APPROVED FOR RELEASE: 2009/06/16: CIA-RDP01-00707R000200110014-8
activity. The leading critics such as Ota Sik argued that Novotny's policies, following the Soviet model, promoted the inefficient production of unsalable goods through too much investment in heavy industry (Figure 12). Critics gained enough political support to force a public debate on economic policy in 1964 and to push through a comprehensive reform program in early 1965, setting up what was called a New System of Management.
The reform program, to be sure, was two-faced. On the one side, it called for the eventual shift of decision making to enterprises and replacement of most central controls by the "discipline of the market." On the other, the program did almost nothing to reduce existing controls over output, allocations, prices, and exports. As the crisis eased in 1965 and 1966 it became clear that Novotny intended to maintain these controls and return to business as usual. As his position hardened, criticism mounted. Finally, opposition to Novotny on both political and economic grounds led in early 1968 to his replacement by Alexander Dubcek as head of the party.
The Dubcek regime, before the Soviet-led invasion of Czechoslovakia in August 1968, had struggled against both internal and external threats to its survival and consequently had put off dealing with economic problems. The week before the invasion, however, it had published the economic directives for 1969 that addressed some of these problems. It is uncertain—particularly in light of the invasion—how far the regime might have gone to meet the longstanding demands of Sik and others that the state
| Total | Investment in Construction | Investment in Machinery | |
|---|---|---|---|
| 1948 | 12,197 | 9,170 | 3,027 |
| 1950 | 19,186 | 13,192 | 5,994 |
| 1955 | 30,378 | 22,137 | 8,241 |
| 1960 | 56,626 | 38,060 | 18,566 |
| 1961 | 60,519 | 40,048 | 20,471 |
| 1962 | 58,803 | 38,408 | 20,335 |
| 1963 | 52,252 | 33,814 | 18,438 |
| 1964 | 58,162 | 36,575 | 21,587 |
| 1965 | 62,595 | 38,458 | 24,137 |
| 1966 | 68,610 | 41,373 | 27,237 |
| 1967 | 70,446 | 44,550 | 25,896 |
| 1968 | 76,207 | 47,892 | 28,315 |
| 1969 | 83,573 | 51,683 | 31,890 |
| 1970 | 88,475 | 54,194 | 34,281 |
| 1971 | 93,484 | 57,795 | 35,689 |
| 1972 | 101,641 | 64,203 | 37,438 |
should leave most economic decisions to enterprises, introduce the sales-profit motive for managers, allow more of a role for labor, and use government fiscal and financial controls to maintain and direct economic growth. But Sik himself had recognized that the economy would go into shock if his reform program had been put into effect at once. Twenty years of producing by command for protected markets has left their marks—obsolete plant and equipment, management by petty bureaucrats, low standards of workmanship, and ignorance of customers' needs and desires. A dent could hardly have been made in these problems without causing unemployment and major strikes, dislocations in the domestic market, and a balance-of-payments crisis.
Dubcek's reluctance to jeopardize his popular support by enacting strong controls, coupled with an inadequately prepared reform program, allowed more freedom than the economic system was prepared to handle. Average monthly wages jumped from a less than 2% per year increase for the 1960-66 period to 5.4% in 1967, 8.2% in 1968, and 7.4% in 1969. Reflecting consumer demand, retail trade increased 14% in 1968 and 12% in 1969, whereas between 1960-1967 retail trade only rose 3% to 4% per year. Moreover, Dubcek's policies inhibited the ability of the economy to supply the demanded goods. The workweek was reduced from 6 to 5 days. Workers' Councils were given a voice in enterprise decisions, disrupting some wage and production schedules. Even with a large consumer demand and retarded supply, retail prices were increased only about 1% in 1968.
The Soviet-led invasion created a number of additional economic problems. Production was disrupted for a short period, but partially made up for by volunteer production shifts called "Dubcek shifts." A consumer buying panic placed more pressure on supplied. A decline in tourism—4 million people below 1967—imposed strains on the balance of payments. Disrupted transportation and the burden of military supplies created a backlog of goods unable to be loaded or distributed, contributing to a fuel shortage that winter.
At first, Gustav Husak demonstrated a "Dubcekian" reluctance to offend the populace by hesitating to impose necessary economic controls. Continued inflationary pressure, however, forced his hand. Throughout the last half of 1969 and into 1970 new investment projects were curtailed, retail prices were increased and then frozen, and various measures were enacted to reestablish controls over enterprises. Planned wage increases were halted—wages rose only 3% in 1970 as opposed to 7.4% in 1969. At first Husak
20
APPROVED FOR RELEASE: 2009/06/16: CIA-RDP01-00707R000200110014-8
- ↑ In terms of 1967 prices.
