP is defeated, the opposition is not yet ready to rule.’ Bush agreed. As regards the ‘political system for Hungary’, the president stated that ‘the principles articulated by the prime minister are ones that Americans support’ and promised that he would ‘do nothing to complicate the process of reform’. Being inclined toward stability, Bush believed that it was the reform communists who were uniquely equipped to successfully engineer a gradual exit from Moscow’s orbit.[76]

In Hungary – unlike Poland where the political situation was rather precarious in the wake of the elections – the question was not whether reform would proceed but how fast and on whose terms. Currently the reform communists were driving the transformation, and they did so with confidence. Internationally Hungary had more room for manoeuvre than Poland, a strategically more pivotal country for the Soviet Union. And Budapest also knew that it benefited from following in Warsaw’s slipstream. Poland had clearly managed to get away with its reform course by staying within the Warsaw Pact, and the Hungarian reformers also saw this as the best path – especially after Gorbachev had held firm to his non-interventionist position in the Bucharest summit. (Leaving the Warsaw Pact had been the step too far by Hungary in 1956.)

Understanding the new rules of the game, Hungarians were also willing to test the limits of the possible. In fact, they had done so already with the dismantling of the barbed wire. As Imre Pozsgay – effectively Hungary’s deputy prime minister under Németh – explained to Bush, there were only two situations that might attract Soviet intervention: ‘the emergence of civil war’ or ‘a Hungarian declaration of neutrality’. The former he deemed unlikely: he was sure Hungary would undergo a ‘peaceful’ transformation. And the latter was simply ‘not possible’ for Hungary: as in Poland’s case, Hungary’s Warsaw Pact membership was non-negotiable to avoid provoking the Kremlin. Bush entirely agreed that Hungarians should not have to choose between East and West. What was important, he declared, was ‘for Soviet reforms to go forward’ while the United States did not ‘exacerbate Gorbachev’s situation or make the Hungarian course more difficult’.[77]

Bush found the reformers’ buzz and energy infectious. Quite contrary to a Poland that had seemed drab, subdued and worried about its new political pluralism, Hungary, opening rapidly towards the West, seemed really full of vitality. And Bush conveyed this in his speech at Karl Marx University on the afternoon of 12 July. ‘I see people in motion,’ he said. ‘I see colour, creativity, experimentation. The very atmosphere of Budapest is electric, alive with optimism.’ Bush wanted his words to act as an accelerator of the process of change ahead of the multiparty elections, so the country would not get stuck in half-measures. ‘The United States will offer assistance not to prop up the status quo but to propel reform,’ he declared, before reminding his audience that here, as in Poland and across the bloc, simple solutions did not exist: ‘There are remnants of the Stalinist economy – huge, inefficient industrial plants and a bewildering price system that is hard for anyone to understand, and the massive subsidies that cloud economic decisions.’ But, he added, ‘the Hungarian government is increasingly leaving the business of running the shops to the shopkeepers, the farms to the farmers. And the creative drive of the people, once unleashed, will create momentum of its own. And this will … give each of you control over your own destiny – a Hungarian destiny.’[78]

In spite of this passionate rhetoric, as in Warsaw the president offered relatively meagre economic aid: $25 million for a private-enterprise fund; $5 million for a regional environmental centre; the promise of ‘most favoured nation’ status as soon as Hungary liberalised its emigration laws. He also made much about sending a delegation of Peace Corps volunteers to teach Hungarians English.[79]

His audience listened quietly but intently throughout the address. The most emotional moment was Bush’s comments on ‘the ugly symbol of Europe’s division and Hungary’s isolation’ – the barbed-wire fences that, he said, were being ‘rolled and stacked into bales’. Bush declared grandly: ‘For the first time, the Iron Curtain has begun to part … And Hungary, your great country, is leading the way.’ What’s more, with the Soviet Union withdrawing troops, he promised, ‘I am determined that we will work together to move beyond containment, beyond the Cold War.’ He ended ringingly with the invocation: ‘Let us have history write of us that we were the generation that made Europe whole and free.’ It won him a standing ovation.[80]

*

On Thursday 13 July, as Bush flew from Budapest to Paris for the G7 summit, he and Scowcroft reflected on the ‘new Europe being born’. During the flight the president also shared his impressions with members of the press corps, huddled around him on Air Force One. He said he had come away with ‘this real acute sense’ of the change that was taking place in Eastern Europe – a change he described as ‘absolutely amazing’, ‘vibrant’ and ‘vital’. He declared his determination to ‘play a constructive role’ in that process of change. The meetings, especially with the Hungarian leaders, had been ‘very good, very frank’. Warming up, Bush added, ‘I mean it was with emotion, and it wasn’t your traditional “I’ll read my cards, and you read your cards” kind of diplomacy.’ There had been ‘an intensity to it, a fervour to it’ that, he said, ‘moved me very much’.[81]

