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someone else. The Russians behaved like Germans. The Hungarians behaved like Poles. The Poles behaved like Czechos. The Czechos behaved like Swine.

Samuelson's *Principles* is to be translated here. They are waiting for the last edition.

Last night in Lublin I investigated the position of lawyers in the socialist state. A few practice privately. The rest are joined in collectives, and fees are charged for the group as a whole and divided. The principle may come from Sullivan and Cromwell.

I learn that I was the object of quite a tug-of-war in Lublin between the Catholic and the State University. My visit to the hostels of the State University and to the Rector's flat helped keep things in balance.

Everywhere I hear grateful comments on books received from CARE and the Embassy.

Overcrowding in Cracow is as serious as in Warsaw. The city has doubled late thirties, in population since the mid-30s and there has been little building. The churches are also overcrowded, even on a weekday or weekday evening. However, May and June are holy months.

## May 20

At nine I was taken to Nowa Huta some ten kilometers from Cracow to see the new town and vast new steel complex. About 100,000 live in the town, all new in the last eight years. The steel works—*Huta im Lenina* officially, although Lenin doesn't get mentioned in ordinary conversation—is immediately adjacent and covers an area of some three or four square miles. A young English-speaking engineer took us over the plant which, to my unpractised eye, was impressive and fairly workmanlike. By our standards, however, it gives

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the unmistakable impression of being under-maintained, especially as to
paint and polish, and it could certainly do with a larger clean-up and
sweeping gang. One of my companions drew my attention to a decaying sign
urging completion of the Six Year Plan and noted that such propaganda was
now confined to the safety drive. I asked him if it had lost its effect
on the workers and he replied, "No. It never had any."

Nonetheless, this plant is obviously a source of considerable pride.
One engaging feature, however, is that the space between the endless
ranka of buildings, tracks, and stacks is heavily planted with trees. The
effect is to make it look a little like a steel plant in a park.

On the way back to Cracow we visited a couple of interesting old
churches, and then I was taken to see the Rector of the School of Economics.
He asked me about the tendency of class distinction in the United States.
I told him that I thought wealth was becoming less a source of prestige and
that intellectual achievement and politics were becoming more important.
He asked me about the position of scientists. I told him that the Sputniks
had been helpful and that scientists were not a depressed caste.

Next I was received by the Mayor at the City Hall. He is a professor
of economics and queried me about my books. (I discover that a local
literary review has just devoted an issue to them, and hence everyone is
well briefed. I am also beginning to get a glimmer of what it said.) I then
signed the visitors' register which has been kept continuously since the
thirteenth century. My inscription attracted general approval: "May your
revenues always exceed every conceivable need."

I asked the mayor what were his most important problems. He said,

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"Housing, schools, and the deficit in municipal transport." Not new.

I tried to get a picture of revenue sources. These include municipal utilities and would include rents except that these are abnormally low and return little over cost. So the state has assigned some industrial enterprises to city management under the decentralization plan. I gather these are now expected to make an important contribution.

My lecture, at five, was in the Senate Room of the University. The summary in Polish and questions took until eight at which time I was taken to dinner by the professors. Conversation turned on the Germans and the occupation period--an endlessly recurring theme--and the treatment of the University. All professors were called to a lecture on the attitude of the German occupation to science. Once assembled, all were arrested and taken to Sachsenhausen or Oranienburg. Release came only after a number of professors had died and on intervention of the Italian government and the Holy See.

My next neighbor, a Cornell-trained professor, lost his job in 1950 and was rehabilitated only last year. I asked why he had been dismissed, and he said he didn't know--"Of course I'm not a Marxist." I formed the impression that one of his derelictions could have been extreme dullness.

I got back to the hotel toward eleven, very tired and with a splitting headache. Tomorrow I have another lecture and a trip to Warsaw, but first we go (beginning at six) to see villages in the Carpathians.

