Appendix B: The Council for Mutual Economic Assistance --
Soviet Union
The founding of the Council for Mutual Economic Assistance
(Comecon, also referred to as CMEA or CEMA) dates from a 1949
communiqué agreed upon by Bulgaria, Czechoslovakia, Hungary,
Poland, Romania, and the Soviet Union. The reasons for the
creation of Comecon in the aftermath of World War II are
complicated, given the political and economic turmoil of that
time. The primary factor in Comecon's formation, however, was
Joseph V. Stalin's desire to enforce Soviet domination of the
small countries of Eastern Europe and to deter some states that
had expressed interest in the Marshall Plan (see Glossary). The
stated purpose of the organization was to enable member states
"to exchange economic experiences, extend technical aid to one
another, and to render mutual assistance with respect to raw
materials, foodstuffs, machines, equipment, etc." Although in the
late 1960s "cooperation" was the official term used to describe
its activities, improved economic integration was always
Comecon's goal.
Soviet domination of Comecon was a function of its economic,
political, and military power. The Soviet Union possessed 90
percent of total Comecon land and energy resources, 70 percent of
its population, 65 percent of its total 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
citizens in positions of authority also testified to the power of
the Soviet Union within the organization.
Soviet efforts to exercise political power over its Comecon
partners sometimes were met with determined opposition, however.
The "sovereign equality" of members prescribed in the Comecon
Charter assured members that they could abstain from a given
project if they did not wish to participate. East European
members frequently invoked this principle when they feared that
economic interdependence would further reduce their political
sovereignty. Thus, neither Comecon nor the Soviet Union as a
major force within Comecon had supranational authority. Although
this arrangement provided the lesser members some degree of
freedom from Soviet economic domination, it also deprived Comecon
of the necessary power to achieve maximum economic efficiency.
In 1989 the full members in Comecon consisted of Bulgaria,
Cuba, Czechoslovakia, the German Democratic Republic (East
Germany), Hungary, Mongolia, Poland, Romania, the Soviet Union,
and Vietnam. (For the purposes of this appendix, the phrases the
"six European members" or the "European members of Comecon" are
used interchangeably to signify Bulgaria, Czechoslovakia, East
Germany, Hungary, Poland, and Romania.) The primary documents
governing the objectives, organization, and functions of Comecon
were the Charter (first adopted in 1959 and subsequently amended;
all references herein are to the amended 1974 text); the
Comprehensive Program for the Further Extension and
Improvement of Cooperation and the Further Development of
Socialist Economic Integration by the Comecon Member
Countries, adopted in 1971; and the Comprehensive
Program for Scientific and Technical Cooperation to the Year
2000, adopted in December 1985. Adoption of the 1985
Comprehensive Program and the rise to power of Soviet
general secretary Mikhail S. Gorbachev increased Soviet influence
in Comecon operations and led to attempts to give Comecon some
degree of supranational authority. The 1985 Comprehensive
Program sought to improve economic cooperation through the
development of a more efficient and interconnected scientific and
technical base.
Membership, Structure, Nature, and Scope
Membership
In a January 1949 meeting in Moscow, representatives of
Bulgaria, Czechoslovakia, Hungary, Poland, Romania, and the
Soviet Union reached the formal decision to establish the Council
for Mutual Economic Assistance. The communiqué announcing the
event cited the refusal of these countries to "subordinate
themselves to the dictates of the Marshall Plan" and their
intention to resist the trade boycott imposed by "the United
States, Britain, and certain other countries of Western Europe"
as the major factors contributing to the decision "to organize a
more broadly based economic cooperation among the countries of
the people's democracy and the USSR."
Albania joined the six original members in February 1949, and
East Germany entered Comecon in 1950. (Although it did not
formally revoke its membership until 1987, Albania stopped
participating in Comecon activities in 1961.) Mongolia acceded to
membership in 1962, and in the 1970s Comecon expanded its
membership to include Cuba (1972) and Vietnam (1978). As of 1987,
the ten full members consisted of the Soviet Union, the six East
European countries, and the three extraregional members (see
table A, this Appendix).
There were four kinds of relationships a country could have
had with Comecon: full membership, associate membership,
nonsocialist "cooperant" status, and "observer country" status.
Yugoslavia was the only country considered to have associate
member status. Finland, Iraq, Mexico, Mozambique, and Nicaragua,
had a nonsocialist cooperant status with Comecon and, together
with Yugoslavia, had concluded formal agreements of cooperation
with Comecon. Since 1957 Comecon has allowed certain countries
with communist or pro-Soviet governments to attend sessions as
observers. Delegations from Afghanistan, Angola, Ethiopia, Laos,
and the People's Democratic Republic of Yemen (South Yemen) have
attended Comecon sessions as observers.
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, in fact, Comecon's most important organ. These
party and government leaders met regularly to discuss topics of
mutual interest. Decisions made in these meetings had
considerable influence on the actions taken by Comecon and its
organs.
The official hierarchy of Comecon consisted of the Council
Session, the Executive Committee, the Secretariat, four council
committees, twenty-four standing commissions, six interstate
conferences, two scientific institutes, and several associated
organizations.
