Comecon - WikiHQ

The Council for Mutual Economic Assistance, often abbreviated as Comecon ( ) or CMEA, was an economic organization from 1949 to 1991 under the leadership of the Soviet Union that comprised the countries of the Eastern Bloc along with a number of communist states elsewhere in the world.

The descriptive term was often applied to all multilateral activities involving members of the organization, rather than being restricted to the direct functions of Comecon and its organs. This usage was sometimes extended as well to bilateral relations among members because in the system of communist international economic relations, multilateral accords—typically of a general nature—tended to be implemented through a set of more detailed, bilateral agreements.

History

Foundation

thumb|left|upright|Former USSR Comecon headquarters in Moscow.

The Comecon was founded in 1949 by the Soviet Union, Bulgaria, Czechoslovakia, Hungary, Poland, and Romania. The primary factors in Comecon's formation appear to have been Joseph Stalin's desire to cooperate and strengthen the international relationships at an economic level with the smaller states of Central Europe, Czechoslovakia, Hungary, and Poland had remained interested in Marshall aid despite the requirements for a convertible currency and market economies. These requirements, which would inevitably have resulted in stronger economic ties to free European markets than to the Soviet Union, were not acceptable to Stalin, who, in July 1947, ordered these communist governments to pull out of the Paris Conference on the European Recovery Programme. This has been described as "the moment of truth" in the post-World War II division of Europe. According to the Soviet view the "Anglo-American bloc" and "American monopolists ... whose interests had nothing in common with those of the European people" had spurned east–west collaboration within the framework agreed within the United Nations, that is, through the Economic Commission for Europe.

Some say that Stalin's precise motives in establishing Comecon were "inscrutable" They may well have been "more negative than positive", with Stalin "more anxious to keep other powers out of neighbouring buffer states… than to integrate them." Furthermore, GATT's notion of ostensibly nondiscriminatory treatment of trade partners was thought to be incompatible with notions of socialist solidarity.

Comecon was established at a Moscow economic conference 5-8 January 1949, at which the six founding member countries were represented; its foundation was publicly announced on 25 January; Albania joined a month later and East Germany in 1950. According to Dragomir, in December 1948, the Romanian leader Gheorghe Gheorghiu-Dej sent a letter to Stalin, proposing the creation of the Comecon.

At first, planning seemed to be moving along rapidly. After pushing aside Nikolai Voznesensky's technocratic, price-based approach (see further discussion below), the direction appeared to be toward a coordination of national economic plans, but with no coercive authority from Comecon itself. All decisions would require unanimous ratification, and even then governments would separately translate these into policy. Then in summer 1950, probably unhappy with the favorable implications for the effective individual and collective sovereignty of the smaller states, Stalin "seems to have taken [Comecon's] personnel by surprise," bringing operations to a nearly complete halt, as the Soviet Union moved domestically toward autarky and internationally toward an "embassy system of meddling in other countries' affairs directly" rather than by "constitutional means". Comecon's scope was officially limited in November 1950 to "practical questions of facilitating trade."

One important legacy of this brief period of activity was the "Sofia Principle", adopted at the August 1949 Comecon council session in Bulgaria. This radically weakened intellectual property rights, making each country's technologies available to the others for a nominal charge that did little more than cover the cost of documentation. This, naturally, benefited the less industrialized Comecon countries, and especially the technologically lagging Soviet Union, at the expense of East Germany and Czechoslovakia and, to a lesser extent, Hungary and Poland. (This principle would weaken after 1968, as it became clear that it discouraged new research—and as the Soviet Union itself began to have more marketable technologies.)

In a recent paper by Faudot, Nenovsky and Marinova (2022), the functioning and the collapse of the Comecon has been studied. It focuses on the evolution of the monetary mechanisms and some technical problems of multilateral payments and the peculiarities of the transfer ruble. Comecon as an organization proved unable to develop multilateralism mainly because of issues related to domestic planning that encouraged autarky

and, at best, bilateral exchanges.