May 21

We left at six this morning for a trip to Zakopane in the Carpathians

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about 100 kilometers from Cracow. The drive was most pleasant; farms are green, and the peasants were busy with spring seeding. The rolling country is in contrast with the flat plains around Warsaw, and the hills were spotted with apple orchards in full blossom. The mountains are agreeable but unspectacular. Zakopane is a resort town somewhat resembling a Swiss ski center, and we had breakfast at a milk bar that was over-run by young hikers. I got a good picture of two of houses and native costumes.

By twelve we were back in Cracow when I had my third and final lecture. Then after a late lunch we went to the station—the usual crowds—and with the agile help of my professor escort I got a seat. The station and platform were incredibly hot and so was the train, and I was badly dressed for it—a heavy tweed sport jacket.

However, the train was fast and fairly modern, and I got some supper in the restaurant car. This is something of a gamble when you do not know the language and cannot even guess. But I guessed which was the table d'hôte and was right.

On the car, as in restaurants generally, the food was heavy, with great emphasis on potatoes, but well cooked and agreeable. It is served with precisely the elegance of a Canadian threshing bee. Dinner plus a bottle of beer (warm but useful) cost about 240 or $1.60 at the tourist rate. I was back in Warsaw at ten where I was met and brought back to the Grand Hotel Orbis.

In the Cracow station is a large mural of howowa Euta is to look when finished. It is very brilliant and grand. The reality is a good deal less.

A well-informed individual has given me an account of the economic policy of the early fifties. Investment goods were high in the six year plan, and in 1951 and 1952 the Korean tensions brought a great increase in armament

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investment. Adjusting for the relatively low level of capital goods prices, he think Poland was investing about 40 per cent of national income in 1952—including defense. This brought a reduction in living standards and, along with the collectivization, cultivated the discontent which culminated in the 1956 disorders and the ensuing change. Now arms investment has been much reduced, but there is still a deep conviction that this generation must save heavily for the next---"We face twenty years of austerity." I asked him why this generation should give up so much for the next--why, since it isn't a question of starvation or physical privation, this generation might not be given a better break at the price of a slower rate of growth. He said there was an increasing tendency to make this argument.

On the railroad from Cracow one passes two great enclosures with watch towers and surrounding fences—in one case with elaborate lights. Inside are industrial plants and also barracks. The guard towers now seem abandoned, and the gates of one enclosure were open. But one imagined a sinister past.

On the train I saw the only Russian soldiers since I have been here--apart from the officers whom one encounters at the hotel.

May 22

My last lecture was at ten at the University. The attendance was good which was and the discussion, /alert and friendly, lasted until about noon. Then with one of the women professors I called by invitation on Lange at the Parliament. The chamber was in session, and we listened to a speech or two while Lange-- who sits on the ministerial bench--was being told of our arrival. About half the seats were filled. In close parallel with western democracy no one was

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paying the slightest attention.

Lange and I chatted for half an hour and then I went on to a luncheon given by the counsellor of the U. S. Embassy. It was an interesting group including a correspondent for the Party paper, a professor, and the head of the foreign section of the trade unions--an erstwhile American union organizer and Communist party member who returned some years ago to Poland. There was the usual frank discussion of Polish economic problems. The Polish Party people were very critical of the management of plants and enterprises. All were much interested in my impressions, and I did not pick up much that was new.

After lunch I visited the Polish Economic Society and inscribed copies of various books to people--Leontief to the newly-elected Dean of the Faculty of Economics, Duesenberry to the Secretary of the Polish Economic Society, and lesser works to others. (To Mrs. Massalaka of the Society, who has been my friend, counsellor, and guide, I gave a compact. In spite of herself I think she preferred it to a book.)

At five I was to be interviewed by the overseas English service of the Polish radio. But after some reflection I declined. The questions, which they had given me in advance, were quite innocent. But any overseas radio operation is for propaganda purposes. I suspect that scholarly goals are best served by avoiding even the appearance of such involvement. I wouldn't advise a Polish professor who is in the U. S. to go on the Voice of America.