The Council Session, officially the highest Comecon organ,
examined fundamental problems of socialist economic integration
and directed the activities of the Secretariat and other
subordinate organizations. Delegations from each Comecon member
country, usually headed by prime ministers, met in the second
quarter of each year in a member country's capital. Each country
appointed one permanent representative to maintain relations
between members and Comecon between annual meetings.
Extraordinary sessions were held with the consent of at least
one-third of the members. Such meetings usually took place in
Moscow.
The highest executive organ in Comecon, the Executive
Committee, elaborated policy recommendations and supervised
policy implementation between sessions. It also supervised plan
coordination and scientific-technical cooperation. Composed of
one representative from each member country, usually a deputy
chairman of the country's Council of Ministers, the Executive
Committee met quarterly, usually in Moscow. In 1971 and 1974, the
Executive Committee acquired economic departments that ranked
above the standing commissions. These economic departments
considerably strengthened the authority and importance of the
Executive Committee.
Four council committees were operational in 1987: the Council
Committee for Cooperation in Planning, the Council Committee for
Cooperation in Science and Technology, the Council Committee for
Cooperation in Material and Technical Supply, and the Council
Committee for Cooperation in Machine Building. Their mission was
"to ensure the comprehensive examination and a multilateral
settlement of the major problems of cooperation among member
countries in the economy, science, and technology." All four
committees were headquartered in Moscow and usually met there.
These committees advised the standing commissions, the
Secretariat, the interstate conferences, and the scientific
institutes in their areas of specialization. Their jurisdiction
was generally wider than that of the standing commissions because
they were empowered to make policy recommendations to other
Comecon organizations.
The Council Committee for Cooperation in Planning was the
most important of the four because it coordinated the national
economic plans of Comecon members. As such, it ranked in
importance only below the Council Session and the Executive
Committee. Made up of the chairmen of the Comecon members'
national central planning offices, the Council Committee for
Cooperation in Planning drew up draft agreements for joint
projects, adopted resolutions approving these projects, and
recommended approval to the concerned parties.
The Secretariat, Comecon's only permanent body, was the
primary economic research and administrative organ. The
secretary, who was always a Soviet official, was the official
Comecon representative to Comecon member states, other states,
and international organizations. Subordinate to the secretary
were his deputy and the various departments of the Secretariat,
which generally corresponded to the standing commissions. The
Secretariat's responsibilities included preparation and
organization of Comecon sessions and other meetings conducted
under the auspices of Comecon; compilation of digests on Comecon
activities; economic and other research for Comecon members; and
preparation of recommendations on various issues concerning
Comecon operations.
In 1987 there were twenty-four standing commissions, set up
to help Comecon make recommendations pertaining to specific
economic sectors. The Secretariat supervised the actual
operations of the commissions, which had authority only to make
recommendations, subject to the approval by the Executive
Committee and ratification by the member countries involved.
Commissions usually met twice a year in Moscow.
The six interstate conferences (on water management, internal
trade, legal matters, inventions and patents, pricing, and labor
affairs) served as forums for discussing shared issues and
experiences. They were purely consultative and generally acted in
an advisory capacity to the Executive Committee or its
specialized committees.
The scientific institutes on standardization and on economic
problems of the world socialist system (see Glossary) concerned
themselves with theoretical problems of international
cooperation. Both were headquartered in Moscow and were staffed
by experts from various member countries.
Several affiliated agencies functioned outside the official
Comecon hierarchy and served to develop "direct links between
appropriate bodies and organizations of Comecon member
countries." These affiliated agencies were divided into two
categories: intergovernmental economic organizations (which
worked on a higher level in the member countries and generally
dealt with a wider range of managerial and coordinative
activities) and international economic organizations (which
worked closer to the operational level of research, production,
or trade).
Nature of Operation
Comecon was an interstate organization through which members
attempted to coordinate economic activities of mutual interest
and to develop multilateral economic, scientific, and technical
cooperation. The Charter stated that "the sovereign equality of
all members" was fundamental to the organization and procedures
of Comecon. The 1971 Comprehensive Program emphasized
that the processes of integration of members' economies were
"completely voluntary and [did] not involve the creation of
supranational bodies." Hence, under the Charter each country had
the right to equal representation and one vote in all organs of
Comecon, regardless of the country's economic stature or its
contribution to Comecon's budget.
The "interestedness" provisions of the Charter reinforced the
principle of "sovereign equality." Comecon's recommendations and
decisions could be adopted only upon agreement among the
interested members, each of which had the right to declare its
"interest" in any matter under consideration. Furthermore, in the
words of the Charter, "recommendations and decisions shall not
apply to countries that have declared that they have no interest
in a particular matter."
Although Comecon recognized the principle of unanimity,
disinterested parties did not have a veto but rather the right to
abstain from participation. A declaration of disinterest could
not block a project unless the disinterested party's
participation was vital. Otherwise, the Charter implied that the
interested parties could proceed without the abstaining member,
and the abstaining country could "subsequently adhere to the
recommendations and decision adopted by the remaining members of
the Council."
