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Soviet-style reform: first step is the hardest. EAST-BLOC DILEMMA

By William EchiksonStaff writer of The Christian Science Monitor / December 17, 1987



Paris

For Eastern Europe, this winter portends more than mere cold weather. It coincides with rising risks of food shortages and power cuts, student protests, and worker strikes - problems exacerbated by Soviet leader Mikhail Gorbachev's crusade to reinvigorate communism. If, as in Poland and Hungary, East-bloc regimes follow the Soviet example and embark on economic reform, they must raise prices and taxes, close down unprofitable factories, and eliminate thousands of jobs.

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Such proposals are not popular. Poles recently voted ``No'' to a referendum on market-oriented economic changes which included price increases of up to 200 percent. And Hungarians complain about their government's intention to close down unprofitable steel mills, hold down incomes, and impose the communist world's first income tax. The plan, critics say, smacks of a new compound worthy of a Nobel Prize in Chemistry: ``Swedish taxes on Ethiopian wages.''

``The type of reform Gorbachev is talking about is turning out to mean austerity, not prosperity,'' says Pierre Kende, an editor of a Hungarian exile magazine in Paris. ``It's no magic recipe.''

Clinging to the old status quo works no better. That became dramatically visible recently in Romania, home to the East bloc's most repressive regime. According to independent observers, about 20,000 workers went on a four-hour rampage last month in an industrial city to protest pay cuts. They shouted, ``We want bread!'' and ``Down with the system!''

Romania illustrates just how far communism can degenerate without reform. The autocratic Nicolae Ceausescu opposes both glasnost (openness) and perestroika (restructuring) and continues to runs his economy the old communist way, through central command and rigid price controls. Frantic industrialization has left the country with huge but hopelessly inefficient factories, while creating widespread food shortages in what once was Eastern Europe's breadbasket.

``The communist system can no longer substitute security, a guaranteed job, and cheap housing for Western freedoms,'' says Jacques Rupnik, an East European specialist at the Institute of Political Science in Paris.

Cold weather aggravates these explosive conditions. In November, Mr. Ceausescu imposed cuts of at least 30 percent on power supplies. The average household will be rationed to using 40 watt light bulbs several hours a day, and Romanians will shiver in their apartments.

Although Romania is perhaps the scene of the most dramatic distress, it is not alone. Power cuts loom this winter in Poland, Bulgaria, and even in relatively prosperous Czechoslovakia. In the months ahead, fruits and vegetables are expected to disappear from the markets.

The problems are deep-rooted. While Western industries became leaner and more profitable after the recession of the 1980s, Soviet-bloc companies didn't modernize, and they let their products become obsolete. Developing countries such as Brazil and South Korea are pushing them out of competitive markets.

As recently as 1985, the Organization for Economic Cooperation and Development reported that Eastern Europe ran a significant trade surplus with the West. Now, in a report released this month in Paris, the OECD said that Eastern Europe ran a large overall deficit of about $3.5 billion in 1986. The OECD warned that the deficit is pushing up the region's indebtedness and could cause ``problems of credit worthiness.''

Yugoslavia, which has heavily overborrowed, should not be ignored in this discussion. Its experiment with market socialism, which included free emigration, free trade, and workers' councils, is floundering on efforts to close down unprofitable factories and cut soaring inflation. Since the government announced price increases and a wage freeze last month, widespread strikes have erupted.

``East Europe, including Yugoslavia, is going backward economically,'' says Pierre Hassner, a specialist at the Center for International Studies. ``It is becoming part of the third world.''

The growing economic difficulties come at a delicate political moment. From now until June, six out of the seven ruling East European communist parties (including Yugoslavia) are scheduled to hold special congresses. These are rare events and could result in leadership changes.

``It's obviously no coincidence that the six special conferences are being held on the same time,'' says Vladimir Kusin, chief analyst at the Munich-based Radio Free Europe. ``The common denominator is political reform, democratization, glasnost, the political parts of Gorbachev's reforms.''

The Soviet leader obviously prefers allies who think and act the way he does. In order to modernize the Soviet economy, he needs better-quality East European imports, and he cannot tolerate anachronistic tyrants like Romania's Ceausescu - whose rule threatens to produce a crisis.

But Mr. Gorbachev must tread carefully. Soviet-inspired leadership changes, combined with a thorough application of glasnost and perestroika, could upset Eastern Europe's delicate balance, and analysts say Gorbachev's opponents in Moscow could seize upon any unrest in the satellites to challenge his leadership.

For this reason, Gorbachev's calls for reform have been balanced with a tacit acceptance of the status quo. East German leader Erich Honecker publicly says he sees no reason for taking lessons from the Soviet Union. Czechoslovak leader Gustav Husak dutifully gives speeches espousing reforms, but hesitates to put them into practice.