In connection with these matters I had a long talk with a former American Communist party member who was either deported to Poland some years ago or who left in anticipation of immediate deportation. He has seen a lot of

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Polish workers and is an old and experienced party worker and organizer.
He says the workers are in a difficult mood. If asked, they would say, with
all sincerity, that they are against a return to capitalism. But they are
equally against the present regime. The great mistake, he believes, was in
the promises that were made during the Six Year Plan. These were taken
seriously, and at first the workers responded. But when the better life did
not materialize they were disappointed and disillusioned. He criticized the
government of talking of its machines, which are vastly inferior to those of
American factories. Where it had a point--welfare and paid college education
for workers' families--it is silent.

I asked him what the workers wanted. He said, "I don't really know--
just a better life." They want a system that works. They don't know what
that is."

Finally, I asked him how he found his own life in Poland. He said,
"The work is interesting enough. But if you want the truth, I'm homesick
as hell."

He told me his wife and child have just got a visa to visit the U. S.
Now he has to struggle to get a Polish exit permit for them while the U. S.
visa is still valid. I don't get much satisfaction out of the situation of
any man who is serving a life sentence. He made an interesting conversational
slip. "My wife was never a Communist. She is quite honest."

Tonight a final dinner from the Polish Economic Society. It was in a
restaurant in the Old Town in the cellar of a building that once belonged
to Jakob Bugger the Rich. (The last of the Muggers, 80 and without issue,
is a wine-taster for the government.) The dinner was most cordial and even

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merry. I had a long talk with Lange. He thinks the long-run problems between Communist and non-Communist countries will far more involve China than Russia. He says the sense of resentment in China over exclusion from the U.N., over Formosa, and the continued quasi-isolation is very great. We also talked of Polish economic matters but covering ground already discussed.

Many affirm the anamoly of the way the workers' state discriminates, relatively at least, against the workers. Since Poland has a highly intelligent working force, as well as a highly developed intelligentsia, these are the politically decisive groups in the community. The poor deal accorded these groups seems to me politically incomprehensible. The price elasticity of supply of agricultural products

is high so, probably, it is good business to treat the peasants well. If so, the only course is to stretch out the industrialization period--let this generation have some of the gains rather than reserving them for the next.

But there seems also to be a Calvinist conviction that there must be sacrifices now. These are not, incidentally, for military purposes. Everyone seems to agree that Poland does not now need to make large military investments.

However, judging only from the soldiers one sees, the military budget must still be considerable. I haven't seen recent figures.

Note on lunch: The slow mails came up for discussion. A local university professor said, "The reason is simple. It's the censorship."

A correspondent for the Party paper and one or two other officials argued that there was none--only inefficiency.

My American Communist friend asked me what I thought of Nova Buta which he had visited. I told him I thought it looked fairly workmanlike but dirty. He said that in the past it had been ridiculously overstaffed but that this

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had been remedied. As to the plant housekeeping, he said it was terrible.
"In the United States any decent union would say to management, 'Clean up
this place or we pull out the men.'"

At dinner a couple of economists made an impressive point. One said,
the other agreeing, "We have argued against our more orthodox colleagues that
there can be sustained growth under capitalism. Now with the recession we
already hear it said that we were wrong. Do you realize what a test this is for
your economy?"

A note from yesterday: While coming down from the mountains the car
radio was playing a Russian song. My companion said, "It is almost a welcome
change. Until two years ago we heard nothing else. Now we have only
American and French jazz."

May 23

this morning

At a little after eight/I was taken to the airport by two of my
economist hosts, and after various formalities took off for Belgrade. The
plane stops en route at Budapest and proceeds to Hirano from Belgrade if
there are passengers for or at the latter outpost. The plane is a Soviet
type, somewhat resembling a small Convair, and as I write it is flying
adequately. At the exchange control I had to show my money and was sent back
to spend a remaining Z100 that I still had. The only purchasable commodity
was chocolate with which I am now adequately supplied.

