Hungary: a special case
Timothy Garton Ash
Budapest T ike the world seen from a satellite, east- ern Europe seen from an American banker's boardroom looks much of a muchness. In the 1970s it looked like a good credit area. In the 1980s it looks like a bad one. Over the last decade most Western governments more or less actively en- couraged their bankers to lend to Soviet bloc countries, in the name of detente. To- day, governments are more or less actively discouraging them, in the name of solidari- ty. The Hungarians, who on paper have to find more than half a billion dollars this year, are feeling the chill.
They argue that this undiscriminating discrimination is wrong. Their own repay- ment record is good. Refinancing would be a normal procedure for an international debt of about $8 billion. They have cautiously reduced the debt since 1978 — by about $100 million in 1981. Retrenchment has involved cutting imports and public spending, pegging domestic consumption at the 1979-80 level, and dramatically reducing investment in all but selected export in- dustries. Unlike their Polish and Romanian neighbours they can still look forward to slow economic growth. Any new money they received from the West would not be used to bail out those neighbours, they say.
There is much force in this argument. Hungary has used Western credits in the way which the theologians of détente an- ticipated, to facilitate economic reforms which introduce elements of de facto pluralism into the system and make life more tolerable — even materially agreeable — for the majority of Hungarians (Spec- tator, 27 March). In Gierek's Poland and Ceausescu's Romania, by contrast, Western money has been used to put off badly needed economic reforms and prop up a still basically Stalinist centrally planned economic system. High-placed Hungarians are less sanguine than several prominent British observers about the pro- spects for Poland. 'When the party has lost the trust of the masses once, it may regain it,' remarks a senior trade union official, referring to Hungary after 1956, 'but when it has lost the trust of the masses three times . . ' He shrugs his shoulders. As for far- reaching economic reform behind the shield of a semi-military dictatorship, there is no precedent for it. There are profound struc- tural problems, particularly in Polish agriculture, which cannot be solved at the point of a bayonet; without the active cooperation of the working class no reform can get far.
To continue normal, business-like trade and financial relations with Hungary is therefore right for the very reasons that it is wrong for Poland. On strictly economic criteria no one would invest a single new dollar in Poland at the moment. Bankers will want to reschedule the debts rather than declare Poland in default, for the sake of their balance sheets. Individual com- panies and individual governments may want to continue with specific projects, because they have invested too heavily in them, and for the sake of jobs. But the argument for 'business as usual' is now a political one. Polish officials suggest that Western sanctions will drive the country in- to greater dependence on the Soviet Union. Some 40 per cent of Polish industry is estimated to be standing idle for want of Western spare parts or raw materials. Fur- ther sanctions, say these officials, bring closer the prospects of hunger, food riots and bloodshed.
This is indeed a terrible prospect. Yet it is one which the Polish authorities have brought upon themselves. Why did they not introduce serious economic reforms in the Solidarity period, when they might have had the full support of the population for the necessary austerity programme? As for greater dependence on the Soviet Union, clearly the degree of economic in- dependence that they formerly enjoyed did `It's a spot the arrow competition.' dence on the Soviet Union one jot: vide the whole history of the Polish Party's response to Solidarity, and Jaruzelski's coup. The main addressee of any coherent Western policy is Moscow. A coherent, policy towards Moscow is one In discriminating discrimination. Given the present economic plight of Poland, Romania and the Soviet Union, it is Plain economic sense for the West to decline 0, give credits as before. Our ultimate .gnal might be expressed in the formula 'No NeW Money' for these countries, although this will only be gradually and imperfectly achieved. A gradual turning of the screws Is itself not undesirable when dealing with system which moves as slowly as the Sovle one. At the same time 'business as usual shoud be the motto for Hungary, so long as it continues to repay and deliver punctually' and does not function as a funnel to Its socialist neighbours; perhaps also for East Germany, if only because West Germany would not stand for a radical break. Such a policy would announce to Mt Brezhnev and his successor(s): 'We do no wish to start another Cold War. We desire peaceful co-existence and to that end We are happy to do business with you, on business terms. Experience has shown that onlY those countries which have introduced fat; reaching economic reforms (e.g. Hungary) are reliable business partners. Therefore We will continue to do business with them, but we will no longer finance your inefficiency and repression. If you choose to initiate such changes, and to encourage them In Poland, Romania or Czechoslovakia, the we may eventually be in a position where we can reasonably do business with you as We do now with Hungary'. There is no obvious reason why the card' rot as well as the stick should be apPlle equally to all the Soviet bloc countries: They should be given where they are carrots for Budapest, sticks for Jaruzels7a Of course the Hungarian leadership vvoul hate this to be said plainly. Yet it only nee'„ " to be done plainly for the message to gel through to Moscow. The great danger of such a policy is that' rather than introduce the necessan; reforms, including a greater degree ni autonomy for the 'satellite' countries an de facto pluralism, Brezhnev's successors might well choose the Crow's way (to adal) the nickname given by the Poles to Gener'' Jaruzelski's National Council for Military Salvation). They might attempt to militanse their whole empire as Jaruzelski ha militarised Poland. That the path to reforni leads through the forest of militarisation (35 suggested by Neal Ascherson in last week s Observer) is, alas, improbable. But are the alternative policies less dangerous? At present the Soviet leaders seem to be using Western money more to postPone necessary reforms than to facilitate them' Such was the case — on a much wilder scale — with Gierek. Could the results have been worse if he had not been granted those lavish credits?
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