In communist lands, parting from party line aids the bottom line
Boston — Economic unorthodoxy in the communist nations is paying off. ``Those countries that are doing something are doing better,'' says Jan Vanous, an economist with PlanEcon Inc., a Washington consulting firm specializing in the economics of the Comecon trading bloc countries.
Of course, many factors affect communist economies besides their degree of economic orthodoxy. But it does appear that those countries that have moved away from rigid central planning and socialist pricing toward decentralization of power to the individual enterprise, more realistic pricing, and provision of greater economic incentives are growing faster.
The prime example of a shift toward more pragmatic policies paying off is China. Its economy grew an estimated 13 percent last year.
Current indications, says Wall Street economist Sam Nakagama, are that China's growth this year will reach a fantastic 15 percent or more. Industrial production in the first quarter ran 23 percent above the year-earlier level.
``Although [Peking's] leaders are now trying to slow things down to a more moderate pace, they are unlikely to put the brakes on too hard,'' Mr. Nakagama says. ``Top priority is still being given to the execution of the economic-reform program and to the opening to the West.''
Soviet party leader Mikhail S. Gorbachev appears inclined to introduce more reforms. But the Soviet Union remains the major example of communist economic orthodoxy -- and poor economic performance.
The International Monetary Fund (IMF), in its latest World Economic Outlook, predicts growth in ``net material product'' in the Soviet Union of 3.5 percent this year, after an estimated gain of 2.5 percent in 1984. (Net material product is the communist nation's equivalent of gross national product.)
The Soviet Union's growth has fallen well below the 5.5 percent average annual rate in the 1971-75 period, or even the 4 percent rate in the years 1976-80. It worries Soviet officials.
In Eastern Europe, the unorthodox communists seem to be doing relatively well. The Hungarian and Bulgarian economies, experimenting with various forms of enterprise self-management, have been growing about 4 percent annually for the last two years.
Because of its political and debt crisis, Poland's output dropped by nearly one-third between 1980 and 1982. But its economy, almost as unorthodox as Hungary's, is snapping back at a faster than 4 percent rate.
East Germany, relatively rigid politically but more progressive economically, has been growing by 4 to 5 percent a year.
Romania, flexible in international affairs but highly orthodox internally, has enjoyed growth somewhat higher than 3 percent in the last couple of years. (One expert suspects that Romania's numbers are slightly cooked.) Orthodox Czechoslovakia has plodded along with 2 to 3 percent growth.
Meanwhile, the new annual report of the Asian Development Bank shows that the noncommunist developing countries of Asia have been growing at an average rate of 6.3 percent in 1983 and 5.5 percent in '84.
Last year, Taiwan's economy grew 10.6 percent; Hong Kong, 9.6 percent; Singapore, 8.2 percent; South Korea, 7.5 percent; Thailand, 6 percent; Burma, 6.3 percent; Sri Lanka, 5 percent; India and Pakistan, 4.5 percent; Indonesia, 4.4 percent; and even poor Bangladesh, at 3.9 percent. Only the Philippines, facing a debt crisis, had a slump in domestic output, some 4 percent.
Basically, the Soviet bloc is being left in the dust by the growth of the populous and increasingly capitalistic Asian nations.
Nonetheless, the economic position of the East European nations has improved in some ways. The IMF study notes that exports to convertible-currency countries rose more rapidly than imports last year. East Europe had a current-account surplus of about $4 billion last year (ignoring Poland's unpaid interest obligations).
The IMF economists expect a similar surplus in dealings with the West this year. That, it is thought, could open the way for a modest increase in East-West trade. The East Europeans may want to buy more capital goods from the noncommunist nations.
The Soviet current-account surplus, the IMF estimates, may slip from $4 billion last year to $3.5 billion. The Soviet Union is expected to import more grain this year and earn less convertible currency on its exports of oil and gas because of lower prices.
This picture has enabled the Soviet bloc to improve its external debt position. Net debt of the bloc (after deducting a solid increase in financial assets) dropped from $65 billion in 1983 ($11 billion of which was owed by the Soviet Union) to $61.5 billion ($10.5 billion for the Soviets) at the end of last year.
As a result, Western lenders have been looking with more favor on Soviet-bloc borrowers, except for troubled Poland. Indeed, East European countries raised some $2.5 billion in the international capital markets last year, up from $1 billion the year before.
The IMF report concludes, in effect, that the Soviet-bloc nations must proceed with more reforms if economic growth is to continue at more reasonable rates.
The bloc must also consider another decision -- whether to seek economic stimulation through greater contact with the West or just through domestic reform and economic integration within the bloc. At last year's June summit of the Comecon nations, Bulgaria and Czechoslovakia appeared to argue for integration; Hungary and East Germany for seeking more of the West's technology. The Soviets, according to one expert, sat on the fence. But now Mr. Gorbachev may want to climb off that fence if his empire is not to wither economically.