The Multinational Monitor


E A S T E R N   E U R O P E

Behind the Curtain

by Gertrude Schroeder

A passenger train is under way. The winter wind buffets it from one side and then the other, whirls around the car and then, finding a crack in the windows, thrusts its frosty feelers inside. A small blizzard rages in the passenger filled compartment. Snowflakes slowly settle on the overhead racks and on the shoulders and knees of the people, who are shrouded in blankets. It doesn't matter that the railroad car depot's reports list the given piece of rolling stock as being in good repair and fully winterized...

- Izvestia November 22, 1979

As recent events in Poland dramatically indicate, consumerism is on the rise in Communist countries. Their people are clamoring for more goods-above all meat-higher quality, and a host of consumer durables and gadgets. The pervasive shortages, queuing and black markets that are standard features of everyday life are meeting increasing resistance from the public. The governments are being hard put to even partially satisfy these growing desires for goods.

While living standards have increased substantially in the East bloc, residents are aware that their living standards are much lower than those in neighboring Western countries. Though Nikita Khrushchev once boasted that by 1980 the Soviet Union would have the highest living standard in the world, real consumption per capita-the best overall measure of living-is less than a third of the level in the United States, under half the levels in France and West Germany, and about three-fourths of the levels in Italy and Japan.

Even Eastern Europe, with living standards well behind those of Western Europe, generally manages higher per capita consumption than the U.S.S.R. Moreover, living standards, in general, have been rising faster in the West than in the East, so that the gap between East and West has continued to widen.

These generalizations relate to overall levels of living as measured by real per capita consumption, which includes goods and services bought by households, as well as government expenditures on health and education. Looking at consumer goods alone, the gaps are even more striking.

Consider the availability of meat. Increasing meat consumption has become a benchmark of progress in the Soviet bloc, both for governments and the public. Measured in kilograms per capita, meat consumption in the U.S.S.R. is less than half that in the U.S. and Western Europe. It's also well below the level in most of Eastern Europe.

The average Pole eats almost half again as much meat as his Soviet counterpart; the average Czech and West German is even better off on this measure. People in the U.S.S.R. eat much more starchy food such as bread and potatoes, than do most Europeans, both East and West.

A similar situation holds for most household durables, such as refrigerators, washing machines and television sets. The numbers mask an important distinction: the quality of goods in communist countries is generally much poorer than in the West.

Examples are widespread. Some two thirds of the washing machines produced in the U.S.S.R: are of the hand-wringer type, virtually extinct in the U.S. In October 1979, a Soviet newspaper reported that a "blue-ribbon commission made a thorough check of 2,917 wine making enterprises," and ordered 519 to "close immediately" because of unsanitary conditions. Press reports show 1.5 million TV sets returned in 1978-one quarter of annual sales-for repair. Frequent complaints are also made about household appliances.

Production runs of appliance models tend to be long. Consequently, large inventories of obsolete models occasionally pile up as consumer tastes change. Consumers want color TV sets, larger refrigerators and automatic washers, but these items simply are not produced; Automobiles are virtually out of reach, with only one available for every 40-45 persons.

While the government sets quality standards for many products, they are not well enforced. The task of monitoring adherence to quality standards by tens of thousands of firms for tens of thousands of products is beyond the government's capacity. Moreover, their managers' bonuses and the success of the firm depends mainly on meeting plan goals for production. Quality is a secondary consideration. Consumers can return defective goods, but their chances of finding one of better quality right away are virtually nil. They can complain to officials and write letters to the newspapers-a common practice, which has little effect. Judging by the amount of letters in newspapers and cartoons in the satiric magazine Krokodil on the subject, dissatisfaction with consumer goods is a widespread problem in the Soviet Union.

Because of communist governments' traditional reluctance to invest in housing retail and service facilities,_ these sectors are not only backward relative to the West but inadequate to meet even domestic demand. In the Soviet Union, for example, urban housing space, as measured in square meters of housing available per person, is less than one-fifth of that of the U.S. and still below the minimum standard for health and decency set by the government itself in 1928.