One or two further observations on Poland. Only once was there a
suggestion of secret policy activity. A foreign diplomat with whom I talked
(not U. S.) said his house was not safe and he kept the radio going while we

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conversed. Nothing that he said seemed very dangerous by Polish standards, and it is my overall impression that the police, if they do listen, must be astonished when they hear anything that isn't seditious.

More generally, the problem of Poland is that of reconciling a very high state of intellectual achievement with a very low level of economic life. The latter has become a source of great dissatisfaction which manifests itself in the widespread and uninhibited criticism. On the one hand is a narrow and restrained economic life. On the other a brilliantly critical intellectual life. Geography makes a socialist economic order more or less of an imperative. And even the least reconciled do not talk of great change and certainly not of capitalism.

While friendship for the U.S.S.R. is an imperative, even the most ardent Communists with whom I talked consider themselves Poles first. This is a point of first importance for the United States. Certainly the notion that all Communists take their orders willingly and automatically from Moscow--Tito of course excepted--can be a prime source of error.

Finally, It is hard to over-estimate the desire of the Polish intellectuals, again including a good many members of the high bureaucracy and press, and in particular of course the university community, to be considered part of the West. For the university, incidentally, it is difficult to exaggerate the role that the Ford Foundation is playing as a window to the West. Literally everyone you encounter is dreaming of a visit to the English or U. S. universities. Without this prospect one imagines that life for quite a few, especially of the younger people, would seem hopelessly grim and uninviting.

A "Ford Fellowship" is the new Jerusalem.

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My lectures are to be published as a book in Poland and both translation and publication have been arranged. Many apologies have been made for the inability to transmit royalties, but they are to accumulate to my account in zlotys. So I shall be covered come the revolution!

## Later

We arrived in Belgrade about noon. We taxied up to the ramp by a literal museum of ancient planes including a Fokker tri-motor. I was welcomed by a cordial delegation headed by Dr. Stanovnik, and we drank Turkish coffee while formalities were being completed by proxy. Then we drove into Belgrade where I am most pleasantly housed in a small hotel overlocking the erstwhile palace and the park. Dr. Stanovnik and I had lunch and a long talk on a great number of problems of mutual interest. His great concern is with what he calls pragmatic Marxism—the effort to rationalize socialist economic organization by stripping off the influence of irrelevant or obsolete ideology. We started a great many hares during lunch which I hope we can catch this week.

After a nap I walked for an hour or two through the main shopping streets. The contrast with Warsaw could scarcely be more striking. The stores are filled with goods and, partly since there are more imports, they seem to be of far better quality. There is more traffic and the people lack the drab, uniform appearance of Poland. It is immediately evident that this is a far less egalitarian society.

The difference is in the cafes, the chestnut trees along the streets, and above all in the varied, pleasant buildings of a (slightly) older European

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city. These are wonderfully more agreeable than the stark social realism of Warsaw. And even the latter, of which there is some in the parts of the city that were damaged, is softer and less severe than in Poland.

One disappointment. I was to have had a session with Tito, but it has been cancelled. The explanation was candid. There are other Americans coming to town whom he cannot see. In turning them down he thought it better to avoid seeing me. From the context I imagine my competitors are probably some politicians.

At dinner time there was a severe storm, and while making my way into the hotel restaurant I met a tall, handsome, and (by the standards of this part of the world) very well-dressed woman in her late twenties. She seemed to be sheltering from the rain. She smiled and asked me how long I had been in Belgrade. I told her and invited her to have a cocktail with me. This led on to supper.

She makes her living being agreeable to visitors, more especially those at the less brassy hotels. She lives with her parents, both office workers, but has a small apartment for more relaxed moments. The work is not demanding, and she attributed her good looks to the fact that she gets a lot of rest. She says she meets an interesting class of people of whom, on the whole, she finds the Germans best combine affectionate and gentlemanly manners with intellect. After dinner I strolled with her to her apartment but then discontinued my research with a small gift. This was somewhat against my inclination, even as a reputable family man, but in the course of conversation she had mentioned the unfortunate ubiquitousness of police surveillance in "these Communist countries," and this, along with the novelty

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of my surroundings, obliged me to a measure of caution. Also there has been
the religious revival at Harvard.

