Book Reviews

The Times certainly used Duranty, who had a facilityfor turning out readable "I was there" copy. It played up Duranty's stories in columns adjacent to those written by Jimmy James, the Times man aging editor. But James, along with Freddie Bir chall, a previous managing editor who worked out of Berlin, disliked Duranty and would never have accepted him as an officialspokesman. Eventually James let Duranty go on a $5,000retainer that kept him out of Moscow for nine months of the year. It was a pleasant way of being fired. As the Times daily book reviewer in the Thir ties, I handed my copy directly to James, who sel dom questioned anything. I listened to his tirades about Duranty. I also listened to Joseph Shaplen and Simeon Strunsky, who wanted to see Duranty replaced, as he eventually was by Harold Denny. The main count against Duranty is that he was Stalin's man no matter what. Nobody on the Times said so openly. I was flabbergasted when in the elevator I heard Duranty, on one of his trips to New York, say that three million people had died in the Ukraine in a man-made famine. This seemed to me tremendous news. I repeated what I heard, but Duranty, worried no doubt about a return visa, denied he had ever said it. That made me a liar, but Simeon Strunsky, who had heard Duranty too, came to my rescue.

The Times could have had a major beat if Duranty had been willingto tell all he knew about Stalin's decision to starve out the better farmers known as kulaks. But it remained for others-in particular, the Manchester Guardian-to get the beat. An exasperated William Henry Chamberlin quit his job as Moscow man for the Christian Science Monitor to get the story told in the West. Ms. Taylor lets Joseph Alsop have his bitter say in an introduction to a chapter called "The Masters of Euphemism." Says Taylor: "On the 30th of December, 1974, syndicated columnist Joseph Alsop was bowing out. His last column, intended as a warning against the dangers of 'the reporter's trade,' turned into a character assassina tion of Walter Duranty-a man who had suc cumbed, as Alsop said, to that 'fatal hankering to be fashionable .... ' Alsop's shot at Duranty was based on the famine cover-up, and he singled Duranty out as the one who threw a blanket over the fire. 'Duranty ... covered up the horrors and deluded an entire generation by prettifying Soviet realities. He was given a Pulitzer Prize. He lived comfortably in Moscow, too, by courtesy of the KGB.'" In discussing Duranty privately, Alsop called Duranty "a fashionable prostitute" who made lying his "stock in trade." He even lied, though facetiously, about his wooden leg.

While Duranty was busy "prettifying" Soviet realities, hardier souls were trying to evade travel restrictions to find out what had actually hap pened in the anti-kulak drive. William Stoneman of the Chicago Daily News and Ralph Barnes of the New York Herald Tribune, acting on a tip from Eugene Lyons, went to the North Caucasus and the Ukraine, only to be arrested and sent back to Moscow. But they had seen enough. Malcolm Muggeridge, just out from England, bought a ticket to Kiev. His article, which appeared in the ManchesterGuardian,corroborated the findings of Stoneman and Barnes. The big follow-up of the pioneering three was provided by Gareth Jones, who reported fully on his three-week walking trip. Duranty's reaction to the findings of Stoneman, Barnes, Muggeridge, and Jones was that the famine was "mostly bunk." He led a pack in "throwing down Jones," which had a popular run on the Left.

Oddly enough, it was Stoneman who made excuses for Duranty. Nobody, says Stoneman, seemed in a hurry to cover the famine story. As Stoneman saw it, Duranty was "simply amoral, without any deep convictions about the rights and wrongs of Communism." In sending out Joseph Alsop's "assassination" column, Stoneman would always add a note that Duranty behaved as other New York Times men did during the same period in Paris, Berlin, and London. What moved Duranty was a desire to be right about the future. He had placed his bet on Stalin. Everything else followed from that. Even the purges were justified as necessities for keeping Stalin in power. Duranty's great sin was to care more about guessing right than about the nature of right itself. He was far from being alone here. In the end Duranty was to suffer for guessing wrong. He had never saved any money, and he was reduced to the status of beggar when editors turned him down. His women friends saved him.

