38 SOCIAL SCIENTIST Rumania, Bulgaria and Albania have been openly critical of the liberalisation programme. The GDR and Czechoslovakia have restrained their comments, although the reaction in Czechoslovakia is more favourable than that in GDR. The GDR leadership has welcomed the reforms so long as they are confined to the Soviet economy and are not generalised as a model for every socialist economy. In order to understand the GDR leadership's reluctance to examine the relevance of the current Soviet model for their own economy, we must recapitualate GDR's experience with the New Economic System in the sixties and describe its present management model keeping in view its specific production structure and its relationship with the external^ world. In 1963, GDR was the first economy to have embarked upon a programme of decentralisation. The basic document, the Principle for the New Economic System of Planning and Management of the National Economy (NES) was based on Liberman's model (1962). The main theme was that the central authority should concentrate on long-term planning, structural changes required in the economy and cooperation with other CMEA countries. The lower level authorities were to be given greater scope and independence regarding input allocation, output target determination and routine investment decisions. The industrial organisation in GDR comprised of a three tier system. The central authority included the council of ministers, the state planning commission, industrial ministries and other central bodies. The intermediate level authority was represented by the VVBs (Vereinigung Volkseigener Betrieb), which have associations of nationalised enterprises belonging to a given branch. The lowest rung consisted of production units, i.e., the state enterprises, VEB (Volkseigener Betrieb). Under the New Economic System, the VVBs and VEBs were given a great deal of autonomy in routine decision making and a set of economic and financial levers were introduced to dovetail the enterprise level decisions with the central plans. The NES reforms were, of course, extremely moderate compared to the current Soviet reforms but the general direction was the same. According to Osnovnye Polozheniia,2 a document specifying the guiding principles and basic outline of Gorbachev's reforms, central annual production plans are to be abolished completely. Output and input mix, customers and suppliers, structure of wages and bonuses and magnitude of capital investment will be decided by the enterprises on their own. Material balancing at the central level is to be replaced by a system of wholesale trade. Apart from the prices of a few key industrial products, the bulk of the prices are to be determined through inter-enterprise trade. The principle of self financing implies that the ability of the enterprise to produce saleable output directly and unambiguously determines the funds available for wages, bonuses, and new capital projects. There are provisions for identifying insolvent