06I(Plf)~l~TIAL 
• 
the production of unsaleable 9oods, and unprofitable exports. Some type of "economic is likely to be maintained, probably the 
standard variety prevalent in Eastern Europe. But 
the hope of real change will be gone. Economic 
growth obtained under tight control and through 
trade with the Communist world will be largely 
illusory, like past Czech growth. As Professor 
Ota Sik has been telling the people, most recently 
on television, growth has been maintained mainly 
through expanding the output of obsolete goods, 
most of which were then used --directly through 
investment and indirectly through trade with the 
Communist world --to make possible the output of 
more obsolete goods, of which the same uses must 
be made. Czechoslovakia now remains caught in this 
vicious circle. 

Hopes Forgone 
4. 
The Dubcek regime was preparing an escape from this circle by making structural and organiza­tional changes in the economy. The regime had already cut back projected long-term rates of increase in heavy industry, and these changes were reflected in the draft 1969 directives for the economy, issued in early August. The largest increases projected in output, aside from petroleum refining and chemicals --based on Soviet crude oil --were in consumer goods and building materials. The main increases in investment apparently were to be in the same industries and in agriculture, transport and communications, and housing. 

5. 
Over time, as structural changes improved Czechoslovakia's competitive position, Dubcek's economic advisers hoped to introduce an economic system somewhat like that of Yugoslavia, in which enterprises would make their own decisions, with the advice and consent of workers' representatives and subject to broad government regulation, some­what like wartime controls in Western economies. 

6. 
The hope of overcoming the handicaps of 20 years of Communist mismanagement of the Czech economy was perhaps vain. But it formed part of an overall policy under which Czechoslovakia had a prospect of being a more livable place. The hope and prospect must now be deferred indefinitely.