Whitehead Urges ‘Bolder Steps’ : U.S. Aide Backs Reform of Economies in East Bloc

Deputy Secretary of State John C. Whitehead said Friday that economic reform in Eastern Europe would create a more stable and peaceful East-West relationship.

Whitehead, the No. 2 man in the U.S. State Department, said that “we in the West are heartened by the economic reforms under discussion in a number of Eastern countries.”

“We encourage stronger and bolder steps,” he added. “We want the drive for greater economic openness in the East to succeed.”

Whitehead spoke at a meeting in East Germany of the New York-based Institute for East-West Security Studies. He suggested that some observers might be surprised that the U.S. government wants the Eastern European countries to prosper.

“Why should the United States and the West support East Bloc economies?” Whitehead said. “Because we are willing to bet that greater economic openness and further integration of Eastern economies into the world market system will help to reduce tensions and advance the prospect of a more secure and more prosperous world for us all.”

‘Accelerated Decline’

He said that “without greater openness in economic management,” the Communist nations face the prospect of “accelerated relative decline.”

“I suspect,” he went on, “that such a situation would have uncertain consequences for East-West security, consequences that would most likely be in the interest of neither side.”

Whitehead pointed out that although many Third World countries have socialistic economies with central planning, “the only success stories today are countries that have allowed freedom and openness in the marketplace.”

His call for economic reform in the East Bloc countries was supported by other speakers at the conference. Donald M. Kendall, chairman of the executive committee of Pepsico, Inc., said that perhaps too much attention is being paid to arms control at the expense of economic problems.

Kendall said the best way to bring about peace and stability between East and West is to create a strong economic relationship. He pointed out that Pepsi Cola now has 20 plants in the Soviet Union and that 26 more are planned.

Easier for Businessmen

It is becoming easier for Westerners to do business in the Soviet Union under the leadership of Mikhail S. Gorbachev, he said, because an entire layer of the Soviet bureaucracy has been eliminated.

Yet, a senior Gorbachev economic adviser, Oleg Bogomolov, director of the Institute of Economics of the World Socialist System, admitted to reporters that “it is hard to do business in the Soviet Union.”

“We are trying to reform and decentralize decision-making in enterprises,” Bogomolov said. “We hope it will facilitate the way we do business.”

Whitehead told reporters that he has been talking with East German diplomats about the question of reparations for the world Jewish community for acts committed by Germany’s Nazi government between 1933 and 1945.

According to Jewish leaders in Berlin, East Germany has agreed in principle to pay up to $100 million in reparations, but Whitehead indicated that no firm figure has been agreed upon. He said details still have to be worked out regarding where East Germany will get the hard currency and to whom the money will be paid.

The East German government has said in the past that it represents the anti-Nazi elements of the Nazi era and is thus not liable for reparations.