NATIONAL ECONOMY IS ADMITTEDLY IN A MESS

Press, Volume CVIII, Issue 31762, 20 August 1968, Page 12

NATIONAL ECONOMY IS ADMITTEDLY IN A MESS

THE CZECHOSLOVAK SCENE

IB V MICHAEL SIMMONS, writinfi to the "Financial Times”, London, from Prague) (Reprinted from the ''Financial Times” by arrangement) Rumour and counter-rumour irritatingly dart and flit about the current Czechoslovak political scene like a lot of bats in the uncertain half-light.

But the country’s economists, like the men with whistles who warn pedestrians off the road works, have been able to see and say what is wrong in the economic sphere and have been getting, with remarkable articulateness, straight to the point.

Doubtless there are, behind the scenes, countless theories and counter-theories about what should be done—with or without Soviet assistance—but it is openly admitted with an unexpected and. for a Communist country, almost disarming degree of candour, that the national economy is, quite frankly, jn a mess.

Economics and politics are inextricably intermixed. It is almost as if, in the immediate post-war years, Russia were laying contingency plans for times such as this current crisis. For more than 60 per cent of Czechoslovakia’s external trade is with the Eastern bloc, and half this with the Soviet Union itself.

The country’s heavy industry—and this is a predominantly industrial country—is almost totally dependent on Soviet oil and iron ore supplies. Most of its cars run on Russian petrol; much of its bread is from Soviet wheat; and so on.

Trade With West

But more than 20 per cent of the country’s trade is also with the Western industrial economies, exports to them amounting last year to £l3Bm, a fall of £23m on 1966, while imports rose from £l37m to £ls4m.

Nearly a quarter of the 1967 exports went to West Germany and over £2om each to Britain and Italy. Western imports came mainly from the .same trio and from France and Austria. Nor is there any sign of any fallingoff in the West’s will to trade with Czechoslovakia because of the current political troubles. The in-trays and outtrays on the desks of the respective commercial attaches are higher this year than they have ever been. Professor Ota Sik, architect of the current action programme, and promoted by Dubcek to Deputy Prime Ministership, has nqt hesitated in a recent series of television broadcasts to rub the salt in about the rotten economic state of the nation.

Under-employment

If political management had not become the staple conversational diet just now then surely economic mismanagement would have done. For instance, while there is, predictably, no official admission of any measurable unemployment there is without doubt under-employ-ment on a very large scale. And even at the top there are some old-style "conservative” managers considerably more interested in output, for its own sake and production targets than the niceties of pricing and consumer demand. Over production and stockpiling are the inevitable results.

And it is not difficult to find a factory where the manager just will not know the actual cost-effectiveness of his plant That, he may well reply, is not his concern.

Probably the present political mood of argument and counter-argument has given the economists and others courage to shout about the nation's present inadequacies, both on the domestic and the international fronts.

Professor Sik, in one of his telecasts, put it this way: “On the foreign markets, Czechoslovak production is absolutely unable to adjust to changes in demand. Due to relatively high production costs Czechoslovak goods cannot compete abroad.” He stressed, too, the obsoleteness of machinery in the consumer goods industry. “The new economic system must effect a change,” he said feelingly, “which will entail new methods of planning, changes in financing and crediting, removal of sub-

sidies, changes in price rei lation, etc.” Professor Sik went on to say that in 1961 over a third of the country’s engineering ; industry was working to a 1 blueprint more than five years old, and that a tenth of it was working to blue prints three times older than that. Only a third of the products checked in a survey in 1964 was “of a world standard” : and agriculture was in a worse position than industry. He did not hesitate to point out that the average real wage in Czechoslovakia was 46 per cent lower than in West Germany and 12 per cent lower than in Austria. Earnings in the Socialist sector had risen 25 per cent in a 10-year period, while those in West Germany had gone up 2i times and those in Austria had doubled. The aim—and here was the. crunch—was to overcome backwardness of production and services through fundamental changes in the (bureaucratic) system of management and through “a radical stimulation” of foreign trade. Admittedly this would take time, but then a survey of the working week of 500 managers had shown that they averaged 20 hours a week each in conference, and only four hours a week in questions of work organisation. The professor only waxed political at the end of his series, when he spoke of the “crucial juncture” of 1968 and attacked the “old political leaders" for letting things slip. Stating that some Government help would be forthcoming for some small private enterprises, he urged finally that the “supply demand mechanism” become

“the true driving force.” Talk Of A Loan

Most critically, he noted: “The Government is conducting certain negotiations to obtain a foreign loan.” And talk of this loan, essential if Czechoslovakia is to escape from its present economic stalemate, runs as an undercurrent during the present political debate. Trade, all the talkers seem agreed, must be freed, both in relation to the bloc countries, and—more pointedly—in relation to the industrialised countries of the West. Patents and licensing agreements are earnestly sought with the West to lend

some sophistication to production methods—but this searching will get nowhere unless there is the wherewithal, the hard currency, with which to buy. The loan certainly was discussed by Mr Vaclav Vales, Foreign Trade Minister, when he was in Moscow recently. Moscow, it is said here, expressed a willingness to lend but wanted—and here was the rub—to know what the money would be used for. Meanwhile, a recently-agreed proposal that the Russians should supply the Czechs with natural gas is irritatingly, and significantly, left unratifieri.

The International Monetary Fund has been considered—but probably only fleetingly —for a loan. So have thoughts that the United States Government might help. But this would hardly be politically feasible, and Congress would hardly approve such help for a Communist country. France and Italy have also been approached with no known results, while West Germany is regarded, because of its war record, as an undesirable source.

Bankers In London

Britain, too, bas been in the loan picture—possibly very much so. Czechoslovak bankers are at least as secretive as British bankers —but it is known that some of them have been to London recently and that some top London bankers have been in Prague, talking probably at the offices of the Czechslovak Commercial Bank.

Certainly there would be no objections from either point of view to the BritishCzech arrangement of this nature, the flow of money permitting. The Czechs, who are regarded by the British as “very creditworthy and good payers,” would like such help from Britain as much as from anywhere else.

All such talk, however, gets lost in the general political fog. The fact that there would have been serious economic troubles for Czechoslovakia this summer, with or without the political crisis, is not doubted, and is not, despite the fog, lost sight of. It remains to be seen when the crisis is over how Westoriented is the “specifically Czechoslovakian” character of this troubled country’s foreign (borrowing) policy.