Iron Curtain: An Economic Mess

The Communist bloc’s economic news was pretty bad last week, even by Communist standards. There was the Soviet Union, admitting that its industrial production has not risen as fast as planned (see THE WORLD). In Cuba, where the economy has tumbled to 80% of pre-Castro levels, the government moved to halt the decline by making President Osvaldo Dorticós economics minister and central planning board chairman. That was not all. Communist China’s economy has produced more bad news than goods, and Russia’s growing difficulties with Rumania are largely the result of its efforts to impose an unwanted economic strait-jacket on that country. Marxism has made a mess of economics.

The mess has been nowhere more significant than in Czechoslovakia, where last week officials fretted publicly over falloffs in food canning, dairy production and even the supply of Pilsner beer. As Communist satellites go, Czechoslovakia is something special. It is the most industrialized and the most intellectualized country in the Russian orbit. By all accounts, it should have been an Iron Curtain showplace—and for a while it was. But after running at an annual growth rate of between 8% and 11% in the late 1950s, Czechoslovakia’s gross national product has remained almost static at about $18.5 billion since 1961. The heavily controlled economy is now falling so far short of targets that its five-year plans have been abandoned.

Seeds of Shortage. Czechoslovakia’s economic troubles stem from the inflexible imposition of Marxist rules on the economy. Prewar Czechoslovakia was famous for sophisticated consumer goods, from Skoda automobiles to Bohemian glass; its living standard was among Europe’s highest, and the country emerged from the war relatively undamaged. Then the Communists, who seized power in 1948, gradually switched much of the country’s economy over to heavy industry.

Before long, heavy goods represented 60% of all output. New steel mills grew up everywhere, but they depended on Soviet mines for half their ore. In turn, the steel was hammered into diesel locomotives and river barges that were then exported to Russia—even though the Czechs’ own railroads and river fleets were antiquated. Increased costs forced planners to forgo reinvestment and research. The demand for factory labor trimmed the country’s farm population from 3,300,000 to 1,300,000, often left the farms to be run by women, and helped sow the seeds for chronic crop shortages.

The switch stopped economic growth, and also stunted the life of the ordinary Czech. Prices have soared 20% while purchasing power has fallen. Deliveries are slow, queues long and goods faulty; Radio Prague recently admitted that half the output of 650 kinds of industrial products are “below world levels” of quality, and that rejects cost $200 million a year. Prague, once called “the Golden City,” is a mangy metropolis of sooty streets and faulty plumbing. Everywhere signs warn “Pozor pada omitka” (Beware of falling plaster). Railroads cannot haul all the coal needed for power. “What did we use before candles?” runs a favorite joke. The answer: “Electricity.”

Trimming the Bureaucracy. Post-Stalin liberalism in the bloc is bringing self-criticism and some slow improvement. The Czech government is turning back to private ownership in such small enterprises as tailor shops, laundries and hat-check concessions. To provide more laborers, it is also trimming a bureaucracy swollen to 750,000 unproductive clerks and minor officials. To get hard currency for grain and machinery imports, it is wooing Western tourists with film and jazz festivals and easy visas. Last week, in one of the biggest policy decisions so far, State Planning Commission Chairman Oldrich Cernik announced that factories that increase productivity will be allowed to grant wage increases and bonuses. Where productivity falls, warned Cernik, wages will be cut accordingly.