Cranking up economies. Many East-bloc leaders want more loans from the West and want to lean more toward free-market ways of doing business. But some entrenched and powerful communist planners chafe at these ideas. They want a tuneup, not an overhaul, of their economies.
Louny, Czechoslovakia — THE chunky Skoda automobile illustrates both Eastern Europe's economic successes and failures. Almost all families in this northern Bohemian town own a Skoda. It is affordable and easily available. It also coughs and chugs down the road at a maximum of 55 miles an hour, hardly a rival for the sleek Mercedeses that burn up the autobahns less than a 100 miles away across the West German border. To catch up, Skoda has hired Italian designers, bought $75 million in Western production equipment and licenses, and installed robots to replace workers. Next year, the company plans to introduce a new, speedier front-wheel-drive model.
Just as Skoda is speeding up its cars, East European leaders are trying to pick up their stalling economies. Faced with a yawning technology gap with the West, they want more Western loans and are beginning to recognize the need to change their economic systems. Instead of relying on central planning, more and more East Europeans are admitting that they must use more Western-style market forces and private initiatives.
But such reforms face stiff, perhaps insurmountable, opposition. Even in Hungary, the Soviet-bloc country best known for its economic experiments, officials say they have been forced to retain large amounts of state intervention in order to limit ``capitalistic'' ills -- inflation, unemployment, and growing income inequalities. Rank-and-file workers and poor pensioners complain about the riches gained by a few fortunate entrepreneurs.
Powerful planners and bureaucrats in charge of technology ministries are trying to seize on these grievances to reinforce their control. In their view, new industries such as electronics and biotechnology would be developed through planned crash programs. Old industries would be modernized by introducing robots and other high-technology advances. But these decisions still would be made from the center. Western-style entrepreneurs hoping to make a fortune would be throttled.
As these planners see it, the centralized economic system served a useful function after World War II, modernizing a predominantly backward part of Europe. Homes, roads, and factories sprang up out of the war's debris. Millions of people migrated from the depressed countryside to the new industrial towns. For three decades, Czechoslovakia and other Soviet-bloc countries boasted some of the highest economic growth rates in the world. Some signs of success
In Louny, Town Council president Vladimir Drapal points out signs of this success. Before the war, the Bohemian lands were more industrialized than other parts of Eastern Europe; Louny was home to the Praga locomotive construction yard. Since the war, Drapal says, the yard has been enlarged and a new Elektroporcelen ceramics factory was built, along with 5,000 spacious apartments, a culture hall, and an ``old age'' home.
The population enjoys high living standards. Typical is Antonin Kaska, a retired 64-year-old factory worker. In addition to his Skoda, he owns two television sets. His rent for a five-room apartment runs a little more than $50 a month. He even possesses a small country cottage.
Economic gains such as these came about in Eastern Europe by pouring in labor and resources. Once the transformation ended, the East European economies proved ill-equipped to make the new factories work more efficiently. Technology and energy efficiency have lagged, because of a lack of government investment and managerial innovation. With few incentives to work harder, labor productivity also stagnated. A 1984 study in the region of Slovakia estimated that workers in many industries wasted up to 20 percent of their time by arriving late, leaving early, and taking long breaks.
These trends jeopardize the easy life in Louny and throughout Eastern Europe. Polish and Romanian consumers already face shortages of food and other basic items. Even in more prosperous Hungary and Czechoslovakia, growth has dwindled to near zero and industries that once were closely tied to Western markets no longer can export their obsolete products.
``We are at a crossroads,'' says Frantisek Wysochowksy, an adviser to the president of the Czechoslovak State Planning Commission. ``We must find new ways of restoring growth.''
How to accomplish this goal? Traditional thinking in Czechoslovakia holds that giving managers more power, setting prices according to supply and demand, and aligning salaries according to productivity risks diluting Communist Party control. It would either frighten the Soviet Union -- as happened in 1968 when reforming ideas of the Prague Spring were crushed by a Soviet invasion -- or create undue expectations among the public.
Because of these fears, the Czechs and other East Europeans are trying to modernize by having the central planners introduce new technologies, rather than by breaking their power and changing the way products are made.
Czechoslovaks are increasingly coming to believe that an overly centralized system is too inefficient. To improve the quality of the country's products, officials say that they must decentralize their economy -- at least a bit. More freedom to local managers
A few years ago, a set of measures was introduced that gave local managers more freedom to make production and marketing decisions and to widen wage differentials. Private businesses were encouraged to plug the gap in services. Some officials say privately that they must travel much further down this path, firing workers and letting businesses go bankrupt.
The West may have an important role to play. During the d'etente of the 1970s, the West sold thousands of licenses and lent billions of dollars to the East Europeans. The idea was to help modernize their economies. The East Europeans would pay back the debts by selling some of their products to the West.
``It was further believed that the reform and modernization of the socialist centrally planned economy would automatically bring desirable political changes,'' writes Timothy Garton-Ash, a British specialist on East Europe. ``A generation of more sophisticated `technocrats' would demand more free exchange of information, consultation, power sharing, decentralization of decisionmaking,'' all ``in the interests of efficiency.''
But it didn't work out that way. Most East-bloc products turned out to be substandard and unsalable on Western markets, particularly at a time when the West was in recession.
The East Europeans didn't use the money to reform their economic systems, either. Their system proved incapable of efficiently allocating resources. A recent study in Poland into the purchase of 44 foreign licenses between 1971 and 1980 concluded that only three were economically justified. The rest were attributed to the personal whims of Polish leaders or sheer bureaucratic incompetence. `There's room for more lending'
This record does not augur well. With $80 billion in debt outstanding, few private banks are willing to risk lending huge sums again. And with East-West relations only thawing from their freeze during the early 1980s, few Western governments talk about guaranteeing more loans.
Nonetheless, some scope for a renewed Western economic engagement is emerging. Except for Poland, the other East European countries have succeed in getting their debts under control. ``There's room now for more lending,'' says Gerard Wilde, an East European specialist at the Center for International Studies in Paris.
The West also hopes that East European countries have become sufficiently integrated into the world economic system to make good use of the money. In recent years, several East European countries, including Hungary and Poland, have joined the major international economic institutions: General Agreement on Tariffs and Trade (GATT), the World Bank, and the International Monetary Fund. Czechoslovakia is a member of GATT. These organizations insist on at least minimum reforms before authorizing credit.
The Easterners want the loans. Even the cautious Czechs, who borrowed less than other Eastern Europeans in the 1970s, are asking for a modest increase in credits and technology transfers.
Back in Louny, both the imperatives for change and the pressures against it are clear. Most citizens do not compare their standard of living with that of nearby West Germany; even Town Council president Drapal has never crossed the border. They seem content. ``I wouldn't trade my Skoda in for a Mercedes,'' Mr. Kaska says. ``We like to guard what we have.''
But his aging Skoda cannot go on chugging forever. Already, it has traveled 290,000 kilometers (180,090 miles) and often needs repairs. With a wrench in hand, Koska looks up from his repair work on the motor and says, ``Sometimes it sure would be nice to go from 0 to 100 kilometers an hour in 10 seconds.''
That, of course, is how fast a new Mercedes accelerates.
Last in a series of occasional articles. Previous installments ran Sept. 19, Oct. 20, Nov. 17, and Nov. 24.