The president had no idea what lay ahead and so he remained cautious, but he was certainly encouraged by what he had seen. ‘I am firmly convinced that this wave of freedom, if you will, is the wave of the future,’ said Bush buoyantly. To some, it seemed that he was too cautious and overly sympathetic to the communist old guard. Yet others, including his deputy national security adviser Robert Gates, argued that the president was playing a more complex game. While preaching democratic freedoms and national independence to the crowds, he talked the language of pragmatism and conciliation to the old-guard leaders – in a deliberate attempt to ‘grease their path out of power’.[82]

Certainly, the challenge faced by his administration was to encourage reform in Eastern Europe without going so far and fast as to provoke turmoil and then a backlash. A fraught economic transition could easily result in inflation, unemployment and food shortages – all of which would force reform-oriented leaders to reverse course. Above all, Bush wanted to be sure to avoid triggering a Soviet reaction – possibly a crackdown in the style of 1953, 1956 and 1968. The key to successful change in the Soviet bloc was Soviet acquiescence, and Bush was keen to make it easy for Gorbachev to provide this. ‘We’re not there to poke a stick in the eye of Mr Gorbachev,’ he told the reporters. ‘Just the opposite – to encourage the very kind of reforms that he is championing and more reforms.’[83]

Fresh from witnessing revolutionary change, Bush arrived in a city obsessed with commemorating revolution. 14 July 1989 would mark the bicentenary of the fall of the Bastille, the starting point of France’s quarter-century roller coaster of demotic politics and imperial autocracy. French president François Mitterrand was determined to impress his international guests with an extravagant celebration of French grandeur – and his own quasi-regal position. Yet, given the dramatic upheavals in Eastern Europe, France’s historical pageant had particular resonance in July 1989.

As soon as Bush arrived, he was whisked off to the Place du Trocadéro opposite the Eiffel Tower. He sat with the six other leaders of the major industrialised nations, together with over twenty leaders from developing countries in Africa, Asia and the Americas, for a ceremony to commemorate the 1789 Declaration of the Rights of Man. Actors read excerpts from the declaration and quotations from the revolutionary leaders, wreaths were laid at a stone inscription of the document and 500 doves were released into the blue Paris sky. Mitterrand’s intent was clear: France’s pioneering revolution was to be remembered not for the blood in the gutters but for its enduring values: liberté, fraternité, égalité. Then followed an evening at the brand-new, gleaming mammoth Opera House in the Place de la Bastille, on the site of the once-dreaded royal prison. On this occasion too Mitterrand’s special twenty guests were present, together with the leaders of the G7 – as they were for the Bastille Day Parade the next morning, when the French president put on a massive display of France’s ‘world class’ military prowess down the Champs-Elysées. Nobody could mistake the implicit message: the Fifth Republic was still a power with global reach. Watching 300 tanks, 5,000 troops and a mobile nuclear missile unit go by along Paris’s grand boulevard, Scowcroft couldn’t help being reminded of ‘a Soviet May Day parade’.[84]

Mitterrand’s friends from the Third World really irritated the Americans. After all, the Paris G7 economic summit had been prepared especially to deal with the pressing issues of debt relief and the global environment. But the US delegation emphatically did not want to get the G7 meeting conflated with an impromptu North–South gathering on the margins of the French national celebrations, especially after the debtor countries had already seized the spotlight in Paris to appeal for relief from the developing world’s $1.3 trillion debt. The White House worried about the risk that in such an ex tempore meeting between creditors and debtors, as advocated by France, the ‘South’ as a bloc would dress up their demands to the ‘North’ as ‘reparations’ for years of colonial ‘exploitation’, laced with Marxist–Leninist-inspired rhetoric. And generally, the US strongly opposed collective debtor action. In its view, debt problems should be resolved country by country and in this vein the Americans announced a $1–2 billion short-term loan to neighbouring Mexico and then picked up the case of Poland.[85]

Given the G7 summit’s central focus on debt relief, General Jaruzelski saw his opportunity and appealed to the Big Seven for a two-year, multibillion-dollar rescue programme on 13 July. Published in all major Polish party newspapers, his six-point programme included seeking $1 billion to reorganise food supplies, $2 billion in new credits, as well as a reduction and rescheduling of Poland’s debt of roughly $40 billion, plus financing for an assortment of specific projects. Significantly, the Solidarity movement endorsed Jaruzelski’s appeal; indeed, Wałęsa had just come out in support of an approved Communist Party candidate for the presidency, which made General Jaruzelski’s victory much more likely – thus helping to end the political deadlock of the post-election weeks.[86]

Still elated by his recent visits, Bush was happy to use Jaruzelski’s financial demands to put Eastern Europe on the top of the summit agenda, wresting the initiative away from Mitterrand and his supporting cast of global little leaguers. But if support for democratic change were to be the centrepiece of the meeting, this meant the summit also had to engage with a less palatable issue for the Americans: the crushed revolution in China. And so the Paris G7 came to be dominated by two burning political issues of the moment – problems that potentially threatened global order.