Nikita Khrushchev era

After Stalin's death in 1953, Comecon again began to find its footing. In the early 1950s, all Comecon countries had adopted relatively autarkic policies; now they began again to discuss developing complementary specialties, and in 1956, ten permanent standing committees arose, intended to facilitate coordination in these matters. The Soviet Union began to trade oil for Comecon-manufactured goods. There was much discussion of coordinating five-year plans. The next few years saw a series of small steps toward increased trade and economic integration, including the introduction of the "", revised efforts at national specialization, and a 1959 charter modeled after the 1957 Treaty of Rome.

Once again, efforts at transnational central planning failed. In December 1961, a council session approved the Basic Principles of the International Socialist Division of Labour, which talked of closer coordination of plans and of "concentrating production of similar products in one or several socialist countries." In November 1962, Soviet Premier Nikita Khrushchev followed this up with a call for "a common single planning organ." This was resisted by Czechoslovakia, Hungary, and Poland, but most emphatically by increasingly nationalistic Romania, which strongly rejected the notion that they should specialize in agriculture. In Central and Eastern Europe, only Bulgaria happily took on an assigned role (also agricultural, but in Bulgaria's case this had been the country's chosen direction even as an independent country in the 1930s). Essentially, by the time the Soviet Union was calling for tight economic integration, they no longer had the power to impose it. Despite some slow headway—integration increased in petroleum, electricity, and other technical/scientific sectorsand the 1963 founding of an International Bank for Economic Co-operation, Comecon countries all increased trade with the West relatively more than with one another.

Leonid Brezhnev era

thumb|right|250px|The executive committee of the COMECON in session.

From its founding until 1967, Comecon had operated only on the basis of unanimous agreements. It had become increasingly obvious that the result was usually failure. In 1967, Comecon adopted the "interested party principle", under which any country could opt out of any project they chose, still allowing the other member states to use Comecon mechanisms to coordinate their activities. In principle, a country could still veto, but the hope was that they would typically choose just to step aside rather than either veto or be a reluctant participant. This aimed, at least in part, at allowing Romania to chart its own economic course without leaving Comecon entirely or bringing it to an impasse (see de-satellization of communist Romania).

Also until the late 1960s, the official term for Comecon activities was cooperation. The term integration was always avoided because of its connotations of monopolistic capitalist collusion. After the "special" council session of April 1969 and the development and adoption (in 1971) of the Comprehensive Program for the Further Extension and Improvement of Cooperation and the Further Development of Socialist Economic Integration by Comecon Member Countries, Comecon activities were officially termed integration (equalization of "differences in relative scarcities of goods and services between states through the deliberate elimination of barriers to trade and other forms of interaction"). Although such equalization had not been a pivotal point in the formation and implementation of Comecon's economic policies, improved economic integration had always been Comecon's goal.

While such integration was to remain a goal, and while Bulgaria became yet more tightly integrated with the Soviet Union, progress in this direction was otherwise continually frustrated by the national central planning prevalent in all Comecon countries, by the increasing diversity of its members (which by this time included Mongolia and would soon include Cuba) and by the "overwhelming asymmetry" and resulting distrust between the many small member states and the Soviet "superstate" which, in 1983, "accounted for 88 percent of Comecon's territory and 60 percent of its population."

In this period, there were some efforts to move away from central planning, by establishing intermediate industrial associations and combines in various countries (which were often empowered to negotiate their own international deals). However, these groupings typically proved "unwieldy, conservative, risk-averse, and bureaucratic," reproducing the problems they had been intended to solve.

One economic success of the 1970s was the development of Soviet oil fields. While doubtless "(Central and) East Europeans resented having to defray some of the costs of developing the economy of their hated overlord and oppressor," they benefited from low prices for fuel and other mineral products. As a result, Comecon economies generally showed strong growth in the mid-1970s. They were largely unaffected by the 1973 oil crisis.

