Romania takes its turn and hikes food prices
Romania is following the lead of Poland and Czechoslovakia and raising food prices.Skip to next paragraph
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President Nicolae Ceausescu confirmed Feb. 6 that retail food prices must go up, but he did not say when or how much they would rise. Some reports say the increases on most basic foods will be 50 to 100 percent, relatively mild compared to those in Poland.
Only a short while ago the Romanian leader said price increases are necessary to meet rising production costs and provide incentives for better farming. He ordered agricultural specialists to go and work directly on the farms.
Some price rises were anticipated after it was disclosed that the Romanian economy had just experienced its worst year since World War II. National income rose only 2 percent in 1981 instead of a targeted 7 percent.
Romania's financial position is almost as bad as Poland's. It has only about half as many people as Poland, and Romania's current debt to the West is some $ 11.4 billion--about half that of Poland.
About $2.4 billion of the Romanian debt is due for repayment this year. Reportedly West European banks have agreed in principle to allow more time. But meanwhile, the $1.5 billion loan granted last year by the International Monetary Fund (of which Romania is the only communist, Soviet-bloc member) is in suspense.
In bloc terms, the Romanian situation is nothing new. The admission that there was no option other than raising food prices to production and market levels is yet another confirmation of the essential economic nonviability that has come to roost throughout the COMECON area in the last two years.
Only East Germany and Hungary have achieved some reasonable degree of stability. The East Germans had the best management and work results in the bloc last year; the Hungarians have retained the reformed market mechanism they introduced in 1968 despite the heavy impact of world conditions since the mid- 1970s.
The old established high-growth-rate policies simply do not work anymore, as the bloc's more imaginative economists have known for some time.
The principal author of the Hungarian reform, Prof. Rezso Nyers, wrote recently that signals demanding change manifested themselves as early as the 1950s, but governments ignored them. Now, he said, Polish events have demonstrated just how costly that has been.
Hard-line leaders still brush that argument aside. They are running scared of the political consequences of reform - either as it emerged in Prague in 1968 or in Hungary through a gradual switch to a ''market socialism.''
But the realists within the bloc, as well as independent observers, see the COMECON states face to face with an imperative need to drop the old ''command'' system and replace its preoccupations with ''extensive'' growth and altogether new concepts of ''intensiveness'' based entirely on efficiency, profitability, and quality.
One of the greatest common problems--which applies even to relatively successful East Germany--is continued failure to give priority to export industries at a time when imports, especially of raw materials, are much more costly (and must increasingly be sought on world markets) and therefore require more hard currency.
The East Europeans can no longer count on the Soviet Union for everything. They are having to buy even more of their oil at higher, world prices.
The situation is highlighted by ''emergency'' moves like the introduction of power cuts in Czechoslovakia, and now Romania, that affect street lighting, television time, factories, and government offices.
Official explanations cite low water levels reducing hydroproduction or overdependence on coal while waiting for nuclear programs to come on line. But equally relevant are questions of misplaced investments, excessive output targets that prompt managers to fake their figures, low living standards, and other inadequate incentives for more effective work.
As COMECON meetings last year showed, leaderships are still divided about what to do.
There is at best some awareness that all is not well. But there are many schools of thought as to how to deal with it. There are:
* The inveterate reshufflers of committees and personnel and the ''cosmeticians.'' (President Ceausescu - worried by agriculture's perennial poor results--said recently that livestock experts and veterinarians should take care of the animals and not ''worry about papers telling us why they have died.'')
* Those looking to small, minimal reforms - such as the modest encouragement being offered the peasants and their tiny household plots, even by the Russians.
Czechoslovakia, in fact, has gone a bit further with its Feb. 6 announcement of a ''free market'' for peasant or other home-grown produce.
* The unyielding ''old guard,'' who still think the answer is more ideological discipline, tighter party and central controls. They also talk about ''modernization'' and ''integration'' (although the meaning of the latter phrase remains exceedingly vague).
Against all these variations of a common ''do nothing'' approach are the realists who know that, sooner or later, modification of the system itself is the only answer.
All these problems are evident throughout COMECON, but especially in Poland. What happens to reform there -- once the military straitjacket is removed--could indicate which option COMECON as a whole will finally take.