clock menu more-arrow no yes

Filed under:

PERESTROIKA ISN'T SOLUTION TO MARKET PROBLEMS

The transformation of a centrally planned economy and society requires the abandonment of perestroika, not its realization. Perestroika is a blockade to a market economy, not an aid to its unfolding.

In both Eastern Europe and the Soviet Union, perestroika is seriously flawed by the intellectual, scientific and technocratic ambitions of its supporters. They do not trust the market. They trust themselves.They argue that it is necessary to restructure and rebuild their collapsed economies and only then let the market function. They want to organize sophisticated government programs, build infrastructure and dominant industries, pick industrial winners and losers - all to be paid for by massive Western financial assistance which they want to distribute. They want to help firms in trouble and dictate prices as well as interest and exchange rates according to their a priori beliefs. Simply put, they still want to centrally plan.

The Czech and Slovak Republic will not slowly and gradually dismantle an economic, social and political system that degrades and unjustly treats its citizens, wastes and debilitates the nation's resources, and which has destroyed centuries of cultural heritage.

Instead of taking a road of half-measures, ill-motivated concessions, delays and ideological errors and prejudices, we will take the turnpike to political pluralism, private property and a full-fledged market economy.

Our course is clear. We know that private property is essential. Therefore, the first pillar of our transformation process is privatization. State-owned firms will be massively and rapidly privatized. The speed of privatization should be measured in weeks and months, not years or decades. For Czechoslovakia, the critical legislation authorizing privatization was passed at the end of February.

The second pillar of economic change involves opening our domestic markets through price liberalization, which is the necessary precondition for a functioning market economy. In January, monthly inflation in Czechoslovakia reached almost 30 percent. This was "repressed" inflation stemming from government-established prices and excessive growth of the money supply in the past, and from still-prevalent monopolistic and oligopolistic economic structures.

Since then, we have introduced harsh measures, including three successive devaluations of the Czechoslovak crown, so that the current episode of social dislocation (which is misused by enemies of transformation to attack us politically) constitutes a "once-and-for-all" transitional correction.

The third pillar of change requires opening the Czechoslovak economy to the rest of the world through liberalizing trade rules and moving toward convertibility of our currency.

The perestroika men seemed to work with us in criticizing all the irrationalities of the old system. But when we started to build a new system, they became the main opponents of our approach. Our rivals do not want a genuine market. They want to use the market as an instrument in their omnipotent hands.

On the home front, we have to face these irresponsible arguments every day. Even worse, we have to keep at bay similar self-assured and resounding voices coming from the West - voices that help to discredit our efforts by focusing on the hardships of transition to a free society.

Certainly, there are hardships. Unfortunately, our radical reforms have coincided with unfavorable and unexpected external shocks, including the initial oil price increases that resulted from the outbreak of the gulf war.

In addition, the worldwide collapse of socialism and of centrally planned economies brought about the end of COMECON - the trading group of the socialist bloc.

The ever-increasing disintegration of the Soviet economy also has aggravated the trade crisis of this region. The Soviet Union has been simply unable to honor signed contracts or otherwise fulfill its long-term obligations.

Low-productivity, post-communist economies in East and Central Europe would be in trouble even without the COMECON collapse. Imagine what would happen to the East Asian "tigers" - with all their efficiency, inventiveness and entrepreneurship - if they lost the American market. Without doubt, they would enter a deep depression.

And they, unlike us, do not face the uncertainty associated with our unparalleled radical shifts in property rights. Nor do they have "soft" governments afraid of using power after decades of state abuse.

The current situation is simply unbearable.

And, while all the aid measures being proposed by the West are helpful - financial bridging arrangements to give us breathing room, technical assistance, long-term investment in our still state-owned industries - they do not deal with the critical short-term loss of exports that is crippling us.

Thus, as we make the transition to a market democracy, we most need the opening of Western markets to our companies and our products, contracts for our goods with the Western public sector, and assistance in helping us find trade partners in the East.

My understanding of freedom and prosperity is based on a system of worldwide free-trade, not on man-made institutions. Freedom means not only the elimination of all barriers to commerce but the elimination of bureaucratic institutions, of government attempts to intervene and especially to redistribute wealth.

On this issue of government intervention, my stance no doubt sounds excessively radical to many in the West. But here in Eastern Europe, we have lived for so long in a world based on utopian and psuedo-rationalistic aspirations that we have earned the right be overly sensitive.

1991, Los Angeles Times Syndicate