As soon as the summit got under way on the afternoon of Friday 14 July – in the new glass pyramid entrance of the Louvre – the leaders started by arguing over how far they should go in condemning China. Most Europeans, led by the French president, wanted to punish the PRC with exemplary sanctions, but Bush (as well as Prime Minister Thatcher, who was worried about the fate of Hong Kong[87]) urged them to be prudent. The US president wanted as little damage as possible to the Sino-American relationship that was so important to world peace. Yet he was going out on a limb in Paris, because the US Senate voted that very day by eighty-one to ten to impose more stringent US sanctions against the PRC.

Japan’s prime minister Sosuke Uno, Asia’s sole voice among the G7, also urged caution. Tokyo did not want to see Beijing isolated and by default pushed into Moscow’s arms. Moreover, given Japan’s long history of invading China, it lacked the moral high ground to punish Beijing. Japan saw itself in a unique position. If it could keep channels to China open while using its position as America’s key Pacific ally, it might be able to broker the restoration of Sino-American cooperation. Seeing real benefits in this, Bush worked hard with Uno to soften the language on China in the summit communiqué. In the end, the leaders issued a strong condemnation of the PRC’s ‘violent repression’ but they did not announce any additional sanctions and merely urged the Chinese to ‘create conditions which enable them to avoid isolation’.[88]

With the prickly topic of China out of the way, on Saturday the G7 moved quickly to achieve agreement on Poland and Hungary. Their ‘Declaration on East–West Relations’ stated: ‘We recognise that the political changes taking place in these countries will be difficult to sustain without economic progress.’[89] In order to facilitate this progress, they agreed to impose somewhat easier conditions than on a normal IMF loan, by allowing Poland to postpone its $5 billion tranche of foreign debt repayment due in 1989. They also agreed to consider an array of economic aid options for Poland and Hungary (investments, joint ventures, professional training and an infusion of skilled managers), as well as emergency food supplies.

None of this was particularly surprising. What was much more noteworthy and eventually significant was the decision that the economic and food aid for Eastern bloc countries would be coordinated by the European Community – a striking novelty in international politics.[90] Bush got what he wanted. Enlisting support for Eastern Europe endowed his largely symbolic visit to Warsaw, Gdańsk and Budapest with real substance. But he had never intended to bear the burden alone. The G7 had readily bought his concept of ‘concerted Western action’ in support of Poland and Hungary which, Bush hoped, would lift Western engagement with Eastern Europe out of the superpower domain, spread the burden and make possible a larger, more synchronised and less competitive Western effort. The White House also believed that, couched within this broader multilateral framework, US action would look less threatening to the Soviets. Working with and through allies would become a hallmark of Bush’s diplomatic style.

It was Chancellor Kohl who proposed, with prompt agreement from the others, to ask the European Commission to head a group of donor countries to provide assistance to Poland and Hungary. This eventually became the G24: twenty-four industrialised states both from within the EC and outside it. Commission president Jacques Delors – always keen to assume a larger role for himself at the head of this supranational body – was very ready to oversee what was effectively a ‘clearing house for aid’. After all, in 1988 the EC had already established loose links with the Comecon as a trading bloc and Hungary had intimated its desire to work towards an association agreement. So, while the USA was content to take a back seat, the EC gained a position of leadership that signalled its growing political power.

The Eastern European aid package was the first time the European Community had been chosen as a follow-up agency for a G7 decision. It was a harbinger of things to come. Just three weeks earlier in Madrid on 26–7 June the EC had agreed to consummate a closer union – both political and economic – in 1992. And it was no accident that the specific blueprint for tighter economic and monetary union had been mapped out by Delors himself.[91]

Delors had been propelled into the presidency of the European Commission in 1984, following a strikingly effective three-year stint under Mitterrand as France’s finance minister which highlighted his skills as a political broker. He had successfully persuaded his notoriously obstinate boss to temper his socialist Keynesianism with a policy of austerity and fiscal consolidation. This shored up the failing franc and enabled France to remain within the European Monetary System. On the back of these achievements, moving on to Brussels as Commission president, Delors deftly steered the twelve often divergent members of the European Community towards the signing of the Single European Act in 1986, which embodied a firm commitment to move towards full economic and monetary union (EMU). Delors undoubtedly saw EMU as a way to advance the cause of European integration but he was not an avid federalist, passionate about a United States of Europe. His objections, both pragmatic and philosophical, to European federalism also help to explain his caution about highly centralised approaches to decision-making when developing the embryonic ‘Euro Area’. In 1988, at the EC Council meeting in Hanover, European leaders authorised Delors to chair a committee of central-bank governors and other experts to propose concrete stages towards EMU. Here, again, he showed his ability to forge compromises between proponents of different economic approaches, in particular building bridges between France and Germany.[92]