WORLD

The Scent Of Freedom

ANDREW PHILLIPS August 22 1988
WORLD

The Scent Of Freedom

ANDREW PHILLIPS August 22 1988

The Scent Of Freedom

WORLD

COVER

It is a scene that would have been unthinkable just two years ago. At 10:15 on a midsummer morning, the weekly trading session of the Budapest stock exchange is declared open. Casually dressed businessmen and women seated around an oval conference table in a modern office block calmly buy and sell stocks and bonds as chief trader Erika Timkóné calls out their names. The frantic, noisy bidding that characterizes the trading floors of Western exchanges is absent—but the Hungarian traders are no less rivetted by their task. Precisely 29 minutes later, the session is over, and officials count up their morning’s work: $820,000 worth of securities have changed hands. Says Ilona Hardy, the 32-year-old head of Hungary’s Securities Exchange Committee: “Of course, it’s a modest beginning. But you must remember: we have to learn to do business all over again.”

The session has revolutionary implications for Hungary and the five other Eastern European countries dominated for four decades by the Soviet Union. Hungary abolished stock trading and other capitalist practices in 1948, soon after the Communist party took power. But in January, Budapest opened the only exchange in the Communist world, and officials now ambitiously talk of computerizing its operations next year with financial help from the World Bank. Encouraged by Soviet leader Mikhail Gorbachev’s bold policy of political and economic reform, Hungarians are forging ahead with changes that will move their society

much closer to a Western-style market economy with a greater degree of political openness. Comic: The Hungarians’ eagerness to emulate Western models at times has an almost comic side; early this month, Prime Minister Károly Grósz, just back from an 11-day visit to the United States and Canada, declared that his country wants to build Eastern Europe’s first Disneyland. Throughout the Eastern Bloc, the Gorbachevinspired Soviet innovations are being closely

watched with a mixture of hope and caution in a region that is home to 113 million people. The Soviet Union’s leaders, once the unbending enforcers of socialist discipline in their Eastern European realm, are now prodding their allies to embrace reform. Hungary, traditionally the pacesetter of change in the region, has been the most eager to respond, with Poland not that far behind. But other countries have been much slower to follow—or, in the case of Romania, have rejected the new course altogether. East Germany and Bulgaria, with

their aged, conservative leaderships, have taken only tentative steps toward liberalization. Life: The new winds from Moscow are felt most sharply in Czechoslovakia, where the people this week are painfully mindful of a poignant anniversary. Late on the night of Aug. 20, 1968, Soviet and other Warsaw Pact troops marched into Czechoslovakia and put an end to the most sweeping reforms ever attempted in the Soviet Bloc. Two decades later, some Czechoslovak dissidents now look to Moscow with hope. Bohumír Janat, a leader of the dissident Charter 77 group—formed in 1977—told Maclean's. “I never thought I would praise any Russian leader. But Gorbachev is at least on the side of life—while the leadership here is still trying to uphold a system of death.” As Eastern European leaders grope with the revolutionary changes sweeping the Communist world, they are working against a backdrop of severe economic difficulties—and increasing tension in their own camp. Hungary and Poland, boldest of the experimenters, have to deal with high inflation and foreign debts that threaten to cripple their attempts to modernize. East Germany and Czechoslovakia are grappling with stagnant, inefficient economies that no longer produce the impressive growth rates that once ensured relative prosperity and bought social peace. Crisis: In Romania, living standards have dropped sharply and political repression has increased as President Nicolae Ceauçescu marches his country into almost complete isolation. Throughout the region, dissident groups are pressing for political reforms to match the economic changes. And while the Soviets once ensured that their allies maintained a facade of unity, they are now squabbling openly over economic, ethnic and environmental issues. Says Alan Smith, senior lecturer at London’s School of Slavonic and East European Studies: “There is an economic, political and social crisis coming in the East. In many ways, it has already arrived.”

