Can Belarus' communism-lite go on?

MINSK, Belarus — Belarus, at first glance, appears a land that time forgot.

For those acquainted with the unique pleasures of the now-deceased Soviet Union, much in this country of 10 million on Europe’s eastern edge conjures an overwhelming sense of deja vu — sometimes even a frisson of nostalgia. The names of the major thoroughfares remain unchanged: “Marx Street,” “Revolution Avenue” and “Internationale Road.” Banners on the main squares proclaim the glories of the fatherland and the accomplishments of the proletariat. Nov. 7, the day celebrating the Bolshevik Revolution, is still a major holiday, replete with parades and speeches. Train and bus stations even retain the unmistakable Soviet smell of cheap sausage and boiled cabbage.

The similarities go much deeper. “Market socialism” is the term that Belarus authorities use to describe their system: a combination of Soviet-style planned economy, with a thin crust of free-market capitalism. More than two-thirds of the economy remains in government hands. Key foodstuffs are subjected to price caps, so that they remain accessible to the population. As in the Soviet Union, a “five-year plan” targets critical areas and dictates what percentage the gross domestic product will increase by.

But there are key differences with the Soviet Union. For one, President Aleksandr Lukashenko’s government rules without major input from the Communist Party (though it is part of the pro-government camp). More importantly, Belarus today is not the bankrupt economy that the Soviet Union was just before its fall. Belarusians enjoy the highest living standards in the former Soviet Union, with annual growth rates in the last decade reaching 10 percent.

It is unclear, however, whether that growth and the system they support can be sustained given the recent changes in the global economy and the country's unsteady relationship with Russia.

Belarus sometimes seems like an updated and idealized version of the old USSR — communism with T.G.I. Fridays and Tommy Hilfiger, and without the Communist Party, for that matter. Belarusians can travel freely. Their poverty level is the lowest in the former Soviet sphere, as is the gap between the richest and the poorest. Soviet social protections remain largely intact, and the population is guaranteed almost 100 percent employment. Stores are well-stocked, if a bit limited in their choice. Downtown Minsk gleams under the constant scrubbing and grooming of a seeming inexhaustible army of cleaners.

“What is laudable is that they don’t want anyone to slip through the social safety net,” said one Western diplomat, who, like many interviewed in country for this article, asked to speak without attribution, due to the sensitivity of discussing the situation openly.

“If that’s what works for them, that’s fantastic,” the diplomat added.

All of this comes with a heavy political price, of course, just like the Soviet Union. Belarus is one of the world’s most repressive societies, called “Europe’s last dictatorship” by United States and European Union officials. Political dissent is persecuted and marginalized, and the government plays a cat-and-mouse game of occasionally registering, and then cracking down on opposition parties, NGOs and independent newspapers. Public demonstrations are rarely allowed — more often are broken up by the police and participants hauled off for temporary jail sentences. Recently, opposition figures claim to have been kidnapped; in the past they simply disappeared.

Belarusians can be guarded in their statements, so it is difficult to judge their feelings, good or bad, toward their government. Diplomats and political scientists, however, speak of an unspoken “social contact” between the ruling elite and the population. According to one Western official in Minsk, also speaking off-the-record, the implicit deal is roughly thus: “You provide high rates of economic growth, and we continue to support you — if only passively.”

The problem is that, as a result of last year's global recession and worsening relations with the Kremlin, Belarus lost the two structures at the root of the country’s economic miracle: a giant market for its exports in Russia, and cheap Russian oil and gas that allowed its industry to keep its fixed costs at a minimum.

The International Monetary Fund (IMF) and World Bank believe that Belarus' economy will grow by 3 to 4 percent next year — respectable for a country that saw its export markets virtually disappear. But President Lukashenko has decreed, however, that GDP will increase by 11 to 12 percent. And the latest five-year plan calls for average monthly salaries to reach $500 by the end of 2010 — at the moment they are hovering only at $300.

Belarus was forced to go hat-in-hand to the IMF and neighbor Russia for loans to patch over budgetary holes in 2009, and is still looking for additional funds. Meanwhile the government devalued the national currency without warning.

In Borisov, an industrial city an hour’s drive to the east of Minsk, though no one speaks of removing Lukashenko, the economic pinch is without question being felt. Rather than lay off employees, factories are shortening their work weeks to three and four days. Inventories are piling up, nevertheless, as the enterprises, kept afloat by cheap government credit, produce goods that in the end are not sold. Some workers were forced to take a three-week vacation over the year-end holidays.

“Everyone is feeling the effects of the crisis — everyone,” said Irina, a waitress at a local restaurant.

The government seems to be pinning its hopes on the international loans helping it weather the storm just long enough for the Russian economy to recover, which would drag Belarus out of its economic morass as well. This may well take place, allowing a bit of breathing space, but the country’s deep-structure economic problems are unfortunately more systemic. The international economic topography has altered irrevocably, experts say, and though an economic collapse may not be imminent, the giant growth rates of the last decade are a thing of the past. In the long run, the Belarus model, “market socialism,” is no longer sustainable. The choice is to reform, diversify the economy, privatize and open itself up to outside investment — or watch the industrial base each year yield diminishing returns.

And, as a result, the “social contract” that has been the bedrock of Lukashenko’s rule could be subjected to some serious questioning in the coming months.

“Their economic model has exhausted itself,” said the Western official. “Some officials understand this, but others don’t.”