Evolution
Early Years
During Comecon's early years (through 1955), its sessions
were convened on an ad hoc basis. The organization lacked clear
structure and operated without a charter until a decade after its
founding. From 1949 to 1953, Comecon's function consisted
primarily of redirecting trade of member countries toward each
other and introducing import-replacement industries, thus making
members economically more self-sufficient. Little was done to
solve economic problems through a regional policy. Because of
Stalin's distrust of multilateral bodies, bilateral ties with the
Soviet Union dominated the East European members' external
relations. Each country dealt with the Soviet Union on a one-to-
one basis. Although reparations transfers (extracted by the
Soviet Union in the immediate postwar years from those East
European states it regarded as former World War II enemies) had
been replaced by more normal trade relations, outstanding
reparations obligations were not halted until 1956. In these
circumstances, there was scarcely the need nor the scope for
multilateral policies or institutions.
Rediscovery of Comecon after Stalin's Death
After Stalin's death in 1953, the more industrialized and
more trade dependent East European countries (Czechoslovakia,
East Germany, and Poland) sought relief from their economic
isolation in new forms of regional cooperation. For countries
with small, centrally planned economies, this meant the need to
develop a mechanism through which to coordinate investment and
trade policies.
In the 1950s, instability in Eastern Europe and integration
in Western Europe increased the desirability of regularizing
relations among the Soviet Union and Eastern Europe in a more
elaborate institutional framework. The 1955 Treaty of Friendship,
Cooperation, and Mutual Assistance, which established the Warsaw
Pact, and its implementing machinery reinforced political-
military links (see Appendix C). On the economic front, Comecon
was rediscovered.
Rapid Growth in Comecon Activity, 1956-63
The years 1956 to 1963 witnessed the rapid growth of Comecon
institutions and activities. Comecon, for example, launched a
program to unify the electrical power systems of its member
states and in 1962 created the Central Dispatching Board to
manage the unified system. The organization took similar steps to
coordinate railroad and river transport. In 1963 a special bank,
the International Bank for Economic Cooperation, was created to
facilitate financial settlements among members. In this period,
Comecon also undertook a number of bilateral and multilateral
investment projects. The most notable project led to the
coordinated construction of the Friendship (Druzhba) oil pipeline
for the transport and distribution of crude oil from the Soviet
Union to Eastern Europe. The joint Institute for Nuclear
Research, established in 1956, initiated cooperation in another
area of long-term importance.
Parallel to these developments, the Soviet Union led efforts
to coordinate the investment strategies of the members in the
interest of a more rational pattern of regional specialization,
increased productivity, and a more rapid overtaking of the
capitalist economies. These efforts culminated in 1962 with the
adoption at the Fifteenth Council Session of the Basic
Principles of the International Socialist Division of Labor,
which called for increased economic interdependence. Furthermore,
Soviet party leader Nikita S. Khrushchev proposed a central
Comecon planning organ to implement the Basic Principles
and to pave the way for a "socialist commonwealth" based on a
unified regional economy.
These proposals provoked strong objection from Romania, which
charged that they violated the principle of the "sovereign
equality" of members. Romania's opposition (combined with the
more passive resistance of some other members) deterred
supranational planning and reinforced the interested-party
provisions of the Charter. The institutional compromise was the
creation of the Bureau for Integrated Planning, which was
attached to the Executive Committee and limited to an advisory
role on the coordination of members' development plans. The
Basic Principles were superseded several years later by
the 1971 Comprehensive Program.
Inactivity and Subsequent Revitalization in the Late
1960s
After the fall of Khrushchev in 1964, a comparative lull in
Comecon activities ensued, which lasted until well after the 1968
Soviet-led intervention in Czechoslovakia. By the end of the
1960s, Eastern Europe, shaken by the 1968 events, recognized the
need to revitalize programs that would strengthen regional
cohesion. Disillusioned by traditional methods and concerned with
the need to decentralize planning and management in their
domestic economies, reformers argued for strengthening market
relations among Comecon states. Conservatives, however, continued
to advocate planned approaches that would involve supranational
planning of major aspects of members' economies and the
inevitable loss of national control over domestic investment
policy.
The 1971 Comprehensive Program
The controversy over supranational planning led to a
compromise in the form of the 1971 Comprehensive
Program, which laid the guidelines for Comecon activity
through 1990. The program incorporated elements of both market
and plannned approaches. From the former, the program advocated a
stronger role for money, prices, and exchange rates in intra-
Comecon relations and incentives for direct contacts among lower
level economic entities. From the latter, the program called for
more joint planning on a sectoral basis through interstate
coordinating bodies for activities in a given sector. In
addition, international associations would engage in actual
operations in a designated sector on behalf of the participating
countries. Finally, the program emphasized the need for
multilateral projects to develop new regional sources of fuels,
energy, and raw materials. Such projects were to be jointly
planned, financed, and executed.
The 1971 Comprehensive Program introduced a new
concept in relations among members: "socialist economic
integration," whose aim was "to intensify and improve"
cooperation among members. The program avoided, however, the
suggestion of ultimate fusion of members' economies that had been
contained in the 1962 Basic Principles. It set limits on
the integrative process in the following terms: "Socialist
economic integration is completely voluntary and does not involve
the creation of supranational bodies."