The outlines of that crisis could be readily seen during tours of Hungary and Czechoslovakia, neighboring countries that have responded to change in dramatically different ways. Both suffered a brutal invasion from the East: Czechoslovakia in 1968 and Hungary in 1956, when Soviet tanks crushed an anti-Communist revolt and deposed the government of Imre Nagy, who had taken his country out of the Warsaw Pact. In both Budapest and Prague, shop windows are full; both countries offer their citizens relative prosperity in Eastern Bloc terms, with few shortages of essential goods. And leaders of both countries acknowledge that change is needed if they are to avoid slipping further behind the West. But the differences between the economic and political climates in the two countries are much more striking than the similarities.

Profits: In Hungary, which has enjoyed the most liberal atmosphere in the Soviet Bloc for the past 20 years, the pressure for reform in the Soviet Union has encouraged the government of Prime Minister Grósz to be much more liberal than even Gorbachev has dared. “In the past, we often encountered incomprehension from our allies when we wanted to make changes,” said Ernö Horvath, a senior official of Hungary’s foreign ministry. “Now, the wind is behind us. We do not have to explain.” The leadership’s determination to introduce reforms quickly results partly from Hungary’s impending economic crisis. Servicing the country’s foreign debt of nearly $22 billion (by far the highest per capita debt in the Eastern Bloc) absorbs much of its

hard currency earnings— making it desperate for foreign investment. As a result, Hungarian leaders plan to pass new laws by early 1989 that would make it much easier for domestic and foreign companies to do business. For the first time, foreign firms would be allowed to set up wholly owned subsidiaries in Hungary, instead of operating through joint ventures with state companies, and would be allowed to change all their local profits into their own currencies and takë the money out of the country. Strict: And in June, the Communist party’s Central Committee announced a plan to radically restructure the economy by cutting off subsidies to inefficient state enterprises, do away with subsidized prices for many goods and allow managers to lay off workers in order to make their companies profitable. It is a program that owes more to the strict conservative

economics of British Prime Minister Margaret Thatcher than to those of Karl Marx. And Grósz himself has spoken in language strikingly reminiscent of Thatcher’s lectures to the British people. “State authorities must cease acting as nannies,” he said in a speech this spring, “and leave decisions to the enterprises and individuals.”

Unrest: Such plans, however, will inflict economic pain on many ordinary Hungarians, already squeezed by inflation, running at an annual rate of 17 per cent, and the first income tax in the Communist world (the top rate is 60 per cent). Party leaders estimate that up to 100,000 people will lose their jobs—while World Bank experts say the number is more likely to be 250,000. In a society that has offered guaranteed employment as one of the trade-offs for lack of personal freedom, that could well mean widespread social unrest. Says Martin Tardos, a professor at Budapest’s Karl Marx University of Economic Sciences: “In principle, everyone wants reform. But there will be losers as well as winners. Factories will close, and others will have to fire workers. It is hard for many people to accept that.”

The economic changes have fuelled demands for political reforms as well. Hungary’s intellectuals, like those in Poland, already enjoy a wide degree of liberty; they openly criticize the government with little fear of retaliation and can publish their views with relatively few restrictions. Many were encouraged in May when two of the Communist party’s most outspoken reformers, Imre Pozsgay and Reszö Nyers, were named to the ruling Politburo. Pozsgay, they noted, joined in the debates last September at a meeting of the Democratic Forum, Hungary’s most important dissident group, and has openly speculated that the country might abandon its oneparty system—previously unthinkable in a Communist-ruled country. Few expect Hungary to go that far, but many say that the country might well sanction open factions within the Communist party. “They must acknowledge the link between free economics and free politics,” says Miklós Haraszti, an editor of the unofficial journal Beszélö (roughly: Speak Out). Ghosts: Even in Hungary, however, those who openly challenge the Communist party’s political monopoly can quickly run into trouble with the authorities. In June, police broke up a demonstration of several hundred dissidents and detained several of their leaders. Other critics have been denied passports—something now guaranteed by law to ev-

ery Hungarian citizen. In late July, six people associated with Beszélö and an independent artists’ group called Inconnu staged an eight-day hunger strike in a run-down apartment building barely a quarter of a mile from Central Committee headquarters in downtown Budapest to protest being refused passports. But even they were surprised when Grósz commented on their action during his U.S. trip, and the state-controlled newspapers reported the dissidents’ complaints. “Before, we would not have been able to get our message out at all,” said Ferenc Koszeg, a bearded Beszélö editor who lost 15 lb. during the hunger strike. “At least now they talk about us. That is progress of a sort.” Even that much progress, however, is nowhere to be found in Czechoslovakia. In sharp contrast to the relatively open political atmosphere of Budapest,

