TIME: Almanac 1993/TIME Almanac 1993.iso/time/caps/85/85capman.3

Text File | 1992-09-25 | 9.3 KB | 186 lines

                                                                                January 6, 1986

MAN OF THE YEAR

Other Heresies


In eastern Europe, too, governments have been trying to make
Communism work better. Neither of the two that have gone
furthest in producing variations of the system is directly
comparable to poor, agrarian China. But one shares China's
penchant for economic pragmatism, while the other is testimony
that not all the failures of Marxism can be blamed on Moscow.

HUNGARY

In the fashionable neighborhood of Zugliget, overlooking
downtown Budapest, the drabness of Communism seems a world away.
Sleek, modern villas nestle beside Italianate mansions along
the quiet, winding streets. Well-coiffed women in fur coats
promenade upon the snow-dusted sidewalks. The district that
housed many of Hungary's prewar magnates now shelters a
different breed of plutocrat:  the entrepreneurs who have
prospered under the country's unique brand of "goulash
Communism."

Hungary's 11 million people have long been the envy of the East
bloc for their cautious success at replacing at least part of
a Soviet- style centralized economy with profit-oriented
agriculture cooperatives and carefully administered oases of
free enterprise. Along Budapest's glittering Vaci Street, the
shelves of well-kept stores and boutiques are stuffed with
Western videocassette recorders, luxury clothing and high-tech
kitchen appliances. The nearby food markets display long racks
of sausage and ham, mounds of fresh winter vegetables and
ubiquitous garlands of crimson paprikas. Says a member of
Hungary's new economic gentry, a small-time plastics
manufacturer known as Jozsef:  "Are we rich?  By Western
standards, no. But here, we are quite comfortable."

That statement by no means applies to all Hungarians, and the
comfort that exists has been hard won. Hungarians, first
experiments with marketplace reforms were crushed during the
country's 1956 uprising against Soviet domination.
Paradoxically, the man who presided over the suppression of the
revolt, Janos Kadar, now 73 and still the country's leader, made
today's relative prosperity possible.

Even as he threw rebellious students and workers into prison,
Kadar ordered economists to diagram an overhaul for he country.
"It was clear that centralized planning had failed," says Ivan
T. Berend, president of the Hungarian Academy of Sciences. "If
we were to provide a comfortable standard of living, market
principles had to be introduced."  Unstated by Hungarian
authorities was the premise that in return for that comfort the
population would live passively under Communist rule.

Unveiled in 1968, the New Economic Mechanism gradually gave
factory managers limited freedom from the tyrannies of rigid
central planning. Among other things, they could make more
decisions about production quotas without the approval of state
authorities. Small- scale entrepreneurs were allowed to open
everything from private bakeries to boutiques and restaurants.
In the countryside, profit- oriented, cooperatives sprang up
alongside Soviet-style collective farms. Vendors were allowed
to set the prices of vegetables, clothing and many consumer
goods freely.

One of the most effective reforms was the official sanctioning
of the "second economy."  Typically working eight hours a day
in a state factory or farming cooperative, Hungarians were
encouraged to hold down additional jobs as taxi drivers,
seamstresses, restaurant workers or shop clerks. They were also
allowed to use their regular workplaces for private after-hours
labor in a number of designated occupations. The reforms were
roundly successful:  between 1968 and 1978 real purchasing power
rose more than 50%.

Since 1981, however, the standard of living has fallen about 6%
as inflation, currently running at 10% annually, has eaten into
the purchasing power of stagnating wages. The slowdown exposes
the limitations of Hungary's miracle. The economy remains
dominated by state-owned companies that still look disturbingly
similar to the ossified factories of its East bloc neighbors.
Productivity is woefully low. Says Economist Berend:
"Sometimes it seems that we have ended up with the worst of a
planned economy and the worst of a market one."

Many Hungarian technocrats feel that such problems can be cured,
but only with greater economic freedom. Accordingly, additional
reforms are being debated as part of Hungary's new Five-Year
Plan, which begins in 1986. But no one is sure if additional
changes will reverse the pattern. But under Moscow's watchful
eye, Hungarian reformers are unlikely to move any faster. Says
Marton Tardos, one of the country's most respected economic
analysts:  "If the government is bold, we can set the economy
on the right track. But I am not sure it can or wants to be
bold."