May 24

A most interesting day. This morning I strolled around Belgrade looking for pictures and found a few interesting people and street scenes. Then at ten I called by appointment on the Undersecretary of the Planning Board. We had a long and informative talk punctuated by schnappes and coffee. He thinks the greatest accomplishment of the Yugoslavs has been in breaking through the crust of backwardness and getting the industry that is necessary for sustained growth. The worst problems are the continuing imbalance in the external position and the tendency (as in Poland) for more gains to accrue to peasants than to workers. We also talked about time preferences in planning--how much should be sacrificed in the present for a higher living standard in the distant future. The Yugoslavs are not so Calvinist as the Poles. They are committed to supplying consumers' goods, including important ones, in the present. Tito has said that those who won socialism should enjoy some of its fruits. The great current argument is over how much reliance should be placed on foreign aid and foreign assistance. Should this be taken while the taking is good and for the maximum effect on living standards as well as investment? Or should there be economic independence, at a lower level, in order to protect political independence?

Some of these matters were discussed later at an informal session at
Dr. Stanovnik's Institute. (The discussion was very gay and easy-going.)
After lunch I was taken for a drive deep into the heart of Serbia to the south

of Belgrade. It is gently and then more steeply rolling country yielding eventually to mountains. The farms are small and primitive but look productive as do the vineyards. We visited the tombs of the kings of Serbia and Yugoslavia. All seemed to be immigrants.

Also we passed the place where 80,000 Yugoslavs, including Jews, were shot by the Germans during the war. A town nearby still forbids Germans, East or West, to remain over night.

My companion, a young intellectual from the Institute, told me the following:

(1) The police are no longer a factor in life.

(2) That, on the whole, intellectuals feel tolerably well satisfied with their situation and freedom.

(3) That the favorite American novelists are Hemingway and Faulkner and the best playwrights are Henry Miller and Tennessee Williams.

I had dinner with the Stanovnik in a delightful restaurant on a hill near Belgrade. I gave Mrs. Stanovnik a compact which I think she liked and we had a long talk about the reasons for, and reliability of, American aid.

I saw Tito today. He was proceeding at a high speed in a four car convoy when we met him. A motorcycle outrider moved us off the road and to a stop while he passed. Tito looked well -- if I saw the right man.

After the austerity of Poland I still find myself revelling in the luxury of life here. Excellent food and wine, good service and people who seem to be enjoying themselves.

May 25

We went today to look at farms and villages to the north of Belgrade. It was a beautiful cool summer Sunday, and youth day, and Marshall Tito's

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birthday to boot. Everyone was out -- even the peasant women looked well-dressed and handsome. Youngsters were everywhere in jerseys and shorts, the girls making a point of extreme abbreviation. On the several roads into Belgrade a relay race was in progress. The winning baton was to be delivered to the Marshall.

We drove in a Pobeda north to Novi Sad and then on nearly to the Hungarian border. This country, the Danubian plain, is level, rich and pleasant but far from exciting. The villages, where the peasants live, are exceedingly large -- sometimes numbering 10,000 people -- and in between are correspondingly great stretches of open land without houses. They travel great distances to their land.

I had hoped to wander through some villages and old towns, and take pictures, and I had made my wishes tolerably clear. But the socialist inevitable happened -- an experiment station, a hybrid corn breeding station, an irrigation experimental farm and a state farm. These are the only presentable culture. Incidentally, the experiment stations seemed very good -- far better equipped, more workmanlike, and more self-confident than those I saw in Poland. Indeed they were quite impressive.

At midmorning we had schnappes and vermouth and at noon an opulent meal in Novi Sad with more alcohol. Then we had wine and soda during the afternoon. I consumed lightly, having regard to the hot weather and drowsiness, and one of my hosts asked if we were unaccustomed to drinking in the United States.