Perestroika

The 1985 Comprehensive Program for Scientific and Technical Progress and the rise to power of Soviet general secretary Mikhail Gorbachev increased Soviet influence in Comecon operations and led to attempts to give Comecon some degree of supranational authority. The Comprehensive Program for Scientific and Technical Progress was designed to improve economic cooperation through the development of a more efficient and interconnected scientific and technical base. Gorbachev and his economic mentor Abel Aganbegyan hoped to make "revolutionary changes" in the economy, foreseeing that "science will increasingly become a 'direct productive force', as Marx foresaw… By the year 2000… the renewal of plant and machinery… will be running at 6 percent or more per year."

The program was not a success. "The Gorbachev regime made too many commitments on too many fronts, thereby overstretching and overheating the Soviet economy. Bottlenecks and shortages were not relieved but exacerbated, while the (Central and) East European members of Comecon resented being asked to contribute scarce capital to projects that were chiefly of interest to the Soviet Union…" Furthermore, the liberalization that by 25 June 1988, allowed Comecon countries to negotiate trade treaties directly with the European Community (the renamed EEC), and the "Sinatra doctrine" under which the Soviet Union allowed that change would be the exclusive affair of each individual country marked the beginning of the end for Comecon. Although the Revolutions of 1989 did not formally end Comecon, and the Soviet government itself lasted until 1991, the March 1990 meeting in Prague was little more than a formality, discussing the coordination of non-existent five-year plans. From 1 January 1991, the countries shifted their dealings with one another to a hard currency market basis. The result was a radical decrease in trade with one another, as "(Central and) Eastern Europe… exchanged asymmetrical trade dependence on the Soviet Union for an equally asymmetrical commercial dependence on the European Community."

The final Comecon council session took place on 28 June 1991, in Budapest, and led to an agreement to dissolve in 90 days. The Soviet Union was dissolved on 26 December 1991.

Post-Cold War activity after Comecon

After the fall of the Soviet Union and communist rule in Eastern Europe, East Germany (now unified with West Germany) automatically joined the European Union (then the European Community) in 1990. The Baltic States (Estonia, Latvia and Lithuania), Czech Republic, Hungary, Poland, Slovakia, and Slovenia joined the EU in 2004, followed by Bulgaria and Romania in 2007 and Croatia in 2013. To date, Czechia, Estonia, Germany (former GDR), Hungary, Latvia, Lithuania, Poland, Slovakia, and Slovenia are now members of the Organisation for Economic Co-operation and Development. All four Central European states are now members of the Visegrád Group.

Russia, the successor to the Soviet Union, along with Ukraine and Belarus founded the Commonwealth of Independent States which consists of most of the ex-Soviet republics. The country also leads the Shanghai Cooperation Organisation with Kazakhstan, Kyrgyzstan and Uzbekistan and the Eurasian Economic Union with Armenia, Belarus, Kazakhstan and Kyrgyzstan. Along with Ukraine, Georgia, Azerbaijan and Moldova are also part of the GUAM.

Vietnam and Laos joined the Association of Southeast Asian Nations (ASEAN) in 1995 and 1997 respectively.

Membership

Full members

Albania had stopped participating in Comecon activities in 1961 following the Soviet–Albanian split, but formally withdrew in 1987. East Germany reunified with the West and withdrew from Comecon on 2 October 1990.

{| class="wikitable sortable" style="font-size:95%; white-space:nowrap; width:100%;"

! style="line-height:95%" | Name

! style="line-height:95%" | Official name

! style="line-height:95%" | Accession date

! style="line-height:95%" | Continent

! style="line-height:95%" | Capital

! style="line-height:95%" | Area (km2)

! style="line-height:95%" | Population (1989)

! style="line-height:95%" | Density (per km2)