Comecon members adopted the 1971 Comprehensive
Program at a time when they were actively developing
economic relations with the rest of the world, especially with
the industrialized Western economies. The program viewed the two
sets of policies as complementary and affirmed that "because the
international socialist division of labor is effected with due
account taken of the world division of labor, the Comecon member
countries shall continue to develop economic, scientific, and
technological ties with other countries, irrespective of their
social and political system."
In the years following the adoption of the 1971
Comprehensive Program, Comecon made some progress toward
strengthening market relations among its members. The objectives
of the program proved somewhat inconsistent with the predominant
trends within members' economies in the 1970s, which was a period
of recentralization--rather than decentralization--of domestic
systems of planning and management. The major exception to this
lack of progress lay in the area of intra-Comecon pricing and
payment, where the expansion of relations with the West
contributed to the adoption of prices and extra-plan settlements
closer to international norms.
A number of projects formulated in the years immediately
following the adoption of the 1971 Comprehensive Program
were assembled in a document signed at the Twenty-Ninth Council
Session in 1975. Entitled the Concerted Plan for Multilateral
Integration Measures, the document covered the 1976-80 five-
year-plan period and was proclaimed as the first general plan for
the Comecon economies. The joint projects included in the plan
were largely completed in the course of the plan period.
By the end of the 1970s, with the exception of Poland's
agricultural sector, the economic sectors of all Comecon
countries had converted to the socialist system. Member states
had restructured their economies to emphasize industry,
transportation, communications, material, and technical supply,
and they had decreased the share of resources devoted to
agricultural development. Within industry, member states devoted
additional funds to machine building and the production of
chemicals. Socialist economic integration resulted in the
production of goods capable of competing on the world market.
The 1980s
Most Comecon countries ended their 1981-85 five-year plans
with decreased extensive economic development (see Glossary),
increased expenses for fuel and raw materials, and decreased
dependency on the West for both credit and hard-currency (see
Glossary) imports. The sharp rise in interest rates in the West
resulted in a liquidity shortage (see Glossary) in all Comecon
countries in the early 1980s and forced them to reduce hard-
currency imports. High interest rates and the increased value of
the United States dollar on international markets made debt
servicing more expensive. Thus, reducing indebtedness to the West
also became a top priority within Comecon. From 1981 to 1985, the
European members of Comecon attempted to promote the faster
growth of exports over imports and sought to strengthen
intraregional trade, build up an increased trade surplus, and
decrease indebtedness to Western countries.
In the 1980s, Comecon sessions were held on their regular
annual schedule. The two most notable meetings were the special
sessions called in June 1984 and December 1985. The first summit-
level meeting of Comecon member states in fifteen years was held
with much fanfare June 12-14, 1984, in Moscow. The two
fundamental objectives of the meeting were to strengthen unity
among members and to establish a closer connection between the
production base, scientific and technological progress, and
capital construction. Despite the introduction of proposals for
improving efficiency and cooperation in six key areas, analysts
from East and West considered the meeting a failure.
The ideas and results of the June 14 session were elaborated
at a special session held December 17-18, 1985, in Moscow. This
special session featured the culmination of several years of work
on the new Comprehensive Program for Scientific and Technical
Cooperation to the Year 2000. It aimed to create "a firm
base for working out an agreed and, in some areas, unified
scientific and technical policy and the practical implementation,
in the common interest, of higher achievements in science and
technology."
The 1985 Comprehensive Program laid out sizable
tasks in five key areas: electronics, automation systems, nuclear
energy, development of new materials, and biotechnology. It
sought to restructure and modernize the member states' economies
to counteract constraints on labor and material supplies. The
need to move to intensive production techniques within Comecon
was evident from the fact that from 1961 to 1984 the overall
material intensiveness of production did not improve
substantially.
Cooperation under the 1971 Comprehensive Program
The distinction between "market" relations and "planned"
relations made in the discussions within Comecon prior to the
adoption of the 1971 Comprehensive Program remained
important in subsequent Comecon activities. Comecon was in fact a
mixed system, combining elements of both planned and market
economies. Although official rhetoric emphasized regional
planning, intra-Comecon relations were conducted among national
entities not governed by any supranational authority. They thus
interacted on a decentralized basis according to terms negotiated
in bilateral and multilateral agreements on trade and
cooperation.
Market Relations and Instruments
The size of the Soviet economy determined that intra-Comecon
trade was dominated by exchanges between the Soviet Union and the
other members. Exchanges of Soviet fuels and raw materials for
capital goods and consumer manufactures characterized trade,
particularly among the original members. The liquidity shortage
in the early 1980s forced the European members of Comecon to work
to strengthen intraregional trade. In the early 1980s,
intraregional trade rose to 60 percent of foreign trade of
Comecon countries as a whole; for individual members it ranged
from 45 to 50 percent in the case of Hungary, Romania, and the
Soviet Union, to 83 percent for Cuba, and to 96 percent for
Mongolia.
Trade among the members was negotiated on an annual basis and
in considerable detail at the governmental level and was then
followed up by contracts between enterprises (see Glossary).
Early Comecon efforts to facilitate trade among members
concentrated on the development of uniform technical, legal, and
statistical standards and on the encouragement of long-term trade
agreements. The 1971 Comprehensive Program sought to
liberalize the system somewhat by recommending broad limits on
"fixed-quota" trade among members (trade subject to quantitative
or value targets set by bilateral trade agreements). There is no
evidence, however, to indicate that quota-free trade grew in
importance under the program.