One of my guides had been an exchange student in plant genetics at the University of Illinois. He was a monument to the virtues of this enterprise.

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I arrived back in Belgrade very late for a party given by one of the cultural attaches at the Embassy. It was a nice and typical American party with very well-groomed, slim, and attractive young wives getting systematically stewed.

There is some excitement over the telegram, a birthday greeting from X to Tito implying he isn't a fascist beast. The Russians obviously do themselves endless harm -- especially in the countries close at hand. I am tempted to think, on the basis of my tour, that Poland and Yugoslavia are unique in Europe for the absence of anti-Americanism. For this, Russian foolishness is to be thanked. One of my guides today was a former Partisan and an old Communist. When I happened to say, anent something or other, that the Russians had really born the brunt of World War II, he promptly jumped on me. "What about that pact with the Germans before the war? Anyway, look how they even defeated at the beginning. They couldn't organize a front until they got British and American supplies." When I expressed doubt on the latter point he was adamant although he conceded that Russian manpower losses had been high. He concluded the argument by saying, "Of course, I admit that you should do something about Dulles."

Passing an airfield outside of Belgrade in the morning our attention was drawn to masses of red poppies which stretched in a solid carpet, seemingly to the horizon. I pointed out that these flowers supported the regime. One of my companions responded without a moment's hesitation, "But it is not required. A hundred flowers can bloom."

A current Yugoslav statement of the difference between capitalism and socialism: "Capitalism makes social mistakes and socialism makes capital mistakes."

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May 26

At last an easy day. I got up late and worked on my lectures and later went for a stroll. I am still impressed by the air of well-being and by the number of good-looking and well-groomed women. At twelve I gave my first lecture. The room was packed and with a good number of high officials -- also a sizeable delegation from the Embassy. By arrangement there was no discussion of this lecture, it being purely historical, although I was challenged in a friendly way for citing Joan Robinson on Marx's view of Say's Law.

I lunched with some of the economic staff of the Embassy. They are well impressed by the viability of the Yugoslav economy as an I on brief observation.

In the evening I went to a reception at the Embassy-- small and pleasant -- and then on to dinner with two high Yugoslav economic officials. Both are old partisans and both had had a period of postwar service in Washington. The result, which I believe to be almost invariable, was a deep interest in American politics and folkways. Both are strong Yugoslav nationalists but also more than half American in outlook and interests. Nothing in this part of the world strikes one with more force than the existence of pro-American Communists.

We discussed agricultural matters and the danger of leaving agricultural policy to the technical agriculturalists. We also discussed the time discount system of the socialist state. They affirmed the Yugoslav view that life should be enjoyed in the present. In their view the cause of socialism has been deeply damaged by those who call for severe sacrifices indefinitely

continued so that at some remote future date there will be general
affluence.

We dined at the Metropole -- a vast, newly completed hotel of most
luxurious aspect. No workers' barracks this.

May 27

My second lecture was uneventful with a good attendance. The American Ambassador was present although I am not sure he found the subject fascinating.

In the afternoon I met for two or three hours with fifteen or twenty
professors and assorted intellectuals. The subject was the nature of the state
in the United States. A very interesting and highly undogmatic discussion.
The Yugoslaves are much concerned with discussing what is to be retained and
what is to be rejected from Marx. There is much more theoretical discussion
of this sort here than in Warsaw. Preoccupation in Warsaw is far more with
the practical problems.

In the evening I had dinner with two U. S. girls who are wandering through
Yugoslavia and afterward took them to have coffee and strawberries at the
Metropole. There we had a discussion of agricultural policy with one of the
Garste of Coon Rapids, Iowa. He is busy selling hybrid corn to the
Satellites. But nothing much new.

When the Metropole was mentioned in conversation yesterday, someone
said, "Ah! Yes. We believe it to be the largest whores house under socialist
management in the world".

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May 26

My third lecture today went about as usual. A number of high government and Party people were on hand, and there is to be a general discussion following my final lecture tomorrow. I lost the U. S. Ambassador but picked up the Canadian.