After Stalin's death he married one of them just before he died. Duranty had been an opium smoker as a young man. He gave up opium because it interfered with his sex life. The Timesdid not worry about his past or his womanizing as long as the good stories flowed. In all, the Timeswas as amoral as Duranty himself. 0 159 THE ROAD TO A FREE ECONOMY by Janos Kornai W. W. Norton & Company,500 Fifth Avenue, New York, NY 10110• 1990 •224 pages• $16.95cloth Reviewedby PeterJ. Boettke T he heady events of 1989in Eastern Europe have given way to the sober reality of the 1990s. The road from serfdom will not be easy. As Czechoslovak Foreign Minister Jiri Dienstbier recently said: "It was easier to make a revolution than to write 600 to 800 laws to create a market economy." (The Wall StreetJournal,Sep tember 18, 1990) Perhaps the biggest problem is the advice of Western "experts" who warn East Europeans of the dangers of free markets. Most Western economists are convinced that the formerly socialist economies simply pursued the planning principle too vigorously, thus confronting the bureaucracy with an overly complex task. In addi tion' they maintain, in those cases where partial marketization did occur, East European economists didn't learn how to manage their economies effectively. With the right institutional framework-a central bank, a Federal Trade Commission, an Environmental Protection Agen cy, and so on-the economy could be managed efficiently, and the vagaries of unfettered markets could be controlled.

Moreover, Western institutions, such as the World Bank and the International Monetary Fund, continue to provide aid for the planningand managementof economic development to some 75 governments around the world, including those in Eastern Europe. The IMF has committed $2 bil lion since February 1990 to Poland, Yugoslavia, and Hungary; the World Bank plans to lend between $7 and $8 billion to East European gov ernments over the next three years. A new Euro pean Bank for Reconstruction and Development has been formed, and President Bush has pledged $1.2 billion in U.S. funds. Thisallfliesin thefaceoftheoverwhelmingfail ures of government economic planning and for eign aid programs. The very aid packages offered, by subsidizing existing political/economic struc tures, would undermine the revolutionary trans formation that is needed if the formerly Commu nist economies are to get on their feet.

There are, fortunately, some clear thinkers on 160 THE FREEMAN • APRIL 1991 this matter. One of the best is Janos Kornai of Har vard University and the Hungarian Academy of Sciences. Professor Kornai, one of the-leading scholars of the socialist economy and a longtime reform economist in Hungary, explains the deep structural problems that socialist economies face. He then offers an uncompromising solution to those problems. According to Kornai, the fundamental problem confronting socialist economies is that socialist enterprises encounter only "soft" budget constraints. By this he means that state subsidies destroy any profit incentive for socialist firms to act in an economic fashion. Instead, political ratio nales govern the allocation of resources, and prob lems of bureaucratic management result. But Kornai's argument is not that the govern ment should somehow try to harden the budget by tinkering with incentive schemes. He wouldn't, for example, SUbstitute profit targets for gross output targets or bonus schemes. Such tinkering with the industrial system doesn't work, he stress es. Effective "hard" budget constraints are possi ble only in a market economy with the rights of private ownership secured by the rule of law. The idea of markets without property rights is an illu sion. The idea of "market socialism," Kornai con cludes, has revealed itself in theory and practice to be a "fiasco."

In reaching this conclusion, Kornai correctly recognizes that this was a point emphasized by the great classical liberal economists of this century, Ludwig von Mises and F: A. Hayek. Not only does he acknowledge his intellectual predecessors, he adopts a basically classicalliberal agenda as a mod el for the transition to free markets. As he states: "There is no need for hundreds of new regulations Get Organized! that fuss over significant modifications of the bureaucratic restrictions on the private sector, and vacillate over whether to yield at one point or to maintain curbs at the other. It would be more expedient to approach the issue from the opposite direction, by giving unambiguous and emphatic statutory force to the principle that the private sec tor has unrestricted scope in the economy." (emphasis added) Kornai refers to his program as a "surgery" and argues that reform must be accomplished in one stroke. The program entails, on the micro-eco nomic side, the establishment of a constitutional right to private property, freedom of entry, and unrestricted market pricing to guide exchange and production. On the macro-economic side, Kornai argues for a program that: (1) stops inflation, (2) balances the budget, and (3) eliminates price and production subsidies.

One may disagree with Kornai on specifics of his program-for example, his qualifications con cerning externalities, his arguments about manag ing macro-demand, and his call for continued Western aid. But his overall vision of the transfor mation process is the closest thing to a classicallib eral program for Eastern Europe yet available. Even the much lauded SOO-dayplan of the Soviet economist Stanislav Shatalin pales in comparison with Kornai's vision of economic liberalization. One only hopes, for the fate of the people climbing out of the Communist rubble, that Kornai's words get through. D PeterJ. Boettke, Assistant Professorof Economics, New York University,is the authorof The PoliticalEconomyof SovietSocialism:The FormativeYears,1918-1928(Kluwer AcademicPublishers,1990). Attractive blue binders for twelve issues of The Freeman will keep your 1991 issues in order. Price: $12.00 postpaid.

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