Prices
The 1971 Comprehensive Program also called for
improvement in the Comecon system of foreign trade prices.
Administratively set prices, such as those used in intra-Comecon
trade, did not reflect costs or relative scarcities of inputs and
outputs. For this reason, intra-Comecon trade was based on world
market prices. By 1971 a price system governing exchanges among
members had developed, under which prices agreed on through
negotiation were fixed for five-year periods. These contract
prices were based on adjusted world market prices averaged over
the immediately preceding five years. Under this system,
therefore, intra-Comecon prices could and did depart
substantially from relative prices on world markets.
Although the possibility of breaking this tenuous link with
world prices and developing an indigenous system of prices for
the Comecon market had been discussed in the 1960s, Comecon
prices evolved in the opposite direction after 1971. Far from a
technical or academic matter, the question of prices underlay
vital issues of the terms and gains of intra-Comecon trade. In
particular, relative to actual world prices, intra-Comecon prices
in the early 1970s penalized exporters of raw materials and
benefited exporters of manufactures. After the oil price
explosion of 1973, Comecon foreign trade prices swung further
away from world prices to the disadvantage of Comecon suppliers
of raw materials, in particular the Soviet Union. In view of the
extraregional opportunities opened up by the expansion of East-
West trade, this yawning gap between Comecon and world prices
could no longer be ignored. Hence in 1975, at Soviet instigation,
the system of intra-Comecon pricing was reformed.
The reform involved a substantial modification of existing
procedures (known as the "Bucharest formula"), but not their
abandonment. Under the modified Bucharest formula, prices were
fixed every year and were based on a moving average of world
prices for the preceding five years. The world-price base of the
Bucharest formula was thus retained and still represented an
average of adjusted world prices for the preceding five years.
For 1975 alone, however, the average was for the preceding three
years. Under these arrangements, intra-Comecon prices were more
closely linked with world prices than before, and throughout the
remainder of the 1970s they rose with world prices, although
lagging behind them. Until the early 1980s, this new system
benefited both the Soviet Union and the other Comecon countries
since Soviet oil, priced with the lagged formula, was
considerably cheaper than oil from the Organization of Petroleum
Exporting Countries (OPEC), which charged drastically higher
prices in the 1970s. By 1983-84 this system turned to the Soviet
Union's advantage because world market oil prices began to fall,
whereas the lagged Soviet oil prices continued to rise.
Exchange Rates and Currencies
Basic features of the state trading systems of the Comecon
countries were multiple exchange rates and comprehensive exchange
controls that severely restricted the convertibility of members'
currencies. These features were rooted in the planned character
of the members' economies and their systems of administered
prices. Currency inconvertibility in turn dictated bilateral
balancing of accounts, one of the basic objectives of
intergovernmental trade agreements among members. As of mid-1989,
the transferable ruble remained an artificial currency
functioning as an accounting unit and was not a common instrument
for multilateral settlement. For this reason, this currency
continued to be termed "transferable" and not "convertible."
The member countries recognized that the multiplicity and
inconsistency of their administered exchange rates, the
separation of their domestic prices from foreign prices, and the
inconvertibility of their currencies were significant obstacles
to multilateral trade and cooperation. In 1989 Comecon lacked not
only a flexible means of payment but also a meaningful, standard
unit of account. Both problems vastly complicated the already
complex multilateral projects and programs envisaged by the 1971
Comprehensive Program. The creation in 1971 of the
International Investment Bank provided a mechanism for joint
investment financing, but, like the International Bank for
Economic Cooperation, this institution could not by itself
resolve these fundamental monetary problems.
Recognizing that money and credit should play a more active
role in the Comecon system, the 1971 Comprehensive
Program established a timetable for the improvement of
monetary relations. According to the timetable, measures would be
taken "to strengthen and extend" the functions of the "collective
currency" (the transferable ruble) and "to make the transferable
ruble convertible into national currencies and to make national
currencies mutually convertible." To this end, steps would be
taken to introduce "economically well-founded and mutually
coordinated" rates of exchange between members' currencies and
between 1976 and 1979 to prepare the groundwork for the
introduction by 1980 of a "single rate of exchange for the
national currency of every country." This timetable was not met.
Only in Hungary were the conditions for convertibility gradually
being introduced by reforms intended to link domestic prices more
directly to world prices.
Cooperation in Planning
Since the early 1960s, official Comecon documents have
stressed the need for a more cost-effective pattern of
specialization in production. Especially in the manufacturing
sector, this "international socialist division of labor" would
involve specialization within major branches of industry. In the
absence of significant, decentralized allocation of resources
within these economies, however, production specialization could
be achieved only through the mechanism of the national plan and
the investment decisions incorporated in it. In the absence at
the regional level of supranational planning bodies, a rational
pattern of production specialization among members' economies
required coordination of national economic plans, a process that
posed inescapable political problems.
The coordination of national five-year economic plans was the
most traditional form of cooperation among the members in the
area of planning. Although the process of consultation underlying
plan coordination remained essentially bilateral, Comecon organs
were indirectly involved. The standing commissions drew up
proposals for consideration by competent, national planning
bodies; the Secretariat assembled information on the results of
bilateral consultations; and the Council Committee for
Cooperation in Planning (created by Comecon in 1971 at the same
session at which the Comprehensive Program was adopted)
reviewed the progress of plan coordination by members.