Pravda reports that it receives "many" letters about shoddy workmanship in apartments. One came from Vitaly Pavlovich of Vyborg who reported that hi: apartment had no light-because workers forgot to wire the switch-and cracks in the window frames. Twice he complained to housing authorities, Pravda reported, and both times was told "Just wait "The newspaper continued `Writer did not wait. The joints, the clearances . . . and the uncaulked cracks let in so much cold air fiat the thermomete hardly rose above zero."

Other important aspects of consumer welfare in the Eastern Bloc compare more favorably with the West. Communist governments have emphasized investment in education and health services, which are provided to the population without direct charge. This does not mean however that everyone receives services of equal quality certain elite groups-such as high party and government officials, military and police officers and the heads of large enterpriseshave access to special shops, restaurants and health clinics and do not have to spend hours every day standing in lines.

The rest of the population does. Short, ages of desired and necessary goods are endemic. Soviet research surveys indicate that the average family spends 1.9 hours per day in shopping lines. In the past year food lines have appeared all over the country in the U.S.S.R. and Poland, both of which had poor harvests last year. In a speech last year Party Secretary Leonid Brezhnev complained about shortages of "medicines, soap, detergents, toothbrushes and toothpaste, needles, thread, diapers and other goods produced by light industry." A high Planning Committee official referred to unsatisfied demand for meat and dairy products, fruits and vegetables, cotton textiles, furniture, wood products, motorcycles, cars and "many other products."

This pervasive situation is rooted mainly in the modus operandi of Socialist price planning and consumer price policies, although some of the blame clearly goes to the investment priorities of the political leaders, who have favored investment in heavy industry and defense over raising living standards.

It is also an economy unable to meet changing consumer demands. In these Communist countries, the government, of course, decides what goods to produce and what firms are to make them. As the economy grows, the number of products and firms increases enormously. The huge task of trying to run an entire economy with government agencies through central planning becomes increasingly complex. In fact, the task is nearly unmanageable, where consumer goods are concerned. As people's incomes rise, their tastes change and they become more discriminating. They want new, better, more stylish and more modern products; just any old product no longer will be bought. Furthermore, the task of efficiently distributing millions of products to millions of people is also enormous. Satisfying consumer demand requires decentralization, markets and competition; the Communist countries have central planning and allocation, no competition and incentives of producers tied to fulfilling plans rather than pleasing customers. In such a system, black markets and corruption are ao natural result.

Though numerous, the economic reforms carried out in these countries over the past 10-15 years have not improved matters. The "reforms" have consisted primarily of tinkering with planning techniques, prices, incentives, and organizational hierarchies.

Hungary has been a conspicuous exception. The Hungarian government has been willing to favor consumer sectors when allocating investment capital and to import consumer goods from the West.

Although comparisons with the West remain unfavorable, the Eastern countries have experienced fairly steady advances in living standards. This progress has generated expectations among the public of further gains and hopes that the perennial malfunctions in the consumer sector-shortages and queues-will somehow disappear.

Rising expectations pose difficult political problems for the governments of these countries. Because of looming energy shortages and the apparent inability to increase productivity in their economies, all East bloc countries are faced with the prospect of further declines in rates of economic growth over the next several years. Even so, restive populations may well compel their Governments to allocate larger shares of the more slowly growing pies to raising living standards.

Hungary, in particular, seems to be opting for reform. Poland faces the critical task of meeting workers' demands for increases in real wages and free trade unions, while putting its economic house in order, after a decade of rapid growth financed by borrowing from the West. The tasks of dealing with new and changing demands of its people would be Herculean for any East European government, even without the Soviet Union looking over its shoulder and threatening intervention.

Events such as the emergence of the independent union movement in Poland-following the earlier food riots and protests there-are forcing Eastern bloc countries to consider the volatility of consumer demands. Indeed, these developments indicate that consumer and labor discontent-if fueled by a drop in the standard of living relative to the west-may prove to be an explosive form of pressure for reform.

Gertrude Schroeder is professor of economics at the University of Virginia.

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