The head of the U.S.I.S. mission gave me a luncheon which included two or three leading Yugoslav economists -- both Marxists and one a leading Party theorist. We discussed the relevance of modern western economic theory to the problems of economic planning. They suggested that neo-Keynesian models were the most important macroeconomic guide and that the Leontief input-output system, given the aggregate system, was especially important as a planning model. One suggested that Leontief was more important for a socialist than a capitalist economy and added an interesting observation: "You might bear in mind that if the Soviets had behaved wisely, Leontief would have remained in Russia. His work would then have been done in its logical context."

We had a long discussion about what American books should be translated -- an enterprise which U.S.I.S. assists. The Yugoslaves held out for the best theoretical and technical books even though the circulation is small.

"Otherwise, some of our best people, who do not read English, will read only the Marxian literature. They don't necessarily wish to be dogmatic. They have no opportunity to be otherwise." The U.S.I.S. people argued for books of more general interest and appeal. I thought the Yugoslaves had a point.

Anyhow, the next one on the list is not at issue; it is Samuelson's *Principles*.

Later, I called by appointment on the chief agriculturist planner at the Planning Ministry. We talked about agriculture for an hour, but through

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an interpreter. The period of the blockade stopped all investment in agriculture and there followed several years of near stagnation. For the last two or three years, however, output has been rising steadily. The trend will continue up and they are counting on their increased outlays in the new Plan period for fertilizer, hybrid corn, and machinery. (I am not persuaded that they are investing enough in fertilizer which, after all, is a substitute for land.) The policy of forced collectivization is, of course, over. Emphasis henceforth will be on voluntary cooperation including pooled use of arable land and machinery where the peasants are filling. " But we are prepared to take time. We want a free agriculture." I get the impression that these changes are not expected to have any great affect for a very long time.

A stubborn problem in Yugoslav agriculture is that of regional differences in income. While the tilling on the permissible land holding -- about fifteen arable acres over an average of ten -- hold for the whole Republic, some make far more from their land than others. In Slovenia, net income per farm is four to five times what it is in Macedonia. (Lately I saw some figures which seemed to throw doubt on this.)

I had dinner with some American Embassy friends including a former Littauer student. They are old Yugoslav hands and well impressed by the economic progress -- especially of the past three years. In their view Yugoslavia now has a workable and a reasonably effective economy with a high growth. We discussed Russian policy toward Yugoslavia and the satellites, and the emergence of the phenomenon of the pro-American communists. They are no longer surprised by it. I even find myself getting accustomed to the concept.

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May 29

My last lecture today with an hour's discussion following. I am glad they are over although I think, on the whole, they were fairly successful.

Someone has noted that they were the first full-dress, exposition by a bourgeois economist in a Communist country since the Russian Revolution. I find this nourishing to my vanity. A director of one of the economic institutes, in a speech of thanks, said "Certainly what we have heard in these lectures is not what we used to read in the books." There is to be a further and final discussion of the lectures tomorrow at noon.

This afternoon I called by appointment on the editor of the leading economic journal and an important party theoretician. He thinks Yugoslav economists are going in too much for econometrics and formal and irrelevant theory. He said he gathered that there were similar conflicts in the United States. I agreed but told him that, since possibly we had even more economists than economic problems, something needed to be found to keep our profession employed. He thought the Yugoslav situation was less luxurious.

He thinks the economy is in good shape and will continue to expand at a satisfactory rate. One problem is to keep the terms of trade from turning too much in favor of the peasants. He agrees that in Yugoslavia, as in Poland, the peasants rather than the workers have, to date, been the principal beneficiaries of the worker's state. (The Party, someone else observed today, has many members among the peasants but it does not represent the peasants.) He supports strongly the notion that there must be a steady advance in living standards. Socialism must prove itself in the present by getting the gains

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of productivity to the workers. He argues that the balance of payment
deficit should be as large as can be financed. The issue was much in
discussion today for the postponement (equates cancellation) of credits by the
U.S.S.R. and East Germany had just been announced.