In principle, plan coordination covered all economic sectors.
Effective and comprehensive plan coordination was significantly
impeded, however, by the continued momentum of earlier parallel
development strategies and the desire of members to minimize the
risks of mutual dependence (especially given the uncertainties of
supply that were characteristic of the members' economies). Plan
coordination in practice, therefore, remained for the most part
limited to mutual adjustment, through bilateral consultation, of
the foreign trade sectors of national five-year plans. Under the
1971 Comprehensive Program, there were renewed efforts
to extend plan coordination beyond foreign trade to the spheres
of production, investment, science, and technology.
Plan Coordination
According to the 1971 Comprehensive Program, joint
planning--multilateral or bilateral--was to be limited to
"interested countries" and was "not to interfere with the
autonomy of internal planning." Participating countries were to
retain, moreover, national ownership of the productive capacities
and resources jointly planned.
The Comprehensive Program did not clearly assign
responsibility for joint planning to any single agency. On the
one hand, "coordination of work concerned with joint planning
[was to] be carried out by the central planning bodies of Comecon
member countries or their authorized representatives." On the
other hand, "decisions on joint, multilateral planning of chosen
branches and lines of production by interested countries [were
to] be based on proposals by countries or Comecon agencies and
[were to] be made by the Comecon Executive Committee, which also
[was to determine] the Comecon agencies responsible for the
organization of such work." Finally, mutual commitments resulting
from joint planning and other aspects of cooperation were to be
incorporated in agreements signed by the interested parties.
It is extremely difficult to gauge the implementation of plan
coordination or joint planning under the 1971 Comprehensive
Program or to assess the activities of the diverse
international economic organizations. There is no single,
adequate measure of such cooperation. The results were
inconclusive, at best.
Joint Projects
The clearest area of achievement under the 1971
Comprehensive Program was the joint exploitation and
development of natural resources for the economies of the member
countries. Particular attention was given to energy and fuels,
forest industries, and iron and steel and various other metals
and minerals. Most of this activity was carried out in the Soviet
Union, the great storehouse of natural resources within Comecon.
Joint development projects were usually organized on a
"compensation" basis, a form of investment "in kind."
Participating members advanced materials, equipment, and
manpower and were repaid through scheduled deliveries of the
output resulting from, or distributed through, the new facility.
Repayment included a modest "fraternal" rate of interest, but the
real financial return to the participating countries depended on
the value of the output at the time of delivery. Deliveries at
contract prices below world prices provided an important extra
return. No doubt the most important advantage from participation
in joint projects, however, was the guarantee of long-term access
to basic fuels and raw materials in a world of increasing
uncertainty about the supply of such products.
The Concerted Plan
The multilateral development projects concluded under the
1971 Comprehensive Program formed the backbone of
Comecon's Concerted Plan for the 1976-80 period. The
program allotted 9 billion rubles (nearly US$12 billion at the
official 1975 exchange rate of US$1.30 per ruble) for joint
investments. The Orenburg project was the largest project under
the Comprehensive Program. It was undertaken by all East
European Comecon countries and the Soviet Union at an estimated
cost ranging from the equivalent of US$5 billion to US$6 billion,
or about half the cost of all Comecon projects under the
Concerted Plan. It consisted of a natural gas production
facility at Orenburg in western Siberia and the 2,677-kilometer
Union (Soiuz) natural gas pipeline, completed in 1978, linking
the Orenburg facility to the western border of the Soviet Union.
Construction of a pulp mill in Ust' Ilimsk (in eastern Siberia)
was the other major project under this program.
These two projects differed from other joint Comecon
investment projects in that they were jointly planned and jointly
built in the host country (the Soviet Union in both cases).
Although the other projects were jointly planned, each country
was responsible only for construction within its own borders.
Western technology, equipment, and financing played a
considerable role.
The early 1980s were characterized by more bilateral
investment specialization but on a much smaller scale than
required for the Orenburg and Ust' Ilimsk projects. In these
latter projects, Eastern Europe provided machinery and equipment
for Soviet multilateral resource development.
Cooperation in Science and Technology
To supplement national efforts to upgrade indigenous
technology, the 1971 Comprehensive Program emphasized
cooperation in science and technology. The development of new
technology was envisioned as a major object of cooperation;
collaboration in resource development and specialization in
production were to be facilitated by transfers of technology
between members. The 1971 Comecon session, which adopted the
Comprehensive Program, decided to establish the Council
Committee for Cooperation in Science and Technology to ensure the
organization and fulfillment of the provisions of the program in
this area. Jointly planned and coordinated research programs
extended to the creation of joint research institutes and
centers. In terms of the number of patents, documents, and other
scientific and technical information exchanges, the available
data indicate that the Soviet Union has been the dominant source
of technology within Comecon. On the whole, it provided more
technology to its East European partners than it received from
them. Soviet science also formed the base for several high-
technology programs for regional specialization and cooperation,
such as nuclear power and computers.
The 1985 Comprehensive Program, adopted in December,
was intended to boost cooperation in science and technology.
