Jump–Starting Ex–Communist Economies: A Leaf from the Marshall Plan

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The republics of the former Soviet Union (FSU) and Eastern Europe (EE), if they are to avoid political and social chaos, have only a few years to make visible progress toward providing their people with a supply of affordable consumer goods and a reasonable standard of living. The United States, Western Europe and the rest of the world have a huge stake in avoiding the geopolitical havoc and massive migrations that might ensue if the formerly communist countries fail.

Current U.S. policy toward the countries of the FSU/EE is based on the premise that competitive free markets, combined with economic stabilization and privatization, will bring prosperity and economic growth. These changes are expected to encourage foreign investment and to press inefficient enterprises left over from the communist regime either to evolve or to die, letting new enterprises take their place.

This approach is not working fast enough. The average FSU/EE citizen has barely enough money to survive, a very limited choice of things to buy, and dim future prospects for more lucrative employment. However desirable rapid reform might be in the long run, its immediate social and political costs may prove too painful for fledgling democracies to accept.

To compete in the marketplace of the 1990s, FSU/EE enterprises require a wholesale change in their rigid mind–set, which they inherited from a centralized, militarized command economy cut off for more than 70 years from world markets and the worldwide flow of technological information. Instead of simply meeting production targets dictated from above, FSU/EE managers must now be familiar with cost accounting, marketing, quality and inventory control, labor relations, financial and organizational structure, product design, procurement and research. Workers, managers and consumers need to understand their stake in increasing productivity as a means to increase their quality of life. All participants must understand the implicit and explicit rules and procedures that enable a market economy to function smoothly...