Afterward I had coffee with a young western-trained intellectual who is
not, I would assume, a Party member. He is not very happy but he says the
inhibiting factor in intellectual expression is the hierarchial character of
the society, and the stuffiness of those who have arrived, and not the
punishment of hereby. He says this was never too severe and is not now a
problem. He does not think the intellectual life of Belgrade is very lively.
He feels -- one or two others have mentioned this -- that the most serious
problem of the country is discontent and separatism in Croatia. The Croats
feel, as of old, they are being held back by the backwardness of Serbia.

Later I had dinner with some Embassy people, the Canadian Ambassador and wife, the Abels of the N. Y. Times and some Yugoslavs. However, the discussion turned mostly on France and the U. S.

May 30

I had breakfast with some friends from the Embassy and then was taken
shopping by Mrs. Stanovnik. I had told the Yugoslavs that I would consider
myself compensated by their hospitality -- which is indeed all that could be
asked -- but I sensed that this was not entirely satisfactory. They wished
to feel that they were compensating me, however modestly. (The issue did not
arise in Poland where I was being sponsored by the Ford Foundation.) So as a
solution -- since dinars may not be exported -- I agreed to take modest
payment in kind. A young scholar from the Institute came along with the

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official pocketbook. We bought some nice Serbian embroidery and some silver jewelry.

Then we had a final session at the Institute -- a further discussion of the lectures which was both lively and friendly -- and then more expressions of thanks and good-will. Following lunch with some senior economists I was taken to the airport and passed quickly through the formalities of departure. Certainly, it has been a most pleasant and entertaining week.

I leave with the distinct impression that the "market socialism" of Yugoslavia is a going concern. The clue is in the price system. In Poland nearly all prices are fixed by the state. If the price relatives are not right, then the incentive structure is unreliable. A firm that expands output at a loss -- if it happens that its prices are low and its costs high -- may be performing a useful service, and the higher the output and hence the higher the loss, the greater the service. The Poles recognize the problem here and, as I have noted, they are desperately striving to reform their price structure. But this takes a year or two. By the time it is finished another reform will be needed. There have already been four or five "reforms."

The Yugoslavs solve this problem by leaving about seventy per cent of prices to the determination of the individual enterprise. Not even Belgrade hotel prices are fixed and as the result of the completion of the Metropole prices of hotel rooms are coming down. The individual (public) enterprise has the power to adjust its prices and the problem of price relatives is self-solving -- if the prices are too low the firm can raise them and vice versa. This means in turn that earnings can be used as the test of performance and also that earnings can be partly shared by management and

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workers as an incentive. The thirty per cent of prices that are fixed include utilities and things like steel or fertilizer where there is a particular interest in the price. (The use of fertilizer is being subsidized although I would think not enough. It substitutes at nearly constant rates for land, which is very scarce, over a considerable range.) All in all the Yugoslav system is clearly much more flexible and pragmatic than that of the Poles. Clearly, also, it is better designed to incur the disfavor of the Soviets. There is much interest in Yugoslavia as to how far the Poles can go in unwinding their economy without having an ideological conflict with the Russians on this point. The notion that satellite economic policy should follow the "social schematism" of the Russian development seems to me the most dangerous mistake the Soviets are making. Adaptation to the higher living standard, the less self-sufficient character, the non-socialized agriculture and the cultural and economic more of these countries would seem to be an imperative. Indeed this is the lesson of the Stalinist period. Yet one guesses that it is still believed that ideology as distinct from "objective circumstance" is what controls.

The Yugoslavs, incidentally, are completely set in their determination to pursue their own course. In this there cannot be the slightest doubt. There is a domestic difference between those who would decide economic issues more dogmatically and those who argue with great vigor and pride for flexible and pragmatic socialism. But I did not encounter anyone who was disposed to think that Russian doctrine and experience should be considered the guide. I imagine some such may exist and that I was less than likely to encounter them. But I doubt if they are numerous.