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Democracy in Eastern Europe Running Short of Gas : Energy: Benzine shortages and high pump prices threaten the engines of progress--the fledgling entrepreneurs. Freedom may be too costly.

February 03, 1991|Walter Russell Mead | Walter Russell Mead is the author of "Mortal Splendor: The American Empire in Transition." In 1990, he bought, or least tried to buy, benzine throughout Eastern Europe and in three Soviet Republics

BUDAPEST, HUNGARY — Americans call it gas. The philosophical French refer to essence . From the Rhine to the Volta, they say benzine. By any name, it is, after water and blood, the most vital fluid in the modern world.

The Iraqi invasion of Kuwait has played havoc with benzine markets around the world. Nowhere have the consequences been as grave as in the old communist bloc.

The Hungarian government's decision late last year to hike the price of benzine at the pump by 50% generated a wave of outrage. Taxi and truck drivers, backed by much of the populace, quickly moved to seal off bridges, highways and key intersections to show their displeasure. Panic buying swept the country; airports and border crossings closed down, stranding thousands of travelers.

The new Hungarian price was reasonable by West Europe's standards--$3.80 a gallon--but it came as a shock to Hungarians who, historically, have relied on access to subsidized Soviet supplies. In terms of the "pain factor"--the impact of prices on purchasing power--this was the equivalent of more than $50-a-gallon benzine. Prices like that would see politicians hanging from lamp posts in the United States.

Yet the government's hasty decision to rescind half the price rise has left many Hungarians shaking their heads and wondering if the country's new democratic institutions have what it takes to govern in the turbulent times ahead.

The reason? Painful as the price hike may be, it is only one of the many similar steps that Hungary faces in its transition from Bolshevism. Hungary, one of the East Bloc's previous showcase economies, has a per-capita debt burden of Third World proportions. It has a worrisome trade deficit and it faces the cutoff of its special trading privileges in the Soviet Union at the end of the year.

As the depression gripping Eastern Europe bites deeper, Hungary's traditional customers are less and less interested in importing its goods. The gloomy economic outlook in the West suggests that replacement markets will be hard to find. Germany, Hungary's traditional ally, sent emergency coal supplies to help with the winter. But it will be too busy with its own post-communist blues to send much more help to Budapest soon. The United States has a deficit to worry about, not to mention the cost of the Gulf War. For now, the Hungarians must muddle through on their own.

If misery loves company, the Hungarians should be happy. Since last summer, the Great Fuel Shortage has been raging through what used to be communist Europe. In Soviet Georgia, desperate motorists were making black-market assignations with the Red Army soldiers selling stolen benzine on the side; in Bulgaria, public transportation in many areas has been cut back due to fuel shortages, and motorists wait in line for 24 hours to get a tankful of the precious fluid. Ukrainians blame their local horrendous shortage on Boris Yeltsin's "Russia First" policy; in Russia, they blame it on Mikhail S. Gorbachev's deeply unpopular programs. The Czechs and the Slovaks can get it, but they pay through the nose.

Hungary's neighbors face the same triple whammy that shut down the traffic in Budapest last November: Soviet cutbacks, the Iraqi embargo and volatile crude prices. Bulgaria is already cutting power and water during daylight hours to save fuel; Romanian leaders debate whether to shut off fuel deliveries to factories or to homes when winter shortages hit. Already-worried cabinets and international bankers are penciling in the impact on balance-of-trade and debt figures. But the real story is taking shape on the street, and the biggest victims, tragically enough, are the group who represent Eastern Europe's greatest hope for the future: its fledgling entrepreneurs.

When reformers turned entrepreneurs free during the last 18 months, most people had only one valuable asset that could be the core of a new business--a car or, at most, a van. These cars weren't much by Western standards, but the Trabis, the Skodas, the Ladas and the Dacias have made a real contribution to what progress Eastern Europe has seen. Poland's driver-merchants scour the East for tradeable goods. The riches of Istanbul and Berlin come back to Warsaw one trunkload at a time; a similar trade has sprouted along the old silk route from Turkey to the Caucuses.

This scale of business is uniquely suited to the East's current circumstances. Consumers are desperate for almost any product, and neither retailers nor wholesalers have the capital to support large inventories, warehouses or systems of trucks. The newly laid-off factory worker can jump in the Skota and head for the border with a fair hope of coming back with a profit--and maybe developing a taste for doing business.

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