Why E. Europe embraces crisis management

In Warsaw, Wanda Slonimska turns in her ration card at the butcher's--and hopes she can get real pork and not just sausage of dubious parentage for some of her three kilograms of meat a month.

In Sverdlovsk, USSR, Ivan Ivanovich stands in line to get slightly more meat a month, if fat and bones are included. He doesn't read in his hometown newspaper that his country has shipped ''fraternal'' meat to Poland to help keep Wanda Slonimska from rioting in the streets.

In Ploesti, Romania, Alexandru Popescu doesn't even bother to stand in line. He knows a quest for red meat is a losing proposition.

It all adds up to a strong indictment of those East European economies that imitate Moscow's Marxist-Leninist model. And it may even add up to crisis if East Europe's inability to pay off its $60 billion debts or acquire large new capital inputs are thrown in.

Almost all of Eastern Europe (except for Czechoslovakia and East Germany at one extreme and Albania at the other) can point with some pride to a rapid postwar development from agrarian to industrial economies under Communist aegis. But all are facing major problems in the 1980s in shifting from relatively easy heavy industry with its gross output of steel ingots to the much more complex economies of light industry and post-industrial computers.

East Europe as a whole does much better than the Soviet Union in this regard (and by any third-world standards East Europe would qualify for full membership in the rich ''Northerners' club''). East Europeans eat better, dress better, have more apartment space, and amuse themselves in more varied ways than Soviet citizens do. Every Soviet manager who gets machine tools from Halle, East Germany--and every Soviet general's wife who returns home from Leipzig with a new wardrobe and a new piano--can attest to this.

For the East Europeans, however, the proper comparison is not with a Soviet Union they consider alien, but with a Western Europe with which they share a common cultural heritage. For the East Germans, who enjoy the highest standard of living in Eastern Europe, the proper comparison is with their brother West Germans, whom they see every night on color television in their living rooms.

East Germans and other East Europeans may be glad they don't have the unemployment, or the social problems of West Europe.

They do regret the erratic shortages of everyday items ranging from toilet paper to flowers. They also regret the dearth of fresh vegetables during the off-season. Above all they resent today's miserly and poor-quality protein and blame their woes on Soviet hegemony and their Soviet-style economic system.

A number of Western economists would agree with this. They point not only to the narrower range of food and creature comforts, but also to Poland's $26 billion hard-currency debt and the rest of Eastern Europe's $35 million debt, the snail-paced growth rates of most of the region (rates as low as in Western Europe), the quite remarkable 17 percent drop in industrial production in Poland last year, and its threat of economic collapse.

They would argue further that under any less-centralized and bureaucratic economic system, Eastern Europe would have prospered much more than it has under 31/2 decades of command economies. They would certainly have expected Czechoslovakia, an interwar showplace of advanced light industry, to have the glitter of today's Austria--and not to have its industry run into the ground and its plants obsolescent.

In particular, Western economists would blame Soviet-style economies for:

* Stalin's early postwar hauling away of East German industry to the Soviet Union, extraction of reparations from the former Hitler allies of Bulgaria, Hungary, and Romania, and incorporation of eastern Polish lands into the Soviet Union.

* Bleeding of the agricultural sector in East Europe in the 1950s and '60s on the Soviet model to provide investment for industrialization, with only belated comprehensive efforts to raise urban food and rural living standards. (At present only Hungary and Bulgaria are self-sufficient in food.)

* Excessive emphasis (on the Soviet pattern) on building heavy industry with extensive capital and abundant peasant and female labor, to the detriment of light and consumer industry, and efficient use of resources.

* Smothering by rigid command economies of Czech entrepreneurial savvy, Hungarian banking genius, and almost everyone's individual incentive and responsibility. (''The state pretends to pay us, and we pretend to work'' is the standard shrugged joke of workers throughout the bloc.

* Heavy overborrowing from the West in the 1970s (with the West's encouragement) far beyond East Europe's ability to repay.

But Western economists would generally reject a sixth claim of present-day Soviet exploitation of East Europe that is made by some unofficial Polish economists. The Western consensus seems to be that the Soviet Union has, in fact , been subsidizing East European economies since the mid-70s.

The Western consensus also says that during the '70s, East Europe fell victim to recession in the West. This recession shrank the market for Polish exports that Warsaw gambled on to pay off its Western loans.

In any case, planners say East Europe needs to move from extensive to intensive economies to avert economic strangulation. This means rationalizing jobs for a shrinking pool of new labor, economizing on fuel consumption, rationalizing prices and allocation of resources, and modernizing plants.

Under present circumstances it also means curbing Western imports without crippling its own industry dependent on Western technology. It means somehow maintaining the present standard of living--never mind raising it--in the 1980s. It means shifting from grand, unrealistic five-year plans to yearly crisis management. This is a difficult task, especially for rigid economies that do not have the strength of the Soviet economy.

Even more daunting is the 1980s requirement of finding new sources of capital. In the broader economic picture, this is the most critical problem.

In the realm of internal economic organization Hungary and East Germany are pioneering two rather different approaches. Budapest is opening the command economy to the winds of market forces. East Berlin is simply making its very orthodox command economy function in a way that must astound the Russians. The evidence is inconclusive as to which of the two models is more successful.

Thus, as Radio Free Europe economist Cam Hunter analyzes it, Hungarians probably eat better than East Germans--but the Hungarian economy grew the most slowly of any East European economy (outside of Poland's) in the 1976-80 period.

Furthermore, the Hungarians, with a chronic trade deficit with the West, have per capita Western debts as high as Poland's. The fact that these difficulties are not more widely recognized in the West probably owes much to Budapest's astute public relations.

For its part, East Germany enjoys the fastest growth in the region, currently a healthy 5 percent. Its per capita income may be twice as high as Hungary's (though at a more realistic conversion rate would make the East German and Hungarian per capita income just about equal).

Any Eastern European observer trying to choose which example to follow therefore faces a hard decision. The relative East German success with orthodox central planning and huge collective farms may mean only (as some people have formulated it) that human ingenuity has yet to devise any economic system that Germans couldn't make work. Or it may result from East Germany's unique access to the Western European Common Market through West Germany.

On the other hand, the relative Hungarian success with reforms that encourage private livestock raising in cooperation with collective farms and even private production in state factories may be the result of peculiar Hungarian conditons.

In the end neither the Hungarian nor the East German model (nor grudging Soviet f)nancial assistance nor dried up Western financial assistance) offers very much hope for East European economies as a whole. The most ambitious target most are aiming for right now is simply muddling through.

You've read  of  free articles. Subscribe to continue.
QR Code to Why E. Europe embraces crisis management
Read this article in
QR Code to Subscription page
Start your subscription today