Reformer Takes Charge

But Valtr Komarek faces question of how fast he can make changes. CZECHOSLOVAK ECONOMIST

THE message was scathing. Czechoslovakia's economy was stagnating. The country was producing too much steel, too much coal, and too much outdated heavy machinery. A mafia of incompetent managers was responsible. Instead of central planning, enterprise autonomy and free prices were needed. The recipe itself was not so bold: Western economists long had voiced such opinions. What was surprising was the setting: the gilded baroque office of the official Institute for Economic Forecasting. Also surprising was the speaker: Valtr Komarek, the institute's 59-year-old Communist director.

``Communist industrialization is nonsense, it is bankrupt,'' he told the Monitor. ``Unless we move and move fast, we risk becoming an industrial museum.''

For years, while other officials in Czechoslovak economic ministries offered false Pollyanna-like views, Mr. Komarek and fellow economists at the Forecasting Institute uncovered the true figures and preached the virtues of a market economy. They produced papers and viewed their opinions, but wielded little power.

That impotence now has vanished. After mass protests swept Czechoslovakia, Komarek sided with the opposition Civic Forum. With his theatrical speaking style and his dramatic appearance - his bushy gray mane and beard give him a strong resemblance to the Russian revolutionary Leon Trotsky - he seized the nation's imagination, giving a televised address and a press conference which detailed Communist incompetence.

Posters soon appeared in Prague reading, ``Komarek into the government,'' and when the government was named, Komarek had become the deputy prime minister responsible for the economy. Other Forecasting Institute economists were given key policymaking positions: Vladimir Dlouhy is budget minister and Vaclav Klaus as finance minister. Since taking office in December, they have outlined a dramatic new economic program, which includes breaking up state monopolies, creating a capital and security market, overhauling the banking system, and taking steps to make the Czech crown convertible.

``Artists and writers launched our revolution, but artists and writers cannot run an economy,'' explains Jana Smidova, a journalist with Svobodne Slovo. ``That's why we need Komarek.''

Komarek long has been a member of the Czechoslovak Communist establishment. Born in 1930 to a Jewish family, he was imprisoned in a concentration camp during the war. He joined the Communist Party in 1946 and is still a member. From 1949 to 1953, he studied in the Soviet Union before working in a series of high-ranking jobs at in the State Planning Commission. During the 1960s, he was dispatched to Cuba, where he worked as an economic consultant, becoming a close comrade to Che Guevara.

Returning to Prague during the 1968 Prague Spring, he was appointed to the Economic Council, where he worked with economist Ota Sik developing an economic reform. After the Soviet invasion, he was stripped of his position and remained unemployed until 1971. Instead of joining a dissident group, however, he managed to receive permission from then Prime Minister Lubomir Strougal to create the Forecasting Institute. Mr. Strougal himself was seen as a closet reformer, waiting for the right movement to move ahead.

``We were protected by Strougal,'' recalls Karel Dyba, an economist at the Institute. ``Komarek managed to bring back a whole group of really competent economists who had been purged after 1968.''

The question now is how fast to move Czechoslovakia toward a market. In neighboring Poland, Finance Minister Leszek Balcerowicz has opted for a dramatic ``shock program,'' which ends all price controls, balances the budget, and makes the zloty convertible in one fell swoop.

Komarek and the Czechs instead look likely to opt for a ``step by step'' program. In their view, Czechoslovakia is starting from a better point than either Poland or Hungary. The country was one of the world's 10 most-advanced industrial nations before World War II, and although it since has fallen far behind, it has not piled up huge foreign debts like the other East European nations.

The government's plan is to redistribute resources, not to jolt the country back to capitalism. Free prices and a convertible crown will be introduced over a longer period, say 10 years. Meanwhile, instead of mining 103 million tons of coal and producing 15 million tons of steel a year - ``as much as in all of Great Britain,'' Komarek says - he wants to build up light industry. And instead of investing to build more gigantic cranes and other heavy machinery, he wants to promote services such as tourism.

``Austria makes $10 billion a year in tourism. We make one-fiftieth of that,'' he says, sweeping his hands upward to show off his beautiful baroque office. ``With treasures like this, we also should make $10 billion a year.''

But all over Eastern Europe, people wonder if such structural changes will be sufficient. Hungary began injecting market elements more than two decades ago into its economy, including an emphasis on tourism, and the results have been disappointing.

``The step-by-step approach just doesn't work,'' says Hungarian Deputy Finance Minister Zsigmund Jarai. ``You need a big shock.''

The problem with the shock approach is its short-term costs. Mr. Balcerowicz admits that Poland's program could lower real income of Poles by 20 percent in 1990 and lead to layoffs of hundreds of thousands of workers.

In Czechoslovakia, polls show that nearly half of the public wants the economy to remain state controlled, while less than 5 percent favor capitalism. Most Czechoslovaks interviewed voiced support for Swedish-style social democracy, which soothes the workings of the free market with extensive social services. From this perspective, Komarek's vision fits his country's desires.

``I believe in a liberal system, a market economy,'' he says. ``I don't believe in capitalism.''