Prague remains gripped by a climate of stultifying conformism—and haunted by the ghosts of 1968. Western diplomats, other foreigners and critics of the government are routinely kept under surveillance, their telephones tapped and their meetings monitored. Ordinary Czechoslovaks with critical views take elaborate precautions to avoid being overheard—such as switching restaurant tables until they are sure that no one is close enough to hear a conversation. The official news media remain bastions of uncritical orthodoxy; by contrast, Soviet publications are eagerly snapped up because of their lively debates. “You have to get to the newsstand early to get Pravda these days,” said one Prague resident. “Everyone wants to know what’s happening in Moscow.” Czechoslovak officials acknowledge

the need for change—at least in the economic field. They say that their country’s economy badly needs to be overhauled— but they note that, unlike Hungary’s, it is not on the edge of crisis. Foreign debt stands at just over $3.5 billion, and inflation has been held to just one or two per cent a year. But many planners say that they are concerned by stagnant growth rates—and they add that there has been little change since such heavy industries as steelmaking were expanded in the 1950s. Says Karel Dyba, senior researcher at Prague’s Institute of Economic Forecasting: “We are still running the same economy we built 30 years ago. But now it is completely obsolete, so _ naturally we cannot com| pete with the West.” In response, the gov-

ernment plans to gradually introduce economic reforms to let enterprises operate more independently of central planners—but it does not intend to put the whole plan into effect until 1991. Disgrace: That ultracautious approach is even more marked in political reforms, where the Czechoslovak Communist party has not introduced any significant initiatives. Dissidents and other critics say the reason is that the senior men in the party, including General Secretary Milos Jakes, are the same ones who collaborated with the Soviets 20 years ago to snuff out the Prague Spring initiated by Alexander Dubcek—whose reforms were in many ways similar to those now enthusiastically advocated by the Soviet Union. Indeed, Jakes himself headed the party committee responsible for verifying memberships from 1968 until 1977

and personally supervised the party’s purge of some 450,000 supporters of Dubcek, who now lives in official disgrace in the southern city of Bratislava. Czech author Josef Skvoreckÿ, who has lived in Canada since he left Czechoslovakia 20 years ago and has just published a collection of essays that deal with his experiences, Talkin' Moscow Blues, told Maclean's that leaders of the Prague government are now in an awkward situation. The Soviets, he pointed out, are urging them to implement changes very similar to those that they crushed in 1968. Said Skvoreckÿ, a professor of English at the University of Toronto: “All the things that Gorbachev is trying to do—such as increase freeg dom and start economic restructuring— g these were all the main ideas of the 5 Dubcek era. So you can imagine being in 5 the government’s shoes. It’s very embarrassing.”

As a result, Czechoslovakia’s Communist party has permitted no open debate on the 20th anniversary of the Warsaw Pact invasion. In several interviews with foreign journalists earlier this year, Dubcek, now 66 and recently retired from a job as a forestry clerk in Bratislava, argued that there was a “deep underlying connection” between his reforms and Gorbachev’s policies of glasnost (openness) and perestroika (restructuring). Rudé Pravo, the party daily,

retaliated with blistering denunciations of Dubcek—and furious denials that any such link existed. Silence: In conversations with Czechoslovak officials early in August, mention of the 1968 anniversary created an embarrassed silence —or with convoluted attempts to dismiss its significance. Said Miroslav Pavel, the chief government spokesman: “We have so many important tasks at hand that I do not think this is very relevant to the work of the government.” Vladimir Gerloch, a retired editor-in-chief of Rudé Pràvo, offered a more straightforward ex-

planation: “The difference between perestroika then and now is that now it is not in contradiction with the Soviet Union. This is very important.” Strains: Despite the severe restrictions on independent political activity, the Czechoslovakian government has faced a fresh challenge from an unexpected source: the Roman Catholic Church. Last fall, a group of Catholics in Moravia circulated a 31-point petition calling on the government to abolish restrictions on the free practice of religion. Prague’s archbishop, 88-year-old Cardinal Frantisek Tomásek, endorsed the action, and religious activists say that about 500,000 people had signed the petition by the end of July. The government has responded to the growing Catholic restiveness with violence and arrests. In March, riot police in Bratislava used a water cannon to break up a demonstra-

tion of about 2,000 Catholics, many of them elderly women. While the leaders of Czechoslovakia and Hungary grapple with their internal problems, they and the other Eastern European countries face severe strains in relations among them. National and ethnic tensions, once suppressed by Moscow’s strict supervision, have come to the surface. In Bulgaria, authorities have attempted since 1984 to force all the country’s estimated one million ethnic Turks to assimi-

late completely. Turkish dress has been banned, as have Turkish schools, publications and even names. Severe: But by far the most bitter dispute is that between Budapest and Bucharest over Romania’s treatment of the 1.7 million ethnic Hungarians in its Transylvania region. Hungarians are outraged by Romania’s plan to bulldoze 7,000 villages in Transylvania and rehouse their inhabitants in centralá ized agricultural comS plexes. Hungary claims g that the policy will de5 stroy Hungarian culture in Romania —and in June, several thousand

people protested outside the Romanian Embassy in Budapest. The breakdown in relations between the two nominal Warsaw Pact allies is the most severe ever in the East Bloc. Last year, it led Hungary to take the unprecedented step of cosponsoring with Canada a resolution on minority rights at the ongoing Vienna conference on security and co-operation in Europe. The Eastern European countries face a crisis, as well, in their economic dealings. All are members of the Council for Mutual Economic Assistance, or Comecon, but trade among them has stagnated for the past several years. One problem: their currencies are not convertible, so that trade must be carried out through an elaborate and clumsy barter system. Dyba, the Prague economist, said that reform of Comecon could take place only after its member countries carry out economic reforms at home. Said Dyba: “A real common market, like the one in Western Europe, is incompatible with central planning in each country. You have to abolish it and go to a market-driven economy so that you can have free relations among countries as well.” In addition, environmental issues have strained relations among the Eastern European nations. While concern for the environment has long been at the forefront of public debate in advanced Western countries, the Socialist Bloc

prized economic growth above all—and did not permit an independent ecological movement to develop. The result: air and water pollution are far worse than in Western Europe. Protests: East Germany and Poland have long complained about air pollution from northern Czechoslovakia; residents of the northern Bulgarian city of Ruse have suffered chlorine poisoning from Romanian factories on the other side of the Danube River; and Czechoslovakia has complained that Hungary is dragging its feet on a joint hydroelectric project elsewhere on the Danube that may damage the ecology of the river valley. At the same time, inde-

pendent groups dedicated to protecting the environment have sprung up in several Eastern Bloc countries. Earlier this year, protests by several thousand people persuaded the Prague government not to build a power station in an area that environmentalists said could be easily damaged. Said Václav Maly, a Catholic priest in Prague who lost his licence to preach for his active support of the Charter 77 group: “That kind of visible success can encourage other people to speak out.”

Still, Maly and other dissidents caution that they do not

expect quick change in Czechoslovakia or most other Eastern European countries. Aside from Poland and Hungary, there are few signs that their leaders are prepared to follow the spirit of Gorbachev’s reforms —and few signs that popular unrest is widespread enough to force them to take quick action. “It is ironic that the Russians are now ahead in so many ways,” said Janat, the Czechoslovak dissident leader. “But if communism has taught us anything, it has taught us patience. We can wait.” With the glacial pace of change in most of Eastern Europe, that kind of patience will be badly needed—and sorely tested.

-ANDREW PHILLIPS in Prague with correspondents’ reports