Under this program, enterprises and research institutes were
established throughout the East European member countries and
assigned particular research and development tasks. Each project
was headed, however, by a Soviet organization, which awarded
contracts to other Comecon member organizations. The Soviet
project heads, who were not responsible to domestic planners,
were given extensive executive powers of their own and closely
supervised all activities. The program represented a
fundamentally new approach to multilateral collaboration and a
first step toward investing Comecon with some supranational
authority. Genuine economic benefits of this program were
marginal, however, since prices and exchange rates were
artificially set and currencies remained mutually inconvertible.
Labor Resources
Just as the 1971 Comprehensive Program stimulated
investment flows and technology transfers among members, it also
increased intra-Comecon flows of another important factor of
production: labor. Most of the transfers occurred in connection
with joint resource development projects, such as Bulgarian
workers aiding in the exploitation of Siberian forest resources
or Vietnamese workers helping on the Friendship pipeline in the
Soviet Union. Labor was also transferred in response to labor
imbalances in member countries. Hungarian workers, for example,
were sent to work in East Germany under a bilateral agreement
between the two countries. Such transfers, however, were
restricted by the universal scarcity of labor that emerged with
the industrialization of the less developed Comecon countries.
Moreover, the presence of foreign workers raised practical and
ideological issues in socialist planned economies.
Power Configurations Within Comecon
The Soviet Union and Eastern Europe
Between Comecon's creation in 1949 and the anticommunist
revolutions in 1989, the relationship between the Soviet Union
and the six East European countries generally remained stable.
The Soviet Union provided fuel, nonfood raw materials, and
semifinished (hard) goods to Eastern Europe, which in turn
supplied the Soviet Union with finished machinery and industrial
consumer (soft) goods.
This kind of economic relationship stemmed from a genuine
need by the Comecon members in the 1950s. Eastern Europe has poor
energy and mineral resources, a problem exacerbated by the low
energy efficiency of East European industry. As of mid-1985,
factories in Eastern Europe still used 40 percent more fuel than
those in the West. As a result of these factors, East European
countries have always relied heavily on the Soviet Union for oil.
For its part, in the 1950s Eastern Europe supplied the Soviet
Union with goods otherwise unavailable because of Western
embargoes. Thus, from the early 1950s to the early 1970s, during
the time when there was no world shortage of energy and raw
materials, the Soviet Union inexpensively supplied its East
European clients with hard goods in exchange for finished
machinery and equipment. In addition, Soviet economic policies
bought political and military support. During these years, the
Soviet Union could be assured of relative political tranquillity
within Eastern Europe, obedience in international strategy as
laid down by the Soviet Union, and military support of Soviet
aims. By the 1980s, the members of Comecon were accustomed to
this arrangement. The Soviet Union was particularly happy with
the arrangement because it still could expand its energy and raw
materials sector quickly and relatively cheaply.
Mongolia, Cuba, and Vietnam
Soviet-initiated Comecon support for Comecon's three least-
developed members--Cuba, Mongolia, and Vietnam--clearly benefited
them, but the burden on the six East European Comecon members was
most unwelcome. Comecon was structured in such a way that the
more economically developed members provided support for the less
developed members in their major economic sectors. Initially, the
addition of Mongolia in 1962 brought no great added burden. The
population of Mongolia was relatively small (1 million), and the
country's subsidies came primarily from the Soviet Union. The
addition of Cuba (9 million people) in 1972 and Vietnam (40
million people) in 1978, however, quickly escalated the burden.
In 1987 three-fourths of Comecon's overseas economic aid went to
Cuba, Mongolia, and Vietnam.
Comecon had invested heavily in Mongolia, Cuba, and Vietnam;
and the three countries benefited substantially from these
resources. In 1984 increases in capital investments within
Comecon were highest for Vietnam and Cuba (26.9 percent for
Vietnam and 14 percent for Cuba, compared with 3.3 percent and
less for the others, except Poland and Romania). Increased
investments in Mongolia lagged behind those in Poland and Romania
but were nevertheless substantial (5.8 percent). In 1984 the
economies of the three developing countries registered the
fastest industrial growth of all the Comecon members.
Given their locations, Comecon membership for Mongolia, Cuba,
and Vietnam served principally to advance Soviet foreign policy
interests. Among the Comecon members, the Soviet Union
contributed the most to the development of the three poorer
Comecon members, and it also reaped most of the benefits. The
Soviet Union imported most of Cuba's sugar and nickel and all of
Mongolia's copper and molybdenum (widely used in the construction
of aircraft, automobiles, machine tools, gas turbines, and in the
field of electronics). In return, Cuba provided bases for the
Soviet Naval Forces and military support to Soviet allies in
Africa. Vietnam made its naval and air bases, as well as some
100,000 guest workers, available to the Soviet Union.
Support for Developing Countries
Comecon provided economic and technical support to 34
developing countries in 1960, 62 developing countries in 1970,
and over 100 developing countries in 1985. As of 1987, Comecon
had assisted in the construction or preparation of over 4,000
projects (mostly industrial) in Asia, Latin America, and Africa.