YUGOSLAVIA

In theory, it is the very model of a modern Marxist enterprise.
Yugoslavia's clangorous Red Banner auto plant is located in a
sprawling industrial park some 85 miles south of Belgrade.
Inside a vast assembly hall, 16,000 workers turn out about
220,000 cars a year, including 55,000 copies of the small,
ultra-cheap Yugo, the only Communist-built car sold in the U.S.
Amid the factory hubbub, Radojko Suljagic, a department
manager, extols the 78-member workers' council that ostensibly
controls Red Banner. The elective body, of which Suljagic is
president, not only chooses factory management but also sets
such basic policies as wages and production targets. Says
Suljagic proudly:  "It is the most important institution in the
factory. It is the final step in decision making."

A worker on the Yugo assembly line named Radoslav sees worker
power at Red Banner differently. "We are producing a higher
quality car than the others," he says, with a gesture toward
assembly lines that make autos for the domestic market. "We
should be getting paid more, but we are not."

Marxist theory and practice differ widely in Yugoslavia, in ways
that were probably never foreseen by the regime's founder, the
late Josip Broz Tito. In 1950, Tito began to create "different
forms of socialism" for his Communist nation. In his plan, the
country would openly look to the West for trade and inspiration.
Today, 800,000 Yugoslavs live in Western Europe, mostly West
Germany, as guest workers, while their countrymen are also free
to travel to the West, and openly aspire to a Western style of
living. Says Zoran Mandic, 23, a clerk in a Belgrade bookstore:
"Compared to the Bulgarians and the Poles, I am doing very
well."

At the heart of Yugoslavia's brand of Communism is "workers'
self- management," Tito's notion that the means of economic
production should belong directly to workers, rather than to the
state. The Yugoslav system now depends on Basic Organizations
of Associated Labor, which are, in theory, voluntary groups of
workers who make any type of product.

The BOALs permeate Yugoslavia's economic society, and are the
Yugoslav equivalent of shareholders. They elect the workers'
councils, like the one at Red Banner, that serve essentially as
a factory's board of directors. Behind the democratic facade,
of course, Communist Party control is ironclad. In theory, says
a Western diplomat in Belgrade, the self-governing councils are
"the purest form of Marxism."  But in practice, "the trade union
and the management are all controlled by the local party in
every big plant."

Yugoslav Communism has been plagued by a Balkan variant of
Murphy's Law ("if anything can go wrong, it will"). Local
empire building is rampant, a practice that is amplified by
Yugoslavia's strongly regional nature. The polyglot nation
consists of six republics and two autonomous provinces, meaning
that in each area regional bureaucrats have competing, equally
wasteful strategies.

Unlike Hungary, some 85% of Yugoslavia's cultivated land is
privately owned, but the country gains little from that.
Private landholdings average less than eight acres; farmers
cannot benefit from any economies of scale. Says Davor Savin,
counselor to the President of the Federal Assembly:  "It results
from the theory that socialism should prevent farmers from being
old-style capitalist."  Partly for this reason, Yugoslavs spend
65% of their income on food, vs. 35% in Hungary.

Private enterprise has gained a toehold in Yugoslavia, but to
a far lesser extent than in Hungary:  only 12% of GNP, vs. 25%
to 30%. The Yugoslavs have been far more reticent than the
Hungarians in encouraging a "second economy."  Yugoslavia's
socialism does not guarantee job security, and allows prices to
rise at near-market rates. Thus it has been plagued by ills
that can afflict free-market economies:  unemployment stands at
15% and inflation at 80%. Strikes, a theoretical impossibility
in a system where workers are the bosses, are on the rise.

Nonetheless, in the wee hours in downtown Belgrade,
Yugoslavia's troubles are invisible. At the crowded Star
discotheque, the local jeunesse doree shows off in Benetton
sweaters and Pierre Cardin shirts. Yugoslavs admit that things
could be much better in their version of the workers' paradise.
But their restiveness is still curbed by the knowledge that
things could also be much worse.

--By George Russell.  Reported by Kenneth W. Banta/Belgrade and
Budapest