! style="line-height:95%" | Currency

! style="line-height:95%" | Official languages

| style="background:#EAEAEA"|

| style="background:#EAEAEA"|Feb. 1949

| style="background:#EAEAEA"|Europe

| style="background:#EAEAEA"|Tirana

| style="text-align:right; background:#EAEAEA" |

| style="text-align:right; background:#EAEAEA" | Lek

| style="text-align:right; background:#EAEAEA" | Albanian

| People's Republic of Bulgaria (Народна република България)

| Jan. 1949

| Europe

| Sofia

| style="text-align:right" |

| style="text-align:right" | Lev

| style="text-align:right" | Bulgarian

| Republic of Cuba (República de Cuba)

| July 1972

| North America

| Havana

| style="text-align:right" |

| style="text-align:right" | Peso

| style="text-align:right" | Spanish

| Czechoslovak Socialist Republic (Československá socialistická republika)

| Jan. 1949

| Europe

| Prague

| style="text-align:right" |

| style="text-align:right" | Koruna

| style="text-align:right" | Czech Slovak

| style="background:#EAEAEA"|

| style="background:#EAEAEA"| German Democratic Republic (Deutsche Demokratische Republik)

| style="background:#EAEAEA"| September 1950

| style="background:#EAEAEA"| Europe

| style="background:#EAEAEA"| East Berlin

| style="text-align:right; background:#EAEAEA" |

| style="text-align:right; background:#EAEAEA" | Mark

| style="text-align:right; background:#EAEAEA" | German

| Hungarian People's Republic (Magyar Népköztársaság)

| Jan. 1949

| Europe

| Budapest

| style="text-align:right" |

| style="text-align:right" | Forint

| style="text-align:right" | Hungarian

| Mongolian People's Republic (Бүгд Найрамдах Монгол Ард Улс)

| June 1962

| Asia

| Ulaanbaatar

| style="text-align:right" |

| style="text-align:right" | Tögrög

| style="text-align:right" | Mongolian

| Polish People's Republic (Polska Rzeczpospolita Ludowa)

| Jan. 1949

| Europe

| Warsaw

| style="text-align:right" |

| style="text-align:right" | Zloty

| style="text-align:right" | Polish

| Socialist Republic of Romania (Republica Socialistă România)

| Jan. 1949

| Europe

| Bucharest

| style="text-align:right" |

| style="text-align:right" | Leu

| style="text-align:right" | Romanian

| Union of Soviet Socialist Republics (Союз Советских Социалистических Республик)

| Jan. 1949

| Europe / Asia

| Moscow

| style="text-align:right" |

| style="text-align:right" | Rouble

| style="text-align:right" | None

(1975)
(1976)
(1984)
(1985)
(1986)
Ethiopia (1986)
(1986)
(1986)

In the late 1950s, a number of communist-ruled non-member countries the People's Republic of China, North Korea, Mongolia, Vietnam, and Yugoslavia were invited to participate as observers in Comecon sessions. Although Mongolia and Vietnam later gained full membership, China stopped attending Comecon sessions after 1961. Yugoslavia negotiated a form of associate status in the organization, specified in its 1964 agreement with Comecon.

In the late 1980s, there were ten full members: the Soviet Union, six East European countries, and three extra-regional members. Geography, therefore, no longer united Comecon members. Wide variations in economic size and level of economic development also tended to generate divergent interests among the member countries. All these factors combined to give rise to significant differences in the member states' expectations about the benefits to be derived from membership in Comecon. Unity was provided instead by political and ideological factors. All Comecon members were "united by a commonality of fundamental class interests and the ideology of Marxism-Leninism" and had common approaches to economic ownership (state versus private) and management (plan versus market). In 1949 the ruling communist parties of the founding states were also linked internationally through the Cominform, from which Yugoslavia had been expelled the previous year. Although the Cominform was disbanded in 1956, interparty links continued to be strong among Comecon members, and all participated in periodic international conferences of communist parties. Comecon provided a mechanism through which its leading member, the Soviet Union, sought to foster economic links with and among its closest political and military allies. The East European members of Comecon were also militarily allied with the Soviet Union in the Warsaw Pact.