A monetary figure for this assistance is difficult to estimate,
although a June 1986 Czechoslovak source valued the exchange
between Comecon and developing countries at 34 billion rubles per
year (US$48.3 billion at the official June 1986 exchange rate of
US$1.42 per ruble). The precise nature of this aid was unclear,
and Western observers believe the data to be inflated.
From the 1960s to the mid-1980s, Comecon sought to encourage
the development of industry, energy, transportation, mineral
resources, and agriculture of Third World countries. Comecon
countries also provided technical and economic training for
personnel in Asia, Africa, and Latin America. When Comecon
initially lent support to developing countries, it generally
concentrated on developing those products that would support the
domestic economies of the Third World, including replacements for
imports. In the 1970s and 1980s, assistance from Comecon was
directed toward export-oriented industries. Third World countries
paid for this support with products made by the project for which
Comecon rendered help. This policy gave Comecon a stable source
of necessary deliveries in addition to political influence in
these strategically important areas.
Trends and Prospects
Comecon served for more than three decades as a framework for
cooperation among the planned economies of the Soviet Union, its
allies in Eastern Europe, and Soviet allies in the Third World.
Over the years, the Comecon system grew steadily in scope and
experience.
This institutional evolution reflected changing and expanding
goals. Initial, modest objectives of "exchanging experience" and
providing "technical assistance" and other forms of "mutual aid"
were extended to the development of an integrated set of
economies based on a coordinated international pattern of
production and investment. These ambitious goals were pursued
through a broad spectrum of cooperative measures extending from
monetary to technological relations.
At the same time, the extraregional goals of the organization
also expanded; other countries, both geographically distant and
systemically different, were encouraged to participate in Comecon
activities. Parallel efforts sought to develop Comecon as a
mechanism through which to coordinate the foreign economic
policies of the members as well as their actual relations with
nonmember countries and with such organizations as the European
Economic Community (EEC) and the United Nations.
Asymmetries of size and differences in levels of development
among Comecon members deeply affected the institutional character
and evolution of the organization. The overwhelming dominance of
the Soviet economy necessarily meant that the bulk of intra-
Comecon relations took the form of bilateral relations between
the Soviet Union and the smaller members of Comecon.
The planned nature of the members' economies and the lack of
effective market-price mechanisms to facilitate integration
hindered progress toward Comecon goals. Without the automatic
workings of market forces, progress depended upon conscious acts
of policy. This fact tended to politicize the processes of
integration to a greater degree than was the case in countries
with market economies.
By 1987 Comecon's 1971 Comprehensive Program had
undergone considerable change. Multilateral planning faded into
traditional bilateral cooperation, and the Bucharest formula for
prices assumed a revised form. The 1985 Comprehensive
Program or, as some Western analysts call it, the "Gorbachev
Charter," became Comecon's new blueprint for taking a firm grip
on its future. The purpose of the 1985 program was to offset
centrifugal forces and reduce Comecon's vulnerability to
"technological blackmail" through broadened mutual cooperation,
increased efficiency of cooperation, and improved quality of
output.
Additional progress in this direction was made at the Forty-
Third Council Session held in Moscow in October 1987 and the
Forty-Fourth Council Session held in Prague in July 1988. As a
result of these sessions, all Comecon members, with the exception
of Romania, reached an agreement on the necessity within Comecon
of a "unified market," which would lead to the "free movement of
goods, services, and other production factors." They also agreed
to work toward a genuine multilateral convertibility of their
currencies, recognizing, nevertheless, that achievement of such a
goal was some ten to fifteen years in the future.
Members attending the Forty-Third Council Session also agreed
to changes in Comecon's organizational structure. Some Comecon
bodies were abolished, others were reorganized or merged, and new
bodies were created. The aim of these changes was to streamline
and improve their performance. At the same time, however, as
meaningful changes were being made within Comecon, the rapidly
changing political climate of Eastern Europe and the pressure for
economic reforms within each of the Comecon member states were
not only threatening the unity of Comecon but also raising
serious doubts about any further need for its existence.
* * *
Although the selection is still rather sparse, several
English-language works on Comecon appeared in the early 1980s.
Socialist Economic Integration by Jozef M. van Brabant
discusses in great detail the mechanisms and operations of
socialist economic integration in general and Comecon in
particular. It is perhaps the most comprehensive English-language
work on the subject. Analysis of Comecon's operations and
development in the modern economic and political arena is
provided in Paul Marer's "The Political Economy of Soviet
Relations with Eastern Europe." The best sources for up-to-date
political and economic analysis are the Radio Free Europe
background reports. Articles by Vladimir Sobell, in particular,
provide useful information about the 1985 Comprehensive
Program.
Russian-language sources provide useful information on
Comecon procedures and structure in addition to insight into the
Soviet and East European view of Comecon's goals and
shortcomings. Articles in this vein can be found in Voprosy
ekonomiki and in Ekonomika. Translations of
selected articles from these publications can be found in the
Joint Publications Research Service's USSR Report on Economic
Affairs. The Comecon Secretariat publishes a bimonthly
bulletin (Ekonomicheskoe sotrudnichestvo stran-chlenov
SEV), which has a table of contents and a summary in
English; the annual Statisticheskii ezhegodnik stran-chlenov
SEV; and various handbooks. (For further information and
complete citations, see Bibliography.)|~
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