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

James M. Silberman, Charles Weiss, Jr., and Mark Dutz

From Foreign Affairs, January/February 1994

Article preview: first 500 of 2,410 words total.

Summary:  Rigorous work-study tours of private businesses in developed countries could expose large numbers of people from ex-communist economies to market-based practices. Such technical assistance, successfully pioneered by the Marshall Plan, could jump-start the lagging economies of Russia and its neighbors.

James M. Silberman was Chief of Productivity and Technology Development at the Bureau of Labor Statistics, responsible for the Productivity Assistance Program of the Marshall Plan. Charles Weiss, Jr., is former Science and Technology Adviser to the World Bank. Mark Dutz is an economist for the World Bank?s Private Sector Development Department.

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.

Huge numbers of people from government, management and labor must therefore be exposed to new ideas on an unprecedented scale and within a very few years. An indispensable tool for this purpose is to send people from the FSU/EE to observe market economies and to see for themselves how enterprises are managed, how a competitive product is designed, manufactured and marketed, and how modern economy operates, and then to have them share their observations with many countrymen upon returning home.

In the 1950s a similar effort, the National Productivity Drives, was financed as part of the Independent Technical Assistance arm of the Marshall Plan, reaching almost every plant in every industry, marketing agency, agricultural entity and research and development institution in Western Europe, Japan, South Korea and Taiwan. Now largely forgotten, these drives brought from Western Europe some 24,000 managers, engineers, supervisors, workers, and elected and appointed officials--and several thousand more from other countries--to the United States to acquire firsthand experience, to learn to make well–informed judgments, and to gain access to technology over a generation more advanced than what they were using. ...

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