International barter helped preserve the Comecon countries' scarce hard currency reserves. In strict economic terms, barter inevitably harmed countries whose goods would have brought higher prices in the free market or whose imports could have been obtained more cheaply and benefitted those for whom it was the other way around. Still, all of the Comecon countries gained some stability, and the governments gained some legitimacy,

Within Comecon, there were occasional struggles over how this system should work. Early on, Nikolai Voznesensky pushed for a more "law-governed" and technocratic price-based approach. However, with the August 1948 death of Andrei Zhdanov, Voznesensky lost his patron and was soon accused of treason as part of the Leningrad Affair; within two years he was dead in prison. Instead, what won out was a "physical planning" approach that strengthened the role of central governments over technocrats. At the same time, the effort to create a single regime of planning "common economic organization" with the ability to set plans throughout the Comecon region also came to nought. A protocol to create such a system was signed January 18, 1949, but never ratified. While historians are not unanimous on why this was stymied, it clearly threatened the sovereignty not only of the smaller states but even of the Soviet Union itself, since an international body would have had real power; Stalin clearly preferred informal means of intervention in the other Comecon states. This lack of either rationality or international central planning tended to promote autarky in each Comecon country because none fully trusted the others to deliver goods and services.

Oil transfers

Beginning no later than the early 1970s, Soviet petroleum and natural gas were routinely transferred within Comecon at below-market rates. Most Western commentators have viewed this as implicit, politically motivated subsidization of shaky economies to defuse discontent and reward compliance with Soviet wishes. Other commentators say that this may not have been deliberate policy, noting that whenever prices differ from world market prices, there will be winners and losers. They argue that this may have been simply an unforeseen consequence of two factors: the slow adjustment of Comecon prices during a time of rising oil and gas prices, and the fact that mineral resources were abundant in the Comecon sphere, relative to manufactured goods. A possible point of comparison is that there were also winners and losers under EEC agricultural policy in the same period. Russian and Kazakh oil kept the Comecon countries' oil prices low when the 1973 oil crisis quadrupled Western oil prices.

As one of the Comecon members deemed underdeveloped, Cuba obtained oil in direct exchange for sugar at a rate highly favorable to Cuba. Within the socialist economic paradigm, the subsidies in favor of Cuba and other underdeveloped Comecon members were viewed as rational and fair because they counteracted unequal exchange.

On the other hand, Czechoslovak trams (Tatra T3) and jet trainers (L-29) were the standard for all Comecon countries, including the USSR, and other countries could develop their own designs but only for their own needs, like Poland (respectively, Konstal trams and TS-11 jets). Poland was a manufacturer of light helicopters for Comecon countries (Mi-2 of the Soviet design). The USSR developed their own model Kamov Ka-26 and Romania produced French helicopters under license for their own market. In a formal or informal way, often the countries were discouraged from developing their own designs that competed with the main Comecon design.

Structure

Although not formally part of the organization's hierarchy, the Conference of First Secretaries of Communist and Workers' Parties and of the Heads of Government of the Comecon Member Countries was Comecon's most important organ. These party and government leaders gathered for conference meetings regularly to discuss topics of mutual interest. Because of the rank of conference participants, their decisions had considerable influence on the actions taken by Comecon and its organs. J.F. Brown, a British historian of Eastern Europe, cited Vladimir Sobell, a Czech-born economist, for the view that Comecon was an "international protection system" rather than an "international trade system", in contrast with the EEC, which was essentially the latter. Whereas the latter was interested in production efficiency and in allocation via market prices, the former was interested in bilateral aid to fulfill central planning goals.

Prices, exchange rates, coordination of national plans

:See: Comprehensive Program for Socialist Economic Integration

International relations within the Comecon

:See: International relations within the Comecon

Soviet domination of Comecon was a function of its economic, political, and military power. The Soviet Union possessed 90 percent of Comecon members' land and energy resources, 70 percent of their population, 65 percent of their national income, and industrial and military capacities second in the world only to those of the United States. The location of many Comecon committee headquarters in Moscow and the large number of Soviet nationals in positions of authority also testified to the power of the